Blockchain game funding metrics have fallen, on average, by 30% QoQ since Q4 2022. The number of deals funded has “only” dropped by 16% from Q4, and 21% from Q1.

When we zoom in on Q2, we did see a slight increase in the total funds raised by 59% ($85.8M vs. $54M) and the total number of deals by 80% (9 vs. 5) compared to April. However, without Mythical Games’ $37M Series C1 raise (which was aimed at helping them get to profitability), Q2 metrics would be a lot lower.

Unfortunately, there is no evidence to suggest that the worst is over. My previous comments on how VCs will act with increased caution and that valuations/rounds will likely drop back down to pre-bull cycle levels have so far remained accurate. The silver lining here is that one could argue valuations have been over-inflated for a while, and many teams have asked for too much and delivered little. As we see future raises fall back down closer to game industry standards, teams will be forced to be more capital efficient, rapidly deliver results, and ultimately find product-market fit.

It is worth noting that China and the MENA region are best positioned to deploy capital over 2023 and beyond. Both have placed a large focus on gaming, with gaming revenue expected to hit $6B in MENA by 2027, and China already accounting for 47% of mobile revenue and 39% of PC and console markets (China’s 2 largest gaming companies – Tencent and Netease – made up 61% of the domestic market). Provided we see continued interest in blockchain industries (especially in gaming/metaverse inniciatives) from these 2 regions, I can imagine an increasing number of blockchain gaming projects will drift away from the increasingly hostile US market to look for greener pastures.