Investors remain interested in online gaming despite Zynga debacle. Mobile gaming gaining momentum. Deal sizes and funding levels remain low despite high deal volume activity.
Although Zynga’s IPO and subsequent stock performance have been abysmal, the level of investment activity in the gaming industry by venture capitalists, angels and corporations has not waned significantly. In fact, online gaming which saw a bit of a deal activity plunge around the time of the Zynga IPO has bounced back with 39 financing transactions in Q3 2012 (graph below).
Interestingly, mobile gaming saw a less significant dip and seems to be steadily climbing highlighting the clear move to mobile that investors are making (as shown in the chart below). Despite deal euphoria to mobile gaming, the bigger money continues to go to online gaming which has seen an average of $412 million per quarter over the last 2 years (with the lowest quarter in terms of funding was Q3 2012 where it came in at $102 million). Mobile gaming on the other hand has averaged $62 million per quarter in the last two years with the biggest single quarter being $116 million.
While the deal activity for both online and mobile gaming has been strong, the funding amounts remains relatively small. This is driven by a slew of activity in Seed and Series A deals of less than $5 million as this funding by stage heatmap illustrates. 73% of deals were of less than $5 million and 82% of deals were less than $10 million.
Overall, the move towards the < $5 million deals has pushed median deal values down as the choppy but negative trend in the orange median line illustrates in the below graph. Average deal sizes of course jump wildly with a big deal in any given quarter so medians are the better measure.