Where did all the money go? The state of games investment

Thousands of fans descended on MCM Comic Con at Excel London last week, many of them in extravagant costumes, all eager to meet their heroes and spend lavishly on tie-in merchandise. But while all that was going on downstairs, if you’d ventured up to the third floor and looked behind the Cosplay Hospital (yes, it’s a thing), you would have found dozens of games industry folk gathered in the greyest room you’ve ever seen, all talking about money and how best to get it.

The GamesIndustry.biz Investment Panel formed part of the Investment Summit put together by Game Republic at this year’s EGX/MCM Comic Con (the two were combined in 2024). The stellar panel was made up of Cassia Curran (former head of business development at Jagex and founder of Curran Games Agency), Lirui Ding (principal at the gaming venture capital firm Transcend Fund), Simon Byron (managing director of Yogscast Games), and Meg Clarke (game scouting manager at Team17).

The topics under discussion included opportunities for funding and the future outlook for the games industry. But first, in my duty as chair, I had a pressing question for the panellists: where did all the money go?

“I think there are probably two parts,” replied Ding. He explained that the first part is that the games industry attracted a lot of what he called “tourism capital” during its COVID boom years. “These are the people who don’t really know the gaming industry that well: Some of them don’t even play games,” he said. “I think it disappeared because they didn’t know how to invest. […] Lots of the investment unfortunately failed, so that money disappeared.”

The second part is that a lot of the games industry investment has been moving out of the US and into Europe over the past few years. “But then from last year, we’re really seeing a lot of money actually going from the US and Europe to other emerging markets,” he explained, “whether it’s China, Turkey, or even Vietnam.”

“I guess for me the money’s not gone,” replied Clarke when asked the same question. “I think it’s just diversified and redistributed – obviously you’ve already touched upon [the money] going to different territories, different types of investors. I would say there’s a band of funding that has definitely dried up and that is those higher budget triple-I games. But the great thing about the games industry is it’s incredibly resilient, and a lot of these people that have been laid off after COVID, they’ve started new ventures, they’ve been able to raise capital. There’s loads of little boutique publishers popping up, loads of funds for much smaller projects. […] There’s a lot of money there that can be invested into grassroots projects and into smaller companies.

“So there is money there, it’s just not where it was before. There’s a band that’s dissolved and melted down to the smaller projects underneath, and it’s gone a bit wider over the world. So we might feel it a little bit more here in the UK, where our cost of living is a lot higher due to many factors. But some of these smaller territories, these upcoming territories, are [seeing] a lot more investment, because their projects are more affordable to investors, especially new investors.”

Curran emphasised that the COVID investment bubble definitely burst a while back. “But at the same time, I also think that we are seeing continual pressure upon not just games, but all sorts of entertainment content,” she said. “There’s just much more of everything. So there’s pressure from TikTok, social videos, streamers, there’s so many free options to entertain yourself.”

In other words, it’s not just the games industry that’s feeling the pinch: Curran gave the example of cinema revenues being down in 2024 from pre-pandemic figures. “Also, with games specifically, you used to have a refresh of content with every new console generation,” she continued. “That’s no longer happening, and you’re not only competing with new games, you’re competing with old games – people playing for nostalgia purposes. I think everyone here has got a massive Steam backlog of shame.”

Essentially, because digital distribution means users aren’t limited to buying what’s on shop shelves, new games are competing not only with the other games released that week, but also with games going back years. “So even if the number of players is still increasing, the amount of content is increasing even faster.”

Byron said that this year hasn’t felt like an improvement. “I was promised last year that if we survived till ’25, it was all going to be fine,” he said. “Well we’re here, and it is pretty tricky.

“The money’s still there, right? Publishers need to publish, so there is money there. I think the real challenge is that everything has shifted. If you look at the people that are doing well now, they’re not the people that were doing quite so well two years ago, five years ago – and those foundations that the bigger companies were built on are being eroded.

“You’re seeing companies coming in and finding success by being more agile, more nimble, and just rolling their sleeves up. We delight in seeing games pop off on Steam at the moment, and often they come from people you’ve never heard of.”

In short, all bets are off. “The old things you used to rely on – these indications of success and the things you thought you had to do – are completely different these days.”

Ding emphasised that the situation varies by region. Whereas he found that people were still gloomily talking about “survive to ’25” at GDC this year, he noticed the mood was “totally different” at ChinaJoy, Tokyo Game Show, and Gamescom Asia, which were buoyed by the successes of games like Black Myth: Wukong from China and Stellar Blade from Korea.

Opportunities

When it comes to finding opportunities in the current market, Clarke emphasised that developers should focus on making games that mean something to them, rather than chasing trends.

“I listened to a podcast with Willem Dafoe, and he said something that I keep reusing, which is: ‘Do the thing to do the thing.’ Don’t do things to please other people, because if they don’t like it, you are making something that you hate. So if you make something that you enjoy that’s inspired by things that you receive fun, good vibes from, […] that’s the best start.”

Clarke emphasised that attempting to chase trends is likely to see your game being lost in a sea of similar content. “Of course, some people see success with genre-chasing,” she qualified, “but it really depends how agile you can be, how innovative you can be.”

However, the days of publishers signing new games on the strength of a paper pitch alone are long gone. “We definitely need at least a prototype,” said Clarke, adding that this is the case for most publishers she knows. “It’s even true for sequels: we still want to be able to see that new mechanic or that new thing beginning to be proven out. So you will need a pitch deck, you will need a production plan, and you will need a prototype.”

Curran highlighted a very specific opportunity for developers in the VR space that she said is only likely to exist for the next 12 months or so. “Free to play on VR is actually breaking out,” she said. Whereas the free-to-play market on PC, console, and mobile is currently mature and hard to break into, it’s only just emerging in the VR space through multiplayer titles like Animal Company.

This market is being driven by a new demographic: VR natives. “They’re basically children, really young people, who after school, they go home, put on their headset, and they’re jumping into Animal Company, Yeeps, or Ruffnauts,” she said. All of these games use similar locomotion methods to Gorilla Tag, and all are highly social. But Curran emphasised that time is running out to join this market before it becomes saturated. “This is a very specific niche trend opportunity that will close.”

Ding added that in terms of funding opportunities, Transcend is looking for both unique games and those that fall into previously successful genres. He gave the example that Transcend has funded Midsummer, the studio formed by XCOM creative director Jake Solomon, which is working on an “AI-native” life simulation game – a game that “people have never ever seen before,” said Ding. “It took us a while to understand what the game is about.”

On the flipside, Transcend is also funding a co-op shooter made by Ruckus Games, a team led by the former creative director on Borderlands 3, Paul Sage. “That’s a very, very proven genre, but we are seeing a lot of innovation within that specific genre as well. So we’re quite flexible.”

The future

Finally, what does the future look like for games funding? “I think generally it is really encouraging to see a lot of developers reinvesting in the industry,” said Clarke. “We’re seeing a lot of funds and publishers crop up from successful devs. Obviously they will be cutting their teeth in the actual publishing space, but they’ve published their own game before, and now they’ve decided to help others. And I think that’s a really encouraging sign that the money is not being taken away from games and put into other places.”

But she added that funding won’t go back to the highs we saw a few years previously. “I don’t think we’re going to bounce back to COVID numbers – unless a terrible world event happens.”

Clarke advised developers to access prototype funds to help pull a demo together for pitching – and to be mindful of budgets in the early stages. “You really need to bring those starting costs down to as low as you can,” she said. “But getting that prototype together is what’s going to sustain the interest of investors.”

“You really need to bring those starting costs down to as low as you can”

Meg Clarke, Team17

She noted that the future will favour smaller teams. “There was this bubble of really high investment, really large teams, that unfortunately just did not pay off. The sales weren’t there to support that model. But we are seeing loads of success with loads of micro teams and really innovative, fun, exciting ideas.”

Curran said that the games industry hasn’t really had an inflection point that triggered a brand new area of growth since the debut of smartphones in the late 2000s. But she thinks there will be growth in areas of the world that haven’t yet fully embraced gaming. “That’s where you’ll see the funding happen.”

Aside from that, she highlighted government investment in the UK games industry as a positive sign, and she also emphasised that making games should be about passion first. “There are much easier ways to make money – do not make games just to make money.”

Rather than funding, Curran said the biggest problem games makers face is marketing – cutting through the noise and finding an addressable audience. But she added that this was where fast, public prototyping can offer benefits, whereby developers can showcase an early, rough and ready prototype on TikTok. “If it takes off, then they double down on that, and if it doesn’t take off, then they make something else. So actually the first thing they do is prove that there’s market demand for it.”

Byron advised developers who are looking to fund a game to work out exactly what they want ahead of time. “I think publishers are simple creatures who want to know what it’s going to be like, how much it’s going to cost, and when it’s going to arrive,” he said, adding that some developers come to him without a firm funding figure in mind. “Just work out what it is that you need, and ask for it.”

“If you’re starting to make a friendslop game now, it is too late”

Simon Byron, Yogscast Games

Again, he emphasised that “publishers need games to publish, so there are opportunities out there,” although he echoed Clarke’s warning about trend chasing. “Friendslop is in vogue at the moment, but again, if you’re starting to make a friendslop game now, it is too late. Do what you want to do, make the game that you want to make, and make it fun. Make sure it’s fun for you: if it’s fun for you, hopefully it’s fun for others, too.”

Ding ended the talk on a positive note. “I think the future looks quite bright in my view,” he said. For one thing, he notes that currently there’s a maximum of around 4 billion people who play games of one sort or another, which means that there’s still more than half the population of the world to entice into the world of gaming.

He also highlighted how games have become one of the main social activities for the current younger generation, using his own kids as an example. “Every time I ask them, ‘Do you want to invite your friends over for a play date?’ they say, ‘Can we play video games?'”

Then there’s the rise of AI to consider. “I’m actually a little bit surprised no one was talking about AI in this panel,” Ding said. “I think there are a lot of things that people can do with AI, to build a prototype quicker and cheaper. There are also opportunities in the sense that I feel the bigger potential of AI is not about cost cutting and doing things quicker and cheaper, but to come up with new, innovative gameplay experiences.

“My favourite analogy is always inventing a spaceship. The whole point is not to go from London to Edinburgh or to Newcastle quicker. The whole point is to get on that spaceship and take it to new destinations. I feel like there has been a lot of discussion about how you can leverage AI tools to do things quicker, which is great, but what about the other side of the coin? Have you thought about how we can use AI to build a new innovative, immersive game experience that could make players be more engaged, or even convert some of the non-players into players?”