Bitkraft Ventures, a venture capital firm specializing in gaming and interactive media investments, has announced the launch of its third fund, raising $275 million. The fund will focus on early-stage investments in gaming studios, platforms, and technology at the seed and Series A stages. With this new fund, Bitkraft Ventures’ total assets under management will exceed $1 billion. This announcement comes shortly after the introduction of another game VC fund, Laton Ventures, which raised $35 million.
Bitkraft Ventures is grounded in its vision of synthetic reality and believes in the transformative power of digital experiences in shaping the future of entertainment. The company recognizes game companies as pivotal players in driving the evolution of digital entertainment. Jens Hilgers, founding general partner at Bitkraft Ventures, emphasizes the importance of the company’s culture and its commitment to being trustworthy and making sound investment decisions.
The gaming industry has experienced significant growth in recent years, with increasing user engagement, activity levels, and monetization across major game platforms. Hilgers points out the success of newly formed game studios and the emergence of AI in game production as factors contributing to this growth. Additionally, Bitkraft Ventures has observed a rise in interest from media and tech giants, as well as private equity firms, entering the gaming market as potential buyers.
Bitkraft Ventures has a strong track record of investing in well-known companies across the globe. Some notable investments include Frost Giant, Anzu, Carry1st, InWorld, Voicemod, Immutable, and Karate Combat. The company’s previous funds have exhibited noteworthy performance, ranking in the top 5% and 8% based on Internal Rate of Return (IRR). Bitkraft Ventures currently operates six venture funds with 130 portfolio companies.
Raising the third fund posed challenges due to the difficulty of acquiring capital from limited partners in the current market conditions. Capital has become more expensive, with higher interest rates and inflation. However, investors remain excited about the potential of the gaming industry, which has proven its ability to experience significant growth. Hilgers believes that the challenges faced by startups and limited access to capital will eventually improve.
Despite the challenges, several tailwinds are supporting the gaming industry’s growth. Emerging markets such as Brazil, India, Southeast Asia, Africa, and the Middle East are driving expansion. Mobile gaming is expected to regain popularity as user privacy trends stabilize. The rise of handheld devices like the Nintendo Switch and Steam Deck allows gamers to play on the go. Augmented reality, virtual reality, and subscriptions on platforms like Xbox and Apple Arcade are also contributing to the industry’s growth.
Exit activity for game companies has remained robust in recent years, with big platforms like Microsoft, Amazon, and Meta entering the market. Private equity firms are also showing interest in the gaming sector, leading to increased transactions. The initial public offering market is starting to open up again, creating new opportunities for game VCs.
Bitkraft Ventures’ network extends to the Middle East, where there is a genuine passion for video games. The Middle East serves as a source of funding for the company’s new fund, along with other regions worldwide. The company’s tactical focus remains consistent, investing globally in video game studios, platforms, technology, and game mechanics.
The availability of talented founders has significantly improved, allowing for investments in a variety of sectors based on their expertise. The game VCs’ role is to invest in startups working on original intellectual properties as big triple-A companies focus on established franchises. Hilgers believes that the gaming industry will continue to grow and innovate, stimulated by talented founders and the acquisition of these companies by great games companies.
While there was a hype surrounding the concept of the metaverse during the pandemic, Hilgers believes that it was attached to things that didn’t fully embody what the metaverse entails. However, he remains confident in the potential of Web3 gaming, which is founded on revolutionary technology enabling a digital-first world and digital asset ownership.
Artificial intelligence (AI) is another significant factor shaping the gaming industry. It can make production and operations more efficient, reduce risk, and improve community management. AI-powered companies like InWorld AI are changing the way players interact with games through dynamic character or map generation.
Despite the challenges faced by the gaming industry, Bitkraft Ventures remains optimistic about its future. The company’s new fund will continue to support early-stage gaming and interactive media companies, driving innovation and shaping the future of digital entertainment.