Venture capital (VC) funding for gaming fell to $193 million in Q2, a 62% drop year-on-year, and a 47% decline from Q1 this year.
This figure is the lowest in five years, with deal volume also shrinking. Only 60 deals were completed during the quarter, representing a 31% drop from the 71 completed in the first quarter.
According to a gaming industry report published by Konvoy, while VC funding fell, private acquisition activity rose by 66%.
Josh Chapman, Managing Director at Konvoy, attributed the decline to fewer new gaming start-ups, less active gaming investors, and a shift of VC investors towards AI.
Chapman believes the trend will continue into the latter part of the year, stating on LinkedIn, “As we look ahead at the 2H of 2025, I believe we will continue to see fewer new companies launched (poor fundraising environment, low valuations, etc) but many of the deals that do get done will be over-subscribed rounds as investors will continue to do more party rounds together”.
Gaming Industry Continues Growth, Despite VC Drop
The global gaming market is projected to be a $189 billion market in 2025, growing to $196 billion next year. Steady growth is expected to continue in the future, with the industry reaching $224 billion by 2030.
The delayed release of GTA 6 to May 2026 has had a sizeable impact on the industry. Konvoy stated that, “The delay of GTA VI has created a vacuum in the 2025 release slate and significantly affects the gaming industry’s anticipated revenues for the year.”
The franchise has generated almost $10 billion in revenue in the 13 years since GTA 5’s release, and developer Take Two is investing $2 billion into the new game. High demand is expected to recoup the investment within 30 days of the game’s release.
The US contributes 26% of gaming revenue at $46.1 billion despite only accounting for 6.4% of global gamers. China generated only slightly more revenue at $47 billion, even though it makes up over 20% of global gamers.
The US also continues to lead the way for VC in gaming startups, attracting 7.7 times more funding than those in China since 2021.
Additionally, the number of VC-backed gaming startups in the US exceeds China’s by more than fivefold, reinforcing the US’s dominance in both monetization and startup investment.
VC Firms Betting On Gambling
While VC was primarily concentrated on AI, companies have also been investing in gambling. Over $2 billion has been invested by VC firms in the US in recent years, with many of the same companies now investing in problem gambling treatments.
Alumni Ventures invested $2 million in Sleeper, a fantasy sports app that reached a valuation of $400 million. The VC group has now invested in Kindbridge Behavioral Health, a telehealth service offering support for gambling addiction.
Similarly, Will Ventures has invested both in crypto casino BetHog, as well as Birches Health, a telehealth provider for gambling disorder care.
This quarter, prediction markets platforms Kalshi and Polymarket also attracted investor attention. Kalshi generated $185 million in a round of Series C funding, which puts the company’s valuation at $2 billion.
Polymarket, meanwhile, is closing in on a $200 million funding round led by Peter Thiel’s Founders Fund, valuing the platform at approximately $1 billion.
