on the economics of venture investment in gaming

game teams used to spend years in pre-production, planning, and so were large scale enterprises (EA, blizzard, bioware, rockstar, these huge studios)

f2p changed the economics, making gaming venture investable by allowing you to release a game with tiny % of total development + the total potential capex before validation & future scale up (vs AAA). f2p game teams came up in the era of consumer social and inherited their data driven playbook (machine zone, zynga)

ai is changing the economics of development again, shortening the process to go to prod, fundamentally you will have cutting edge from large scale enterprises, but for a while gaming will be quite a confused industry esp coming down from the highs of 2021 x covid.

cheaper production will allow investors to demand more from entrepreneurs before pouring in funding, but that doesnt make the category uninvestable, since gaming (esp f2p mobile) is still one of the few biz models that can scale w/o expanding dev team proportionally.

it will be rare to see large budgets greenlit now, or funding of new studios, far more emphasis on experiments, and potentially some incubator programmes ("you will only be able to make the games that ai can make")

as for venture investability of games today, venture only really remembers the breakout names because of the powerlaw, because that big exit tells the story that helps raise the next fund. (208 gaming PE and M&A deals in 2025, vs 778 in 2021)

so in the ai era, investment has poured into:
- world models (world labs, general intuition)
- ai game creation (sekai, spawn, astrocade)

a lot of the funding in gaming has pivoted also to pure ua financing, which puts most of the early stage risk on the gaming entrepreneur, since capital chases the highest roi opportunities [private credit, ai infra companies], since you'll need to prove traction and good ltv-cac ratio before you can secure that financing.

gaming has always been very power law, but perhaps the future of game studios in the ai age really will just be microteams, smaller, lean teams on tiny salaries. and them churning out niche hits will survive via indie gaming funding.

also, roblox devs quietly printing, again. but they're on discord, not x