As venture capital (VC) funds and top investors squeeze the flow of money to traditional startups owing to multiple global macroeconomic conditions, they have now turned their attention on emerging tech like Web3.0 (Blockchain/Crypto/ NFTs) and gaming (Metaverse) where they see immense opportunities. Realising that 'funding winter' has finally set in after a strong rally of more than two years in the pandemic that allowed Internet-driven startups to grow exponentially across the spectrum — edtech, healthtech, e-grocery, food delivery and online home services, they have decided to park their money elsewhere.
Leading the pack is California-based investment firm Andreessen Horowitz (A16Z) which just announced two new funds — a massive $4.5 billion fund for crypto and Blockchain companies and Web3.0 startups and a $600 million 'Games Fund One' that is exclusively focused on the gaming industry.
Web3, or Web 3.0, represents the next generation of the Internet.
A group of former executives from one of the largest cryptocurrency exchanges Binance has also reportedly created a $100 million venture fund.
"Games will play a pivotal role in defining how we socialise, play and work over the next century," said Andreessen Horowitz.
The fund's backers include co-founders at gaming companies like King, Discord, Roblox, Zynga, Twitch, Blizzard, and Riot Games.
Indian startups in the gaming industry have also realised immense opportunities as smartphone usage grows and data packs get cheaper, as high-intensity gaming devices and bigger screens arrive on the scene.
India is currently home to more than 430 million mobile gamers and the number is estimated to grow to 650 million by 2025. Currently, mobile gaming dominates the sector, contributing more than 90 per cent to the current $1.6 billion gaming market in the country, according to a latest report by the Internet and Mobile Association of India (IAMAI).
"The Indian gaming ecosystem consists of gamers of all ages, game developers and designers, investors, and marketers all working together to come up with the latest cutting-edge games, concepts and offers for players," Sean (Hyunil) Sohn, Head of India Division at Krafton, Inc, said.
Gaming startups in India attracted $1.6 billion in the first nine months of 2021, according to a report by investment banking platform Maple Capital Advisors.
Nearly 90 per cent of the investments went to two large players in the fantasy sports and platform gaming sector - Dream Sports and the Mobile Premier League (MPL).
Top venture firms also invested millions of dollars in other gaming startups like PlayShifu, Zupee, and Winzo. PUBG Mobile developer Krafton invested $22.4 million in the home grown esports company Nodwin Gaming.
"In the last 12 years, we had to update our GPUs (graphics processing units) over 700 times, that's the demand coming in from the consumers," said Qualcomm Vice President and President, Rajen Vagadia.
A metaverse and NFT-focused startup known as Sandbox recently raised nearly $93 million in a round led by SoftBank Vision Fund 2, the first investment into crypto assets by the Japanese investment giant. Another NFT-focused startup, known as Sfermion, received $100 million from billionaires Cameron and Tyler Winklevoss (Winklevoss twins) and two general partners from A16Z. Blockchain-based startups from India also aspire to be on the world map.
According to Nasscom, the cryptotech industry in India has expanded over 39 per cent in the last five years. The government has also stated that there will be no blanket ban on all technologies related to Blockchain or Web3.0. Apart from having a robust blockchain space, the technology and entrepreneurship sectors in India too have witnessed significant growth with more than 230 cryptotech startups and 34 Indian companies gaining unicorn status in 2021 itself, according to Venture Intelligence Unicorn Tracker.
Apart from popular crypto exchanges like WazirX, CoinDCX and CoinSwitch Kuber, India is now brimming with Web3.0 startups like Polygon. Rajan Anandan, managing director at Sequoia Capital, recently said that India represents great potential on Web3.0.
"Look at the Indian startups in the Web3.0 space. Some of them are doing great work, and not just in the crypto space. Startups working on Blockchain-based Web3.0 projects in India have continued to grow," Anandan said during the Lenovo Tech World India conference in March.
With capital becoming scarce, Sequoia Capital has also told its founder community to tighten the belt and focus on profitability.
"We are just beginning to see how the increasing cost of money flows through to impact the real economy. If you're stepping back and thinking twice, it's not just you. Belt tightening and priority reassessment will have second- and third-order effects, as one company's costs represent someone else's revenue or purchasing power," the leading VC fund told its founder community.
Sequoia Capital India has invested in almost 30 unicorns of the 100 Indian unicorns.