I wrote for Naavik about alternative funding paths for game studios as venture capital appetite slowed. Read the full article here.

Why I wrote about this

Venture capital for early-stage game studios has cooled dramatically. To be honest, content (=game studios) might have never really been a great venture capital thesis to begin with. I wanted to challenge the assumption that VC money is the only serious way to build a meaningful game company.

The gist of it

It’s not controversial to say that early-stage VC interest in game studios dropped to a low point in 2022. Seed and Series A funding is often driven by expectations of larger, higher-valuation rounds later. When late-stage capital tightens, the early stage freezes first. And that’s exactly what happened.

At the same time, players didn’t stop playing. Demand for content across mobile, PC, and console remained strong, even if consumer spending normalized from pandemic highs. The real question became: if startups create the most innovative games, how will they get built when venture money dries up?

I explored several alternatives.

Bootstrapping is the obvious starting point. Small teams can do remarkable things. Recently, studios like LessMore have scaled meaningful businesses with minimal outside funding. With better tools, analytics, and now generative AI, small teams can push further than ever.

Work-for-hire with parallel internal development is another path. It’s a brutal balancing act: client services demand predictability and milestone discipline, while building your own game requires creative risk-taking. But if managed well, it’s a way to grow sustainably without relying on external capital.

Strategic investors can sometimes provide VC-like early deals. Companies like Sony, Tencent, AppLovin, and Wildlife have backed or incubated new studios directly. In many cases, these are effectively owned greenfield operations. The tradeoff is clear: you gain stability and resources, but you give up independence and upside.

Finally, publishing and co-development have made a comeback. Privacy changes, UA complexity, and rising production costs mean more capital is needed to compete. Deals like Marvel Snap’s illustrate the upside of strong partners, but also the downside: when IP holders and publishers take their cut first, the developer only truly wins if the game is a hit.

There’s no silver bullet. But downturns are when the next wave gets built. Studios starting ambitious projects now may ship just as the market recovers.

Key takeaways

  • Early-stage VC for game studios has dried out in 2022.
  • Bootstrapping is viable, especially with small teams and modern tools.
  • Work-for-hire can finance growth, but it’s operationally demanding.
  • Strategic investors are moving earlier, often in exchange for ownership and control.
  • Publishing is resurging, but layered deal structures mean games must perform exceptionally well for developers to capture meaningful upside.