Blockchain games raised over $1.4 billion in two months, with Jack Ma and Sequoia China joining the game

Gaming is one of the hottest topics in the blockchain industry this year.

Axie Infinity, the largest game on Ethereum, has achieved remarkable development. In August this year, Axie Infinity generated more than $334 million in revenue in a single month, surpassing the $231 million revenue of the traditional game "Honor of Kings" in July this year, which made the blockchain industry boil and brought this "niche" field back to the public eye.

With the support of concepts such as the Metaverse and NFT, blockchain games are still heating up, attracting investment institutions to enter the market. According to incomplete statistics from Chain News, in the past month, more than 20 blockchain game projects announced that they had obtained financing. Traditional capital such as Sequoia China, Rothschild Trust Capital, Jack Ma's Blue Pool Capital and Samsung Venture Capital have also bet on this emerging field.

According to statistics from Lianxin, the cumulative amount of blockchain game financing has exceeded US$1.4 billion since September.

Venture capital actively deploys blockchain games

Before the success of Axie Infinity, the public’s impression of blockchain games was stuck on the CryptoKitties game in 2017. Since the CryptoKitties game boom lasted only a short time, blockchain games were only a relatively unpopular and niche market in both the blockchain industry and the gaming industry.

The cold start of blockchain games originated from the popularity of the NFT concept, and Axie Infinity allowed the market to see the feasibility of the unique business model of blockchain games, namely P2E (Play to Earn), an economic model of earning money while playing.

In contrast to P2E, it is the F2P (Free to Pay) model with the highest market coverage in the traditional gaming industry. That is, players can play games for free in the early stages, but if they want to get a better gaming experience in the later stages, they need to recharge.

The most successful representative of the F2P model is the online games in China. It is precisely because of the maturity of online games in China that domestic game manufacturers have begun to seek new growth points from overseas expansion and 3A (referring to high-cost, high-volume, high-quality games, the rating originated from the United States, AAA is the highest level) masterpieces. Excellent 3A games have always appeared mainly in North America, and in fact, European and American game manufacturers have only begun to taste the sweetness of F2E in recent years. News of game manufacturers over-exploiting players is common around the world.

Axie Infinity was launched in 2018, but it quickly became a well-known project on Ethereum until it brought game gold-making income to Filipino players during the epidemic.

Well-known NFT investor Andrew Steinwold once worried that P2E would inflate the NFT bubble - this business model may have a place in the gaming industry, but it is not the next direction of the gaming industry after P2E. However, Axie Infinity remains popular. In August this year, its monthly revenue exceeded the monthly revenue of the traditional top mobile game "Honor of Kings" in July. Axie Infinity has reversed investors' views with its own growth and even attracted the interest of traditional venture capital.

According to incomplete statistics from ChainNews, since September, about 40 blockchain game projects have announced financing, with a total financing amount of more than US$1.46 billion. Data shows that the financing density in October is significantly higher than that in September.

In September, Ethereum-based fantasy football game Sorare announced that it had raised $680 million, led by SoftBank; NBA Top Shot developer Dapper Labs completed a $250 million financing led by hedge fund Coatue Management. These were the two largest financings announced that month.

In October, more than 20 blockchain game projects announced that they had obtained financing (as shown in the figure below). These projects that have obtained financing cover the underlying protocols, game developers, game projects and game guilds. They are all NFT projects, and P2E chain games are the main ones. In addition to blockchain venture capital institutions such as Panda Capital, Paradigm, and Delphi Digital, the investment institutions that have actively participated in the game also include traditional venture funds and game companies such as Sequoia China and Ubisoft Entertainment (French game giant). It is worth noting that Sky Mavis and The Sandbox announced that they had obtained financing of US$152 million and US$93 million respectively, and the main investment institutions corresponded to A16Z (the world's largest crypto fund) and SoftBank Vision Fund 2 respectively.

Sky Mavis is the developer of Axie Infinity, and The Sandbox is the largest blockchain virtual land economy game.

Animoca Brands becomes a traditional institutional investment channel

Animoca Brands frequently appeared in blockchain game financing news in October, and frequently invested in blockchain game projects.

It is worth noting that Animoca Brands is behind the two projects mentioned above, Sky Mavis and The Sandboxd.

Animoca Brands led the investment in Sky Mavis in 2019; in 2018, Pixowl, the game developer of The Sandbox, was acquired by Animoca Brands, and Arthur Madrid, co-founder and CEO of The Sandbox, is a member of the board of directors of Animoca Brands.

Coincidentally, Animoca Brands also recently announced the completion of a US$65 million financing round, with almost all the investment institutions participating in this round coming from well-known traditional venture funds and industrial capital.

According to its official website, Animoca Brands is an Australian mobile game development company headquartered in Hong Kong. It was founded in 2014, listed on the Australian Stock Exchange through a backdoor listing in 2015, and delisted in 2020).

Animoca Brands has become a unicorn company by developing blockchain games and investing in blockchain game projects. So why does Animoca Brands attract institutions to bet on it?

Public information shows that the company not only develops and invests in blockchain games, its star products are mainly chain games and related ones.

In the blockchain gaming sector, Animoca Brands has introduced traditional world brands into blockchain gaming by acquiring gaming companies, launching original games, and actively investing in related infrastructure, star blockchain games, and peripherals (guilds, etc.).

Animoca Brands has also made more than 100 investments in NFT-related blockchain companies, among which the star projects include Sky Mavis (Axie Infinity), Dapper Labs (NBA Top Shot card game), Yield Guild Games (the largest blockchain game guild), etc. In addition, from the investment in Opensea, the world's largest NFT trading platform, and the recent investment in NFT protocols, it can be seen that the company is not only a big player in blockchain games, but also a big player in the NFT industry.

Animoca Brands, which holds many well-known NFT assets, naturally attracted the attention of traditional institutions. Since Animoca Brands was delisted from the Australian Stock Exchange, it has undergone two rounds of financing, both in 2021.

The company raised funds in the first half of 2021 with a valuation of US$1 billion, which was raised in two rounds. In May, Animoca Brands announced that the first round of fundraising amounted to approximately US$88.9 million, which made the company's valuation cross the US$1 billion threshold. The round was led by Kingsway Capital, with participation from investment funds such as Rothschild Trust Capital.

Two months later, Animoca Brands announced that it had raised another US$50 million, with the corresponding valuation unchanged. Participating institutions included Blue Pool Capital, Samsung Venture Investment Company, Scopely, Token Bay Capital, zVentures (Razer's corporate venture capital department), etc.

It is worth noting that Blue Pool Capital is a family wealth fund established in Hong Kong by Jack Ma and Alibaba’s core founder Joseph Tsai.

In October 2021, Animoca Brands announced that it had raised another $65 million, and its valuation doubled to $2.2 billion. Institutions participating in the latest round of investment include Liberty City Ventures, Ubisoft Entertainment, and Sequoia China.

SoftBank Vision Fund 2 was recently revealed to have invested $93 million in The Sandbox, a subsidiary of Animoca Brands, to develop NFTs and the metaverse.

It can be seen from Animoca Brands’ financing history that traditional institutions’ attitude towards blockchain games has undergone tremendous changes, and such changes have been put into action, namely, by investing in Animoca Brands to enter the world of blockchain games and NFTs in a big way.

The gaming industry is changing

As the Metaverse becomes popular, more and more large companies are taking the Metaverse as their second growth curve. Facebook (now renamed Meta), Nvidia, Tencent, etc. are actively embracing this track. As one of the outposts of the Metaverse, blockchain games have attracted the attention of some traditional game companies. GameStop and Ubisoft Entertainment have successively expressed their interest in blockchain games and NFTs.

The P2E business model is effective, which has led to the explosion of blockchain games this summer. Yat Siu, founder and chairman of Animoca Brandss, and NFT investor Andrew Steinwold believe that P2E is a means for blockchain games to quickly attract players.

Andrew Steinwold said that if only half of the world's 2.7 billion gamers can be attracted, a free-trading economic system can be formed, which will not only release billions of dollars and create a new economy, but also provide new economic opportunities for millions of people.

That is to say, the expression of P2E in the concept of the metaverse is to create new types of jobs, providing game participants with opportunities to make money in addition to game developers.

According to a Messari research report, the greatest significance of blockchain games is to create a stronger community, and economic alliances among young people are expected to create greater value.

However, blockchain games have also been counterattacked by traditional game platforms. Steam, the world's largest digital game distribution platform, stated that it is prohibited to release games based on blockchain technology on the platform.