A lot of money was thrown around as the pandemic hit. The US Federal Reserve set interest rates near zero, so borrowing money was easy and cheap, and VCs funnelled that money into a sector that was booming at the time: games.
Player spending on mobile games was estimated to reach $89.6bn across the Apple Store and Google Play Stores in 2021, 12% growth over an already successful 2020, according to Sensor Tower data. So everyone wanted a piece, which is why the industry saw several mega-investments and acquisitions.
In 2020, Toon Blast maker Peak Games was bought by Zynga for $1.8bn; Royal Match creator Dream Games raised $255m in 2022; Blitz Busters developer Spyke Games brought in $55m in 2022 and another $50m in 2024; Tilting Point raised $235m in 2021; and Zynga co-founder Justin Waldron’s Playco raised $100m in 2020 and another $40m from Meta in 2022.
These are the biggest of the pandemic VC investments into mobile games, but hundreds of millions of dollars were spent in smaller funding rounds into lots of different studios. Anton Gorodetsky, co-founder at market intelligence platform InvestGame, called the period “a historic peak in gaming investment”, a moment that was “fuelled by pandemic-driven engagement, cheap capital and aggressive VC and M&A activity.”
Gorodetsky also said, however, that mobile games (alongside live operations and web3) saw massive funding that was “often based more on user growth than sustainable business models.”
Investors hit a massive wall in the third quarter of 2022, according to data from investment bank Aream & Co. That’s when the zero interest-rate policies softened and the Federal Reserve raised rates. Investments cooled with it for that reason, but also due to other factors, like a decrease in player spending, bringing numbers back down to pre-pandemic levels.
The effects of the downturn have been clear for all to see, with tens of thousands of staff laid off, games canceled and studios closed. “As global economies reopened, gaming time declined, revenues shrank, and inflation eroded consumer spending,” explained Gorodetsky. “Apple’s privacy changes significantly impacted mobile ad monetisation, while overfunded studios faced bloated costs and a decline in demand. VC funding collapsed – dropping 74% YoY by Q1 2023 – and mass layoffs followed, with thousands of jobs lost across the industry.”
But VCs aren’t disappearing, they’re just shifting focus. Instead of investing in content and studios, VCs are funding infrastructure and tools. And obviously, a lot of money is being invested into AI startups like Stability and Parametrix, with data from InvestGame suggesting 65% of infrastructure deals went into AI startups in 2024.
It doesn’t mean that investors aren’t funding games, though: Gorodetsky said Türkiye is a regional breakout for big mobile game studios that continue to get funded. Dream Games, for instance, raised $255m in 2022, and in May, private equity firm CVC announced a big investment in the Royal Match developer. Dream is now valued at a whopping $5bn. Istanbul’s Spyke Games has also attracted more than $100m in funding.
“Turkey attracted $0.8bn across 113 deals, becoming a global mobile gaming hotspot thanks to early-stage studio momentum,” said Gorodetsky. The VC money raised for these Türkiye-based studios is funding the continued success of these already-thriving studios and games.
It’s in some of the smaller funding rounds where we can see that investing millions could still not save studios from layoffs and closures. Tilting Point, which raised $235m in 2021, laid off up to 20% of its staff in 2024, something CEO Kevin Segalla blamed on the “tough” market at the time.
Papukaya was founded in 2020 and backed by mobile giant Supercell. It closed in 2024: “Making games is hard,” CEO Drusilla Hollanda said in a LinkedIn post announcing the shutdown. “And making games without blueprints, with a more experimental approach, proved to be extremely difficult. Especially for a market that has become more and more challenging to newcomers and where UA has become a whole other game to crack on top of the actual game.”
Plenty more mobile studios shut down over the past few years, even with backing from larger publishers and internal funding, including Square Enix Montreal, Industrial Toys, Neon Koi, Alpha Dog Games and Rumble Entertainment.
Playtika has also been busy. One of its biggest investments in 2022 was a $25m minority investment in Ace Games, the maker of Fiona’s Farm. That same year, Playtika laid off hundreds of workers, shut down games, and closed at least one studio.
Gorodetsky said that the pandemic-driven boom in investment “built visibility and infrastructure,” but also “overvalued studios and short-term thinking.” There have been successes out of it, yes – but the studios that saw the best returns already had huge hits in their catalogue.
Gorodetsky says the decline of VC funding is due to investors becoming “more cautious”. While VCs are retreating from mobile – hypercasual funding has “virtually disappeared,” said InvestGame in a recent report – buyers have “doubled down”.
Specifically, investors are acquiring studios with proven success. It’s more than just investing in a game. It’s investing in capabilities like live ops and monetisation systems.
“VC isn’t gone,” adds Gorodetsky. “It’s more selective, favouring infrastructure, scalable tools and mobile ecosystems with clear traction over risky, content-heavy bets.”
