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Why are investors and VCs betting big on Indian gaming startups?

Investors are upbeat about the Indian gaming ecosystem that is growing at a rapid pace, especially post-pandemic

By  Tasmayee Laha RoyOct 14, 2022 10:00 AM
Why are investors and VCs betting big on Indian gaming startups?
India’s gaming opportunity is at a once-in-a-generation inflection point and the sector is witnessing a huge influx of investors and funds. (Representational image via Unsplash)

Note to readers: There has never been a better time for gaming and esports in India. While user traffic has skyrocketed in the last two years, 2022 is also a year of firsts for the industry. From winning the first medal at the Commonwealth games to the first televised BGMI series on primetime Star TV, the year has seen some big developments. With new brands and new players entering the market, esports and gaming have also become a popular marketing tool for marketers across the board. The esports market size in India has quickly scaled to Rs 3 billion in FY2021 and it is expected to reach Rs 11 billion by FY2025. Keep up with the big trends and big players in the space in our In-Focus special series.

The Indian gaming ecosystem houses some of the fastest growing startups in the country, providing massive scope for investors in this space over the coming decade. Investors from India and abroad including names like Tencent, Steadview Capital Management, Sequoia Capital, Kalaari Capital, Dream Incubator Inc, Accel, Neoplux, AET Fund and many others, are investing generously in the sector.

As per investment promotion agency Invest India between January and September 2021, $1.6 billion was received in funding and mergers and acquisitions. Out of this, real money games attracted $700 million.

“India’s gaming opportunity is at a once-in-a-generation inflection point, growing 35 percent year-on-year for the foreseeable future. That makes it a tremendous asset class for investors looking at outsized returns over a consistent timeframe,” says Justin Shriram Keeling, Founding General Partner at the country’s first gaming and interactive media fund, Lumikai.

Keeling says that the genie is truly out of the bottle and this has attracted interest from a variety of investors from early to late stage.

Over the last 18 months alone Keeling says the industry has seen the emergence of three unicorns, a successful IPO, and two M&A deal exits at a combined $ 600 million sale value.

“Later stage private equity and growth stage investors are increasingly active in the Series B and onward opportunities, especially as the glass ceiling for domestic gaming IPOs has been shattered. Critically, early stage investors like Lumikai have an important part to play in sourcing and catalyzing the next wave of gaming leaders as M&A interest remains extremely strong,” Keeling tells Storyboard18.

Lumikai saw four of its seed stage India gaming investments graduate in the last six months, at multiples of 6-7x. Their research points to $4-5billion in gaming revenue growth over the next four years, which equates to a lot of untapped white space.

The fund is keeping a close eye on creator-led gaming and live platforms, more sophisticated midcore games driving in-app purposes, and high quality made in India titles.

Between January and September 2021, $1.6 billion was received in funding and mergers and acquisitions. Out of this, real money games attracted $700 million.

Unlocking the next level of growth

The unprecedented growth of the industry is continuing to open foreign investment opportunities, estimating $ 120-160 billion per year by 2025, says Satyam Rastogi, Founder and CEO at micro eSports tournament platform, Khiladi Adda.

Rastogi points out some of the major reasons for investor’s passionate interest in the industry.

“Era of digitization, larger prize pool, investment growth, monetization formats and a thriving economy are the major backings beyond the investors’ interest,” he says.

While Khiladi Adda is still bootstrapped and net positive in its operations, the company is looking for its first round of funding to unlock its next level of growth. The funding that will be raised in the future will be used for marketing purposes and product enhancement.

In fact, it’s not just gaming companies alone, even adjacent categories and brands are also benefiting from this growth spree.

This September, Kalaari Capital pumped in $1.5 million in a seed funding round in Delhi-based gaming education startup Outscal.

Level-up funding

Talking of funds and how they are benefiting the gaming companies, Rooter that raised $ 25 million as part of theirSeries A round earlier this year led by marquee investors like Lightbox Ventures, March Gaming and Duane Park Ventures and backed by their existing blue-chip investors like 9Unicorns, ADvantage, Capital-A and Goal Ventures, along with IeAD Sports and Health Tech Partners, is deploying the investments to scale user growth, create a robust content creator ecosystem, and build a marketplace for the gaming community

Piyush Kumar, Co-founder and CEO, Rooter says they are focused on driving the maximum growth for the gaming creator community.

Quantifying their success, Kumar says, “Over the last eight months, we have crossed 50 million app downloads and over 16 million MAUs. The top 12 Esports teams in the country and over 1.2 million unique creators every month, stream on Rooter. Also, we’ve become the first game streaming and esports platform to introduce monetization channels and are sharply aiming for revenue growth from $5mn ARR right now to $10mn before the end of 2022.”

Like Rooter, a number of other companies in the space have received funding in the recent past.

Games24x7 raised $75 million at a valuation of $2.5 billion in a funding round that was led by Malabar Investment earlier this year. WinZO, Dream11 and MPL also raised funds in the recent past.

It seems the runway is clear and the rise of gaming in the country is attracting brands, advertisers and investors.

First Published on Oct 14, 2022 9:18 AM