Startup Funding and Gambling: Exploring the Role of Venture Capital in the Gaming Industry

It's a fascinating field that makes use of the latest technology, such as AR, blockchain, and cryptocurrencies, but also relies on traditional and ready-made markets, such as gambling enthusiasts.

In this article, we will explore the role venture capitalists play in the online gambling industry and how and why they support some of the businesses that are working and growing in this field.

Why is the gaming industry a Lucrative Investment?

The gaming industry is on the rise, making it a good investment, at least in the short and middle term. There are many reasons why this is the case. The governments that have prohibited gambling are changing their mind as online gambling becomes widely available.

There's also an increased use of cryptocurrencies as a mainstream payment method. It makes it easier for players to place quick wagers using casinos based abroad and to do so without using any traditional financial institutions such as banks or cards.

There are also many interesting venues that the investor can get into. These range from traditional gambling options such as baccarat websites to interesting and tech-savvy options such as NFT gambling, blockchain-based games, and live betting on niche sports.

The Size of the Industry

The online gambling industry has been growing for years, and chances are that it will continue to grow in the years to come.

The gaming industry is expected to increase in value to $315 billion by 2026, attracting significant venture capitalist interest. It directly employs 66,000 people and indirectly contributes to the employment of 220,000 people. Global eSports revenues were approximately $1.1 billion in 2021, with $833 million, or 75%, coming from sponsorship and media rights.

According to some sources, while venture capital funding for games continued to stagnate during the second quarter of 2023, the total deal value increased 12% from the 1st quarter, and the number of closed deals declined 29%.

From the third quarter of 2022 to the second quarter of 2023, 328 gaming content startups raised almost $2.9 billion in financial investment, and development startups raised $1.7 billion via 108 deals.

An Opportunity for Strategic Partnership

There are many opportunities for strategic partnerships within the gaming industry. Investors can enter into such arrangements with many actors that operate in this field. Many investors are creating partnerships with gambling institutions, and others are entering into agreements with eSports teams that are growing in popularity by the day.

Others are still forming strategic partnerships with teams and leagues and, in many cases, creating unique betting options, such as those relying on NFTs. The complexity of the field provides different investment opportunities and allows investors to hedge their bets.

Many Different Revenue Streams

Investing in the online gambling industry also provides investors with many different revenue streams. Some of these come simply from the gambling site's revenue from their primary work. Others come from streaming rights, and it's also possible to utilize NFTs and communities around them to generate revenue based on attention value.

As is the case with any other investment, different revenue streams are a way for investors to hedge against the inherent risks involved in supporting online businesses. Various revenue streams will cover the losses if one of those streams underperforms, allowing the investors to grow the business even through bad times.

Global Reach

The online gaming market is a truly global business with clients and customers from all over the world. With the use of VPNs and a reliable internet connection, almost anyone can use a gambling site regardless of where they are based and what their government's policies about gambling are.

With the use of cryptocurrencies, the reach has gone even further. Cryptocurrencies have become the most common payment method for online gaming and betting. They don't use any centralized structures, allowing players to make wagers quickly, safely, and anonymously. For startup investors, having a business with a global reach is an exciting proposition.

A Young Demographic

Betting online and playing online games have a wide player base, but lately, a younger generation of players has started to take over the industry. This generation has come of age on the internet, is familiar with the technology involved, and has newly found disposable income to spend.

The generation will dominate the field for the next decade, if not more; therefore, investing in its interest seems like a good long-term approach to startups. The generation also has new expectations from the industry - such as focusing on games of luck and using mobile devices exclusively.

Mainstream Acceptance

There's a change in attitude when it comes to the use of cryptocurrencies and online gambling. Both the hobby and the payment method are now widely accepted and part of mainstream culture. Big corporations, brands, sports teams, and leagues are all behind eSports, online gambling, and the use of crypto.

Many investors are looking for ways to capitalize on this change in attitude. It's also important to note that in the years to come, this change can be a source of problems for potential investors, as it will lead to heavier regulations in the industry. These are already starting to happen when it comes to knowing your customer's laws and regulations to prevent money laundering.

Integrating New Technologies

Online gaming and gambling are also industries that are heavily integrating with the latest tech developments. Technologies such as AR and VR were just ideas from sci-fi films a few years ago, and now they are widely integrated within the online gambling industry.

When it comes to AR, it's already used for major sports events such as FIFA World Cup. Fans can use it to watch the games in real time, while AR can be used to get access to the latest statistical data. It makes the decisions players make, more scientific and based on data.

Potential For Innovation

Investors are always looking for ways to innovate their innovation and the industry they are working with. That way, the product stays fresh, and there's a chance for growth in the future. The online gaming industry is perfectly suited to innovation as it's connected to tech development and very much depends on it.

The technology needed to run global online gambling sites has expanded greatly in just a few years. Blockchain has quickly found new applications and uses, as did the data analysis and the other technologies used in online gaming. Therefore, new ways to use technology will also be developed.

To Sum Up

Startup investors are looking for online gambling and gaming businesses as their next venture. Given the tech-savvy and future-oriented sports betting industry, the two are a good match. In recent years, it has become accepted by the mainstream public and has started to include various new technologies and social features.

The industry has a lot of potential for innovation and can create diverse and steady income streams, which is what risk-averse investors are looking for. Online gaming is also popular with younger players, who will dominate the industry in the years to come.