Investors are becoming more conservative about backing video game projects in the U.S. thanks to the recession over the last year and a half, and seem to be shifting their attention to social gaming and tools and services companies.
Analyst firm PricewaterhouseCoopers says that during 2009, venture capitalists invested in 25 video game software-related companies, to the tune of $153.7 million in the U.S. But in 2008, that number was 35, and the total was $214 million.
"We don't want to invest in hit-driven businesses," Alex Finkelstein, general partner at Boston-based Spark Capital, tells the Boston Globe
According to the report, highly visible declines, like the contraction of the music industry -- and Viacom's declaration of intention to seek a 'substantial' refund
of the bonuses it paid subsidiary Harmonix for Rock Band
's performance -- have made investors wary of the traditional business.
But investors like Charles River are still interested in rapid-growth sectors of the game industry like Facebook and social games, excited by the large addressable audience and the amount of time it spends. A recent PopCap survey found that about 24 percent of U.S. and UK gamers play social games actively
Companies that provide tools, services and tech for games are also having luck finding investments -- voice chat provider Vivox recently raised $6.8 million
in a new round of funding, boosting the amount of venture capital it's received since its 2005 founding to $20.6 million. 3D engine tech maker Unity raised $5.5 million
at the close of 2009.