Blockchain gaming under the microscope part 3: funding and guilds

This four-part series dives deep into the recently published 2022 Blockchain Gaming Report to distill the key insights for readers. The first part looked at the potential for mass adoption of blockchain gaming, in which players use blockchain technology to earn assets with real-world value. The second part looked at the speculation bubble in play-to-earn games. This, part three, looks at how the funding and the guild landscape have changed from the peak of the bull market.

First, the report looks at the funding landscape in Q3 2021. That quarter saw an exponential growth in capital, with more than $1 billion flowing into the sector. Companies building platform layers and infrastructure for future games to live on benefited the most, in terms of funding size. Game developers were getting funded – albeit with less capital – but there was an emerging divide between small budget, big ambition developers and the triple-A developers.

By Q3 2022, total deal value was down by 19% year on year ($875M vs $1.1B). However, the total deal number was up 2.6 times year on year (58 vs 22). Seed round checks were somewhat smaller ($7m compared to $12M), and 2021’s seed round companies graduated to Series A, and some to Series B/B+. The biggest Q3 2022 deals were Limit Break’s $200M raise and Animoca Brands’ $110M raise.

Overall, the deal market is maturing, with more capital going towards blockchain gaming studios that use blockchain gaming infrastructure to produce engaging gaming content. Finally, the report adds, deal activity will continue to normalize going into 2023, as the bear market will reset the market.

In Q3 2022, guilds are one sector that did not see much funding. A large majority of guilds were created during the speculative bull market, and focused on play-to-earn game Axie Infinity. Guilds, which are essentially scholarships for players that want to earn yield on in-game assets, raised $200M over the past two years, with participation from notable venture capital firms like Andreessen Horowitz. But as part two of this series pointed out, the play-to-earn model is unsustainable and experiencing a major decline.

Super guilds like Yield Guild Games (YGG) are looking at significant revenue declines. So far, most of them have relied on community and investment management. That is, building an ecosystem around game scholars and efficiently managing the income from game yields. But that is not enough to sustain all of the 24,000 guilds on the market right now. 97% of players are in micro guilds (10-100 players), while only 1% of players are in macro guilds (1,000+ players).

Therefore, most guilds are undergoing a pivot throughout 2022-23. Unsurprisingly, large guilds like YGG and Meric Circle have better chances of executing this into a long-term sustainable business model. To do that, they can make use of their existing strengths or build new strengths to evolve. For instance, YGG is pivoting into becoming an e-sports organization. Another avenue is building new technology products like NFT marketplaces or ID layers allowing players to track their in-game assets across games. Guilds can also make use of the experience and human capital they acquired, such as providing beta testing services by its lower-skilled scholars. Such value-add services would provide a whole new revenue stream.

Another area is content, where guilds could drive interest through articles, videos, streams and other media. Still, the future of guilds hangs very much in the balance. With a market in its consolidation phase, it is premature to predict the future of guilds.