Global gaming startup funding hits a decade low in 2025 even as the industry booms

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Key points:
• 2025 delivered the weakest gaming-startup funding in a decade, with only $627M raised in H1, far below the multibillion-dollar levels of 2021 and 2022.
• Large late-stage rounds have disappeared, with the biggest 2025 raise topping out at $70M, signalling that VCs are shifting capital toward AI, other markets rather than backing new gaming studios.
• Turkey, the US, and Asia dominate the year’s biggest deals, revealing a reshuffled geography of gaming talent and investment.

For most of 2025, global venture markets have shown clear signs of recovery. AI labs pulled in historic rounds, robotics companies secured nine-figure raises, and biotech and deep-tech infrastructure continued to attract patient capital. Yet the gaming sector is experiencing a very different year. The numbers show a market that hasn’t only slowed, but has lost its momentum almost entirely.

Across the first half of 2025, gaming-related startups raised about $627 million worldwide. At the current pace, this will be the weakest annual total in more than half a decade, far below the $2.82 billion raised in 2023, the $2.54 billion raised in 2024, and a tiny fraction of the $12.47 billion that poured into gaming startups at the peak in 2021.

Quarterly figures tell the same story. Funding fell from $396 million in Q1 2025 to just $223 million dollars in Q2 2025, marking the lowest quarterly total in years. That’s the point where the trend stops being cyclical and starts becoming structural.

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The downturn has nothing to do with player demand

It’s always tempting to associate funding weakness with waning consumer interest, but the facts point in the opposite direction. The number of players continues to grow, engagement remains strong, and spending is high. In the United States alone, more than 190 million people played video games last year, and consumer spending crossed $57 billion (via Entertainment Software Association report).

Public-market performance tells its own story. Roblox, Nintendo, Take-Two Interactive, and other major gaming companies have climbed this year. Mergers and acquisitions (M&A) are also healthy. Scopely’s $3.5 billion purchase of Niantic’s gaming business and CVC Capital Partners’ $2.5 billion investment in Dream Games show that buyers still believe in the long-term economics of gaming. The problem isn’t demand but venture capital.

Where the gaming sector money has gone instead

To understand what is happening, it helps to look at the largest rounds of 2025 so far in the chart below. None of them crossed 100 million dollars. This is unusual for a sector that regularly produced mega-rounds in 2020, 2021, and 2022.

The biggest startup raise this year went to Underdog Fantasy in the United States at $70 million. The next two came from Istanbul, where Grand Games secured $30 million and Bigger Games closed a $25 million round. Good Job Games in Turkey followed with $23 million. Hybe IM in South Korea raised about $20.4 million, Slingshot DAO in the United Kingdom raised $16 million, Skate Space in the Japan secured $15.17 million, and Nekcom in China pulled in $15 million.

The geographical mix is also telling. Turkey is becoming one of the world’s most interesting hubs for mobile-gaming talent. The United States remains commercially strong but cautious. China’s presence is smaller than expected. And the absence of large late-stage rounds suggests that investors are3n’t positioning gaming startups for IPOs anytime soon.

Why investors have cooled on gaming

Three factors explain the pullback. First, costs are rising for gaming studios while revenue predictability is shrinking. Major companies have cancelled high-profile titles mid-development, and layoffs have hit nearly every part of the industry. A Game Developers Conference report found that 1 in 11 developers lost their jobs in the past year. Investors are uneasy about this volatility.

Photo by Sean Do / Unsplash

Second, AI is absorbing capital that might otherwise have flowed into gaming. Even though companies like OpenAI, Anthropic, and Midjourney aren’t classified as gaming companies, their tools are now used to generate game dialogue, simulate environments, design characters, and support world-building workflows. The impact is indirect, but the capital shift is real.

Third, venture firms are no longer convinced that gaming provides the growth curves needed for fast fund returns. Peak years like 2021 created unrealistic expectations. The market is now resetting.

The unusual contradiction of 2025

The deeper tension in the gaming sector this year is a simple one. Everything except startup funding looks healthy. Players are spending more. Public gaming companies are rallying. Acquirers are writing large checks. Job losses are high, but the talent pool is stronger than ever.

The missing piece is venture confidence in small and mid-stage gaming companies. That absence explains why deals are smaller, why no pre-IPO rounds are appearing, and why many talented developers are struggling to find companies willing to take risks on new titles.

What this means heading into 2026

By December 2025, the pattern is clear. Gaming venture funding has reached a floor, not a rebound. If the trend continues, 2026 may become the first year where gaming is driven almost entirely by incumbents, acquirers, and AI-enhanced creative platforms, rather than by young studios raising venture rounds.

The opportunity, however, is obvious. The downturn has concentrated global talent in search of new studios. The cost of building games has fallen because of AI-assisted workflows. And the appetite for gaming content has never been higher. Venture capital has retreated, but the foundation for the next breakout studio is stronger than it appears.

A reset year doesn’t mean a lost year. But unless investors return soon, the 2025 slump could reshape the next decade of gaming in ways that leave the startup layer far thinner than the industry needs.

Updated


December 03, 2025

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