3 predictions for 2025
What I think will happen in 2025?
Three predictions for 2024 come to mind.
1. Gaming VCs will broaden their focus to consumer startups.
More venture capital firms focused on gaming will follow suit and expand their investment strategies into the broader consumer technology space. Our fund, F4, was a pioneer in this strategic pivot. Predominantly investing in gaming, we began deploying capital more broadly in early 2023, investing in diverse sectors including consumer fintech, e-commerce, healthcare, dating, and learning applications. We recognized the transferability of our skills as seasoned game developers and entrepreneurs, which are highly applicable to most consumer-focused startups.
Over the past two years, we at F4 Fund have invested in 19 companies, with only 4 being gaming startups. I believe that in 2025, many larger funds that have clung to pure gaming deals will start to pivot. Without revising their messaging and investment theses to reflect a broader consumer focus, they may struggle to find compelling opportunities.
This migration of gaming-focused venture capital into wider consumer markets represents a significant opportunity. It expands the influence of gaming expertise across the global tech startup ecosystem and creates more pathways for gaming professionals to explore entrepreneurial opportunities beyond their traditional domain. By showcasing how gaming skills can be leveraged in broader consumer markets, this trend will likely inspire more cross-sector innovation and entrepreneurship.
2. AI tools for games will struggle to raise follow on funding
Over the past two years, the technology landscape has been inundated with emerging startups claiming to develop groundbreaking AI tools for game development. These ventures predominantly focus on generative AI applications, such as art generation tools and advanced non-player character (NPC) and AI character technologies. Venture capitalists have been particularly receptive to these AI-driven game development innovations, with many AI character and game development tool startups raising substantial funding rounds, often in the tens of millions of dollars.
However, I anticipate significant challenges for these companies in 2025. Many are likely to become stagnant "zombie companies" or face potential closure. The primary reason for this projected downturn is the limited market potential and increasing commoditization of generative AI technologies. The current landscape is saturated with versatile tooling that can be developed in-house, and major AI model companies like xAI, Anthropic, and OpenAI are rapidly democratizing generative AI capabilities.
While some companies may successfully establish niche businesses by selling AI tools to game developers, securing venture capital backing presents a substantially more challenging proposition. They’ll need to demonstrate substantial revenue growth, which I think seems unlikely for those focused solely on gaming. Alternatively, they must prove their appeal to a broader customer base beyond gaming, which companies like Praktika.ai and Eleven Labs have successfully done.
3. Mobile gaming will strike back
In 2024, I noticed a renewed positivity for mobile gaming—the most I’ve seen since 2021. The funding market seems more willing to allocate capital to mobile gaming than it has in years. Here’s why I think this shift is happening:
First, the dry powder in gaming VC funds is being deployed. Many gaming-focused VC funds raised hundreds of millions of dollars in 2021, and that capital now needs to be put to work. Most VC funds operate on a four-year investment period, meaning the funds raised in 2021 must be deployed by 2025 at the latest. Beyond this window, funds are restricted from making new investments.
Secondly, mobile gaming remains the best bet for venture returns in gaming. Even after the privacy changes from Apple’s IDFA overhaul shook the industry, mobile gaming still offers the best games industry opportunity to leverage VC funding as rocket fuel for growth. It’s taken time for the dust to settle and for new user acquisition channels—like incentivized ads—to mature. Now, we’re seeing a wave of mobile gaming startups that spent the last few years developing their games, and they’re ready to take advantage of these improvements.
This combination of available capital and a more stable user acquisition landscape is making VCs eager to fund mobile gaming again. After years of uncertainty, mobile gaming is proving itself yet again as a fertile ground for high-growth opportunities.
Final words
Let's see what happens in 2025. I'm really optimistic about the second half of this decade; what an amazing time to be alive.
Photo by Kelly Sikkema on Unsplash