Lessons from the Only Major Bull Run in Gaming VC History

Analyzing the single sustained period when gaming was a great fit for venture capital, and what founders and investors can learn for the next paradigm shift.

Photo by ELLA DON on Unsplash

In early 2025, Mitch Lasky and Blake Robbins talked on the podcast, the Gamecraft podcast, about the "The Venture Deadpool", which refers to the amount of venture capital dollars that have been spent on gaming companies. Backing resumes with tens of millions, basically trying to prop up big game studios where ex-Riot, ex-Blizzard, ex-you name it studio people have left to start their own thing. Usually it's 40 people and a monthly burn of 3 million. If you haven't listened to the podcast, you should really have a listen. The guys highlight why gaming and VC isn't working at all.

But one aspect it doesn't mention, which is that a big part of the VC investments have gone into mobile gaming, and in the past 20 years, most of the venture dollars returned have come from backing mobile gaming. This includes Zynga (acquired for $12.7 billion), Scopely ($4.9bn), King ($5.8bn), Supercell ($8.6bn), Niantic ($3.5bn), Glu Mobile ($2.1bn), Peak Games ($1.8bn) and many others.

For years, mobile gaming was a perfect fit for venture capital. It had “hockey stick” potential, where a small studio could build a game, raise enough funding to run paid user acquisition, and quickly propel itself to hundreds of millions or even billions in annual revenue.

I saw this firsthand at Supercell. Clash of Clans went from six months of development to generating a million dollars a day in a matter of months. Nothing like that had ever been seen before, and VCs, especially in Europe, noticed. The model was clear: fund a talented team, give them enough to launch and scale a game, and the upside could be enormous.

For most of the 2010s, right up until the early days of the pandemic, this model drew huge amounts of venture capital into mobile games. And for a while, it worked. The pandemic years saw a wave of acquisitions, the most visible being Scopely’s near 5 billion dollar deal, which was the culmination of a decade of VC bets paying off.

The only problem is that pretty much all of these happened in 2020 or 2021. This piece talks about why that is a problem. Three main problems have shifted the landscape.

1. Scaling is harder, margins are tighter

Many venture-backed mobile studios now struggle to scale. Operational costs are high, user acquisition is expensive, and market saturation makes finding profitable channels a constant battle. Success today requires exceptional marketing know-how from day one, knowing not just how to make a great game but how to market it profitably. Too often, studios chase whatever gameplay trend is hot without validating its marketability first. Even when they do focus on marketability, the approach quickly saturates. The result is that the mobile games industry has reverted to being hit-driven like the rest of the industry, with only a few breakout successes emerging.

2. The incumbents have entrenched themselves

In the early 2010s, small entrants could outmaneuver bigger players. Now the incumbents have staying power. The top mobile game developers have the budgets to experiment endlessly, run massive live operations teams, and constantly release content that keeps lifetime value growing. A startup with a few million, even 10 to 20 million, in venture capital cannot match an incumbent that can throw 500 people at a live game. They launch into a market where they must immediately cater to early cohorts, keep them engaged, and sustain monetization. Without the resources to do this at scale, startups simply cannot compete.

The venture model for mobile games thrived when speed to market, aggressive UA, and market gaps created outsized opportunities. Those conditions are gone. The market is saturated, dominated by a few players with deep pockets, and the path from launch to scale is steeper than ever. For VCs, the upside is still there, but the probability of hitting it has dropped, and with it, the appetite for funding mobile games at the scale we saw a decade ago.

3. Acquisitions are all-time low

I just a matter of a few years, mobile gaming went from an industry that was constantly getting positive news of acquisitions, to nothing. Sure, you would see a Scopely getting acquired, but that's not like they just showed up and had over-night hockey-stick success. Scopely was a decade long journey where the company raised billions in venture capital, and bought several gaming companies and grow through acquisitions.

First off, in a cooling industry, no one is lining up to buy a low-margin mobile game studio. Acquirers want profitable businesses with healthy cash flow, not just revenue that looks good on paper.

Second, who is actually buying right now? Yes, there are incumbents with cash, but for a deal to happen the target needs to be highly attractive and strategically valuable. In 2020 and 2021, conglomerates like Embracer Group were scooping up almost anything that moved, betting that consolidating gaming assets under one roof would create more value. But the reality was different. The overhead of managing dozens of studios added heavy costs, and many founder-led studios lost their creative and operational edge once the founders left or their influence diminished after acquisition.

How does gaming get back in favor?

In the short 25-year history of venture capital investing in games, we’ve really only seen one major bull run. That was mobile gaming, from around 2010 to 2022. The entire opportunity was driven by a new distribution advantage. Suddenly, over a billion people had smartphones in their pockets, and in Western markets, those users had real spending power. It was a massive shift in how games could be delivered and discovered.

People might draw comparisons between that moment and what’s happening now with AI. But so far, AI hasn’t created any distribution unlocks. In AI and elsewhere, we really haven’t seen a player emerge who could offer a fundamentally better way to reach users or provide a more convenient gaming platform for the masses (often prerequisite for VC) than the smartphone app stores.

I do believe there will be another paradigm shift in the near future, one that goes beyond what smartphones made possible. On the gameplay side, AI already offers major advantages, from rapid prototyping to vibe coding and creative tooling. But distribution remains the lifeline of any successful gaming company, and we’re still waiting to see how AI might change that.

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