Gaming VC Funding Drops to $1.2B as Deal Count Hits Five-Year Low

• Gaming VC funding dropped to $1.2B in Q1 2025—the lowest deal count since mid-2019.

• In-game ads and AI-driven platforms remained bright spots amid broader investment slowdown.

• 134 deals were closed, down 5% from Q4 2024, continuing a multi-quarter decline.

Gaming industry venture capital funding fell to $1.2 billion across 134 deals in the first quarter, the lowest deal count in five years, according to a report by PitchBook. The previous quarter saw a 3% drop in funding and a 5% drop in the number of deals compared to Q4 2024. Despite the drop in investments, in-game advertising and AI-driven video game platforms saw a surge in investment.

The $1.2 billion investment is a notable decrease compared to the $1.3 billion average quarterly investments since mid-2023. The report excluded Disney's $1.5 billion investment in Epic Games from third-quarter 2024 figures. The 134 deals closed in Q1 2025 are the lowest since Q2 2019.

Investments in companies with proven models saw an increase, while early-stage investments have decreased. Investors are prioritizing sustainable growth in the gaming industry, and the hype around the metaverse and Web3 has declined. AI-powered platforms continue to generate interest, with Bria’s and Beamable’s Series A rounds receiving $40 million and $13.5 million, respectively.

AI and adtech are two sectors that saw notable investments. GPU platform Ubitus K.K. raised $29.5 million, while digital agent Altera raised $31 million for its game server platforms. In the adtech space, Roblox and Discord are doubling down on their advertising strategies. Roblox has partnered with Alphabet to reward its viewers for watching video ads.

Discord has announced Video Quests on its app to promote video ads. Video game advertising spending is pushing $50 billion, but it still falls short of advertising on social media and retail spaces. While advertising in video games has been historically uncommon, video game companies are looking to explore the space further based on recent investments in Q1 2025. Adtech saw some of the largest year-on-year (YoY) increases to date.

Experts claim that United States President Donald Trump’s “Liberation Day” tariffs may affect the gaming industry even further. The tariffs were announced in April, which affect countries like Japan, China, and Vietnam. The tariffs could negatively affect the hardware and peripherals market, which is currently valued at $40 billion.

Intellectual property holders like Mattel and Hasbro are already facing stock price dips following the recent announcements. Nintendo had also delayed pre-orders of its new Switch 2 console in the United States, and its sales may be affected in the future.