A little over 40 years ago, a relatively unknown gaming startup called Atari Corp. (OTCMKTS: PONGF) developed one of the world’s first video games: Pong. By modern standards, the game itself was fairly simple: users moved two large blocks, representing ping-pong paddles, vertically across the screen, attempting to hit a virtual ball so that their opponent couldn’t return it.
No one could have imagined that Pong would become such a big hit. Eventually, companies like Nintendo Co., Ltd. (OTCMKTS: NTDOY), Sega Group Co., Ltd. (OTCPK: SGAMY), and Activision Blizzard Inc. (NASDAQ: ATVI) jumped in and started manufacturing video games for both arcades and home use. These companies pioneered an industry that’s now worth billions of dollars a year. If you’d bought any of these game companies in their early days, you’d probably be rich by now.
Luckily, even if that wasn’t the case, the gaming industry is still thriving and adding a gaming startup to your portfolio could be a winning strategy There’s a wide range of mobile games, business models, gaming apps, and companies to choose from, but which one is right for you?
Why you should invest in gaming startups
Currently, the total value of the games industry is over $150 billion, a figure that is expected to grow at a rate of nearly 10% through 2025, reaching nearly $260 billion. There are a few simple reasons for this growth and explosive increase in market value.
First, games are fun for both kids and adults. Second, the digital age has brought about technological advances that have improved the quality of video games to levels unimaginable 20 years ago. Video games have evolved from analog ping pong to epic, immersive multiplayer games that can last weeks.
Additionally, it allows for a connection between at-home and mobile gaming that didn’t exist before: With mobile gaming, players can literally pick up where they left off at home and continue playing on their phone or tablet.
Online gaming doesn’t have to stay in one place. In fact, mobile gaming has become so popular that it’s become an industry in itself.
The mobile gaming sector has experienced explosive growth thanks to popular titles like Angry Birds and Candy Crush. This explosive growth has generated incredible amounts of money. Rovio Entertainment (HEL:ROVIO) was a struggling video game company in the early 2000s before it created Angry Birds. The game, which cost just under $150,000 to make, has made billions of dollars for Rovio.
Angry Birds has expanded from popular mobile video downloads to multi-million dollar merchandising deals and even a feature film. The Angry Birds franchise is currently estimated to be worth $5 billion. The video game industry is full of success stories like this, perhaps because there are so many different games to choose from.
If you love sports games, Electronic Arts Inc. (NASDAQ: EA) has licenses from the National Football League (NFL), National Basketball Association (NBA), National Hockey League (NHL) and the world’s top soccer leagues to create high-quality, immersive games that let you manage your favorite teams and play your favorite players for years to come. In Call of Duty, you become a virtual soldier and take part in some of history’s most famous wars and battles, alone or with a team.
All of this represents a huge opportunity for investors. It only takes one popular video game franchise to change the fortunes of a gaming startup and turn it into a video game powerhouse. It’s hard to imagine that the founders of Rovio predicted the popularity of Angry Birds, but with hindsight they should have backed them when they were a startup, right?
That’s why you should seriously consider investing in gaming startups: making the right investment in a single gaming startup that creates a popular franchise could make you millions of dollars overnight.
Where to find gaming startups to invest in
The current popularity of modern video games is mainly due to the advanced technology that is incorporated into them. Today’s modern games offer immersive 3D environments that are so realistic that it is becoming increasingly difficult for players to distinguish the difference between gaming and live action.
Rapid developments in technology have also created many new opportunities to invest in gaming startups. Retail investors no longer have to wait for companies like Rovio to make an Initial Public Offering (IPO). Online crowdfunding platforms have been created to allow retail investors like you to invest in gaming startups and others early on.
Start Engine
StartEngine operates Chicken Waffle Inc., a 3D gaming experience that offers a wide range of video game platforms. The company’s best-known current offering, Baby Hands, has been viewed more than 1 billion times on YouTube, and the company is working on a sequel to capitalize on its success. The acquisition price for the service is $246.03, with the stock priced at $4.17.
Another advantage for Chicken Waffle is that its focus on developing 3D gaming technology allows the company to branch out beyond gaming. Flight simulators, military training, and other specialized training involving immersive environments are just some of the applications for the technology Chicken Waffle is developing. In theory, this makes it more than just an investment in a gaming startup.
Wifander
Wefunder is another platform offering an interesting service in the gaming startup space. The popularity of online video games among school-age children creates opportunities for bad actors to contact them through game messaging apps. Wefunder offers a service called Gamesafe Inc., which aims to provide parents with additional security tools to prevent their children from being targeted by bad actors while online. Gamesafe’s current acquisition price is $100 per share.
The gaming community can also give you an idea of where to go as they will know which games and developers are popular. Consider casual games, in app purchases, what type of business will bring in the best revenue. Remember that a video game startup is not just about one game, there are multiple revenue streams.
How to choose a gaming startup to invest in
Looking at the gaming industry’s growth projections, picking a gaming startup to invest in might seem like an easy task. However, that’s far from the truth. Despite the billions of dollars being made in the gaming industry and new startups developing everything from multiplayer online role-playing games to first-person shooters, sadly, most gaming startups don’t succeed. The same is true for most startups, no matter what industry they’re in.
So, choosing which gaming startup to invest in is difficult. The best way to deal with this is to follow a proven rule of any investment: diversify. Take advantage of low buy-ins on equity crowdfunding platforms to build a complete portfolio of gaming startups. Imagine a winning mix of game developers, security companies and 3D software makers. Such a diversified gaming startup portfolio will give you multiple chances to make big money.
Games: A growing industry that can be enjoyed by both children and adults
Whether you love video games more than life or whether you think they’re a waste of time, the fact remains that there is a lot of money to be made in the gaming industry. As an investor, you should pay attention because where there is money and growth, there are opportunities to add to your portfolio. When it comes to gaming, a lot of those opportunities are in gaming startups.
This doesn’t mean you should build your entire portfolio around gaming startups, but if you have some spare cash to spend or dividends that you don’t know what to do with, maybe you should consider gaming startups. You don’t know who’s going to develop the next Angry Birds or Call of Duty, but you can be sure that whoever does will be an early shareholder in that company.
FAQ
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Before investing in a gaming startup, you should consider factors such as the company’s business model, market size and potential, management team experience and track record, competitive environment, revenue forecasts, and the potential risks associated with investing in the gaming industry.
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To assess the potential return on investment for a gaming startup, analyze the company’s financial projections, market opportunity, growth potential, revenue streams, and exit strategy. It is also beneficial to evaluate the management team’s experience and expertise in the gaming industry.
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Whether you invest in early stage or established gaming startups depends on your risk tolerance and investment strategy. Early stage startups may have higher potential returns but also higher risks, while established startups may have a proven track record but fewer opportunities for growth.
