Gaming regulation roulette could sink billions in VC cash

With the central authorities imposing a blanket ban on real-money gaming, almost $15 billion of funding worth in these startups is starting to weigh closely on enterprise capital traders, as firms and their backers scramble to determine the following steps for an business that’s collectively raised $2 billion.

While Dream Sports, the guardian firm of India’s largest fantasy sports activities app Dream11, has began piloting a wealth management product, Winzo Games is expanding into the US market, together with launching micro-drama choices.

“We’ve made huge investments and are bound to face major capital losses… At this point though the efforts are towards finding out what can be done next,” a New Delhi-based enterprise capital investor, who has backed real-money gaming firms, informed ET. “Real-money gaming companies, essentially, are consumer platforms with a large user base that can be leveraged for other offerings.”

Global and home funds, together with Tiger Global, Z47, Think Investments, Peak XV Partners and Malabar Investments have backed firms akin to Dream Sports, Mobile Premier League (MPL), Games24x7 and Zupee, which are actually grappling with regulatory headwinds.

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“These companies are going to be, not just for us, but for everyone, going to be very largely a write-off, because the business is shut effectively. They all have cash in the bank, because they made a lot of money,” mentioned Rehan Yar Khan, managing companion, Orios Venture Partners. “Since there was always a regulatory overhang over real money gaming, we took a very tiny experimental exposure. So, from the over Rs 2,000 crore that we manage, we invested only Rs 5 crore, that too across two funds in real money gaming.”

The sweeping ban has disrupted enterprise fashions and compelled a number of platforms to shutter money-based video games. Dream11, Gurugram-based Zupee, Peak XV Partners-backed opinion buying and selling platform Probo and MPL have shut their real-money gaming (RMG) merchandise.

Also Read: Dream11, My11Circle, other real money gaming firms begin discontinuing offerings

“In some of the companies that are heavily dependent on RMG, there will be a question mark in the short term as they figure out the next step,” mentioned a companion at a enterprise capital agency with publicity to the house.

Still, some traders stay optimistic that the shakeout may drive innovation. “Most of the VC investors who have invested in gaming did not just come in for RMG. They believe in the long-term evolution of India’s gaming ecosystem. There are pivots and options these companies can explore, because gaming is still a very nascent industry in India,” one investor mentioned.

Nazara Technologies, the one listed participant within the house with publicity to actual cash gaming, noticed its market cap drop by Rs 2,164.9 crore previously week within the aftermath of the federal government’s transfer to ban these providers.

Large income buckets

Real-money gaming has been a big cash-generating operation for these startups, which have largely been worthwhile.

For the fiscal 12 months ended March 2023, Dream11 reported income of Rs 6,580.8 crore and a internet revenue of Rs 443.6 crore, in keeping with Tracxn. The firm has but to file its financials for FY24 and FY25. Meanwhile, Mumbai-based Games24x7 posted income of Rs 2,023 crore with a internet lack of Rs 199.6 crore in FY23, whereas Bengaluru-based Gameskraft reported income of Rs 3,521.4 crore in FY24 with a internet revenue of Rs 947.8 crore.

PeakXV Partners, Tiger Global, Z47, Malabar Investments, Orios Venture Partners and Kalaari Capital didn’t reply to queries.

ET had reported on August 21 that gaming companies are considering alternatives, from testing abroad markets the place real-money play is authorized to shifting towards free, ad-supported contest codecs.

However, consultants had identified that the promoting mannequin will likely be far much less worthwhile compared to real-money gaming, on condition that engagement on the apps will decline as the cash factor is taken away.

“We have been in touch with our investors since the day the cabinet decision was announced, trying to find out what can be done next. This is a major setback but we need to keep building,” mentioned one of many founders of a real-money gaming agency.