According to HexGn Social media, Gaming & Entertainment startup funding report 2019, the sector was not the cynosure of investors in 2019 where funding in this sector dropped by $11 billion to reach $19 billion, from a high of $30 billion dollars in 2018. This is a fall of 36%.
The sector which is at the forefront of the interface between technology and social behavior of humans is Social Media, Gaming & Entertainment. We live in a world where our need to stay in touch, have our identity and the need to express ourselves while feeling closer in a distant planet is being met by technology at an unprecedented scale than ever before.
According to HexGn research, the Social media, Gaming & Entertainment sector, the number of deals too dropped down from 2267 to 1849 fall of 18%. This led to a drop in the average deal size from $18 million to $15 million.
While the demand for services offered by the sector continues to go up, there seems to be strong entry barriers being erected by the older players.
The profitability model of social media, which is heavily reliant on advertising revenue, needs more innovation. Privacy, data security concerns, taxation and geographical dynamics impacted the sentiment.
According to HexGn Social media, Gaming & Entertainment startup funding report 2019, Asia attracted the most funding in the sector. Asia attracted a total of $8 billion in funding in 2019 compared to $16 billion in 2018, this was a decrease of $8 billion compared to the last year and a fall of 49%, largely due to drop in funding in China.
The number of deals dropped by 35% which meant that the average deal size in Asia was $31 million compared to $40 million in 2018.
The next region to attract most funding was North America with a total funding of $7.4 billion compared to $8.4 billion in 2018, a fall of 12%. The number of deals fell at a faster rate, falling by 17%, this meant the average Steel size increased from $11 million to $13 million.
In Europe the funding in 2019 was $2.4 billion compared to $5.2 billion in 2018, a decrease of 55%. However, that deals fell by only 9% during the same period, driving the average deal size in Europe to drop from 12 million to 6 million.
According to HexGn Social media, Gaming & Entertainment startup funding report 2019, the grouping comprising Oceania, South America and Africa saw funding increase by almost 10 times to reach $1.3 billion from $118 million in 2018. However, the number of deals only rose by 37%. The surge in funding was mainly due to a couple of large sized deals. This led to the average deal size increasing to $22 million compared to $3 million in the previous year.
For simplicity we have categorized deals with average size less than $3 million as going into startup formation and validation of business ideas or Seed/Angel funding.
Categories falling between $3 million and $30 million are categorized as early stage funding and we have surmised goes into growth and customer acquisition. Any category above where the average deal size exceeds $30 million is categorized as late stage and is for market expansion or Pre-IPO preparations. While there are exceptions in each category, the purpose is to provide trends rather than hard numbers for reporting.
For simplicity we have categorized deals with average size less than $3 million as going into startup formation and validation of business ideas or Seed/Angel funding. Categories falling between $3 million and $30 million are categorized as early stage funding and we have surmised goes into growth and customer acquisition. Any category above where the average deal size exceeds $30 million is categorized as late stage and is for market expansion or Pre-IPO preparations. While there are exceptions in each category, the purpose is to provide trends rather than hard numbers for reporting.
According to HexGn Social media, Gaming & Entertainment startup funding report 2019, the funding in late stage deals dropped the most in 2019 and reached $12 billion compared to $20 billion a year ago the fall of 39% was in absolute terms $8 billion.
Early stage deals too fell during the same period. Early stage deals reached $6 billion compared to almost $9 billion in 2018, falling by 31%.
According to HexGn Social media, Gaming & Entertainment startup funding report 2019, Seed/Angel funding did not see much change with funding only falling by 1%. The number of deals was down across the board.
The lowest drop was seen in the Seed/Angel stage where the deal decreased by 7%, early stage deals fell by 33% and late-stage deals witnessed a drop of 28%.
The total number of deals above $1 billion remained the same at 3 deals in each of the years. The total number of deals in the $500 million to $ 1 billion range dropped from 7 in 2018 to 2 in 2019.
According to HexGn Social media, Gaming & Entertainment startup funding report 2019, the number of deals in the $100 million to $500 million range also fell from 43 to 26 in the span of a year.
According to HexGn Social media, Gaming & Entertainment startup funding report 2019, the ranges where the number of deals were least affected were in the $50-100 million range and below $10 million.
The most notable changes in the categories of funding where the sharp drop in private equity deals and an increase in debt financing leads. While debt financing deals rose by almost 900% to reach $2.4 billion, an increase of $2.2 billion in absolute numbers.
Coinciding with this the number of private equity deals decreased to $3.6 billion, a change of $1.9 billion. In 2018 declared Private Equity deals were $5.5 billion.
The fall in equity investment, increase in debt financing and overall drop in funding shows maturity and long term potential for the Social Media, Gaming and Entertainment sector, where winner takes all, look at facebook, Tik-Tok or twitter as an example.
The social media, gaming & entertainment segment is a mixed bag of startups that secialises in media technologies and all kinds of businesses related to gaming. This is another one of those industries where the investments went down in 2019. The startups in this industry got an impressive $19 billion in funding last year, but comparing this number to the previous year shows us that the social media, gaming & entertainment sectors has been hit with a 36% decline in the numbers. The five countries that make it our top five ranking on the basis of the investments received are United States, China, Tanzania, the UK, and India. USA and China hold the largest shares in the total funding received at the global level by the social media, gaming & entertainment startups.
Last year, the total funding for the industry by startups in the US was $7.17 billion, a tad bit lower than the $8 billion in 2018. The USA has been a trailblazing nation when it comes to introducing novel technologies through its social media, gaming & entertainment startups. The country that gave us Netflix and Facebook did not stop at just that and has been continually stunning the world with a myriad of interesting products and services.
Interestingly, the top four deals at the global level do not feature any American startups. The highest-funded startup in a single deal from the USA is Unity Technologies, a real-time 3D development platform which got $525 million in funding. This was followed by digital marketing brand CM Group which completed a $410 million funding round and popular social media discussion platform Reddit, that raised $300 million. The same amount was also raised by publishing platform Automattic in a Series D round.
Funding stage-wise, the investments coming through all stages barring seed stage rounds recorded a negative growth last year. Seed stage rounds had barely any changes with a 2% growth as the amount remained stable over the last two years.
China’s slipped one rank down in 2019 as its total investments in the social media, gaming and entertainment segment halved at $6.5 billion. The world has seen a boost in the number of content and entertainment platforms that have come out of China and won at the game of world-domination. A company worth mentioning here is ByteDance whose entertainment app spread like wildfire and garnered a whole lot of attention globally. The Chinese market’s focus on self-reliance has also led to a large number of social media platforms being introduced time and again to reduce the absence of the popular global ones like Facbook or Twitter.
Short video platform Kuaishou Technologies raised $3 billion last year and closed the highest deal for 2019. This was followed by the ever-popular ByteDance which got $1.3 billion in investments in debt financing. Other notable startup rounds from the country were those of music streaming platform NetEase and Q&A platform Zhihu.
Late stage venture stage and debt stage rounds saw the investments increase in 2019. For the debt stage rounds, this year was about re-appearing as 2018 had no startup deals in the debt stages. The country has witnessed no startups deals at the ICO & crowdfunding stages in the last two years.
The quaint country of Tanzania in East Africa closed only one deal but raised enough investments to overtake the UK and India. It went from zero investments in 2018 in the social media, gaming & entertainment sector to a billion dollar deal last year. The deal that helped it land a place in the top five countries was of Tanzania Tech, a tech news publishing startups, that is helping the Tanzanians up their game when it comes to knowledge about the tech industry. It does so by publishing in the local language to help the information reach more people.
This has been the only funding deal in the last two years for Tanzania in the social media, gaming and entertainment segment.
Social media, entertainment, and gaming startups in the UK raised $648 million in 2019. This has been a saddening decline from the three billion dollars plus investments it got in the previous year. The Brexit has been a factor that has affected the funding activities in the UK in the past year and should not be ignored when we talk about the reduced funding activities in 2019.
The highest amount raised in a single round by social media, gaming and entertainment startups for 2019 was $60 million in the UK. Innovative music platform MelodyVR and alumni networking platform Graduway each raised this amount through venture rounds last year. Other funding rounds in the UK social media, gaming & gaming startup segment that were among the top five deals were those of Minute Media, Croud, and Puttshack.
Investments made at early stage venture stages and through private equity grew with the funding raised through the latter growing 1.5 times, in comparison to the 2018 figures. The ICO & crowdfunding investments showed a 100% decline in 2019, with a mere $11 million in funding.
The Indian tech-led entertainment and gaming segment has been getting a lot of attention recently. With large home-grown companies noticing the various app-based platforms and moving ahead with acquiring them has given a much-needed impetus to the industry. However, the overall investments raised by social media, gaming & entertainment startups in India fell by 28% in 2019. The total funding raised last year capped at $416 million.
There were two hundred million dollar rounds last year, which became the top deals for the year. One of them was by ShareChat, a growing social networking content platform while the other round was of VMate, a short video creation platform. Some other startups from the Indian social media, gaming and entertainment sub-segment that are worth mentioning are e-sports platform Mobile Premier League, gaming platform Paytm First Games, and music streaming platform Saavn.
A look at the funding stages and size shows us that investments through early stage and seed stage deals grew by over 70%. 2019 also saw private equity stage rounds which were absent in the previous year.