During the last bull run, venture capital firms were driven by FOMO, hastily investing in blockchain gaming projects. However, this time around, they are adopting a more mature and sustainable approach, focusing on thorough evaluations including gameplay, artists, developers, and security audits. Industry executives, including Shi Khai Wei of LongHash Ventures and Keiran Warwick of Illuvium, note a significant shift in investment strategies, emphasizing due diligence over hype. LongHash Ventures has invested in several top-tier GameFi projects, aiming to stay ahead of the curve. The sector has seen a resurgence in funding, with significant investments in recent months, indicating a more cautious and informed approach by VCs, aware of the cyclical nature of cryptocurrency markets.

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Venture capital firms haphazardly piled into blockchain gaming projects during the last bull run but are taking a much more mature and sustainable approach this time, according to industry executives. “[It was] insane,” Shi Khai Wei, founder of cryptocurrency-focused VC firm LongHash Ventures, told Cointelegraph, adding that some GameFi projects were receiving up to $100 million with only a few team members and some lofty promises. Keiran Warwick, founder of GameFi studio Illuvium, who recently raised $12 million in VC funding, said he saw the same thing, with much of the investor fervor then driven by a fear of missing out (FOMO). “If someone’s speaking to you and they pitch a game that four or five other firms have invested in, you think, well, they’ve done their due diligence, and they know what they’re doing, so we’re just going to follow suit,” said Warwick, adding: “You get this FOMO and traction purely because people don't want to miss out and they think, well, others are in, so we're in.” But VCs have since expanded their checklists and want to see gameplay, artists, developers, security audits and much more, Warwick noted. “The amount of scrutiny that VCs are putting projects under now versus then is huge.” Wei attests to this and says a longer checklist actually helps his firm weed out the not-so-legitimate projects. LongHash has been more invested in GameFi this time as the top-tier projects have launched or are close to launching and are priced at much more reasonable valuations, Wei explained. His firm has invested in Yield Guild Games, Guildfi, Snack Club, Moonveil and Ignite Tournaments. Wei said GameFi has become a focus area for LongHash Ventures in recent months and hopes the firm will be 6-12 months ahead of the curve when the next wave of FOMO kicks in. Why #web3 ? Network effects are the true underlying force of web3 and it also leads to cross-game collaborations. “ #Gaming , art, and decentralized finance all connect together [in web3],” Robby Yung ( @viewfromhk ), our CEO of investments, said to @lloydWahed from @manasearchuk . pic.twitter.com/JzUVndu60I — Animoca Brands (@animocabrands) April 15, 2024 Gabby Dizon, CEO of Yield Guild Games told Cointelegraph that VCs are now also more aware of the “cyclicality” of cryptocurrency markets, as many of them hamstrung themselves by investing at the peak of the last bull market . Related: Crypto VC funding breaks 2-year downturn in Q1 2024 It comes as Warwick’s Illuvium.io secured $12 million in a Series A funding round in late March, led by King River Capital, Arrington Capital, and Animoca Ventures. Among the other GameFi projects to have received funding in recent months are Helika Games, Parallel Studios and Elixer Games in $50 million, $35 million and $14 amounts, respectively. More than $2 billion was invested into GameFi projects in Q4 2021, but funding amounts fell for six consecutive quarters after the first quarter of 2022, according to RootData. However, the trend was finally bucked in the third quarter of that year, and the GameFi sector has seen three consecutive quarterly increases since then, including the last quarter, which tallied $268 million. Magazine:  Web3 Gamer: Games need bots? Illivium CEO admits ‘it’s tough,’ 42X upside 

VCs Adopt More Mature Approach to GameFi Funding After FOMO-Driven Investments