UK private fundraising in the VR sector recorded its strongest year to date, with over £150m in capital raised this year, a 72% increase on 2020 .
Arden Partners analysis reveals £154m of capital flowed into the VR private sector, up from less than £90m in 2020. This was driven by an unprecedented surge in investment in the fourth quarter, the £7.2 million raised crushing the previous record of £46 million in the last quarter of 2018.
Arden believes the gaming industry is set to experience exponential growth over the long term as the rapid acceleration of the metaverse and virtual reality drives investor interest. Virtual reality is the fastest growing market segment as UK revenue is expected to grow by 31.7% in 2021 and is expected to grow at the same rate over the next five years.
In a report published in late 2021, Arden said the rise of virtual spaces, where gamers can create new environments to explore with others via online avatars, has prompted tech conglomerates such as Facebook to hire thousands of employees to work on their development and concentration. to become leaders in the field of virtual reality for consumer and professional services.
The COVID-19 pandemic and repetitive lockdowns also helped trigger significant growth in virtual reality gaming market, shattering revenue, user and growth records. Each quarter in 2020 broke its respective revenue record.
This has led to significant M&A activity in the UK stock market, with Tencent acquiring Sumo Group and EA’s Codemasters for a combined $2.5 billion. Meanwhile, 2021 has been a successful year for game companies listed on the AIM market – with highlights such as Devolver Digital’s IPO, raising $261 million and becoming the largest US company by market capitalization to list on the London Stock Exchange, and the second largest company to trade on AIM.
During its IPO, TinyBuild raised gross proceeds of $36 million, with the market valuing the video game publisher and developer at $340 million on Admission. The UK AIM IPO market is buoyant at the moment and Arden sees virtual reality as a very attractive sector for new capital.
“The unprecedented level of private capital investment in the virtual reality industry, and particularly in the last quarter of the year, indicates just how investors are really starting to see how this market is set to explode,” says Alex DeGroote, research director at Arden. .
“We’ve also seen a wave of companies in this space turning to public equity markets and we expect that to continue,” he said.
“Significant technological developments in virtual reality and the metaverse are laying the groundwork for the rise of new disruptors challenging the likes of Facebook, Apple and Google who are devoting a great deal of energy and investment to taking advantage of the potential returns of the virtual reality space,” says DeGroote.
“With new virtual ways of operating becoming far more prevalent in many consumer and professional sectors post-Covid, we envision an exponential increase in private and public capital investment in the VR sector as consumers and businesses are looking for new ways to communicate and operate.”