"AppMagic and Order of Meta have joined our family of companies," Kirill and Roman Gursky from GEM Capital on the results of 2024
We continue to review 2024 in gaming (or gaming industry-related) teams. Up next is an interview with Kirill and Roman Gursky, managing directors of the gaming division at the investment group GEM Capital.
How did 2024 turn out for the fund? What would you like to highlight as achievements or successes?
Roman: Like 2023, the past year was challenging for the entire gaming industry. Massive layoffs continued and even broke the anti-records of the previous year; several studios announced closures, and some gaming corporations continued restructuring. Despite the turbulence in the industry, 2024 was successful for GEM Capital.
This year was guided by the paradigm: “As you start the New Year, so you will spend it,” and we started it with a real bang! In the very first days of 2024, our portfolio studio Mundfish received a well-deserved gift – a Steam Award! Based on the votes of over 40 million people, Atomic Heart was recognized as the best game in the Outstanding Visual Style category.
Atomic Heart
This year brought us everything: new investments and funding rounds for our portfolio companies, prestigious awards and high ratings, major announcements, the release of new games, and numerous positive reviews on them.
Kirill: Two of our portfolio companies, Eschatology Entertainment and Red Rover Interactive, successfully attracted new funding rounds this year. Notably, in both cases, the round was led by the Korean giant KRAFTON, the creator of PUBG. We are proud of the successes of these studios and believe in their potential, so we gladly participated in the rounds alongside KRAFTON by reinvesting in both companies.
In terms of investment activity, we tried to keep up with our portfolio companies. We carried out a large number of deals. We are very pleased that in 2024, AppMagic, one of the largest analytics services in the world, and Order of Meta, a mobile game development studio founded by the creators of the hit Tacticool, joined our GEM Family. We are sincerely grateful to the founders and teams for their trust and desire to create new projects together!
We remain one of the most active investors in the gaming industry worldwide. According to the latest report by Drake Star for the third quarter of 2024, we ranked third among early-stage funds, and, according to the InvestGame report for the same third quarter, we topped the ranking, taking first place.
Due to our achievements, we were nominated for "Investor of the Year" at the MENA Games Industry Awards alongside regional industry leaders like Savvy Games Group.
Roman: And of course, 2024 was very bright for us in terms of game releases and new announcements!
This year, our portfolio studio VEA Games released Nikoderiko: The Magical World – a bright and engaging platformer inspired by iconic series like Donkey Kong and Crash Bandicoot. The game was warmly received by both players and critics, earning an 80 on Metacritic.
Nikoderiko: The Magical World
Nikoderiko: The Magical World has already received recognition: Kotaku included it in the 20 Spectacular Indie Games, Gamereactor ranked it third in the list of best platformers of 2024 – even above the new Sonic! And Game Rant highlighted the game in their 10 Best 3D Platformers on PS5 of All Time.
Additionally, three of our studios delighted their fans with big announcements and impressive showcases.
Sad Cat Studios showcased a demo of REPLACED during the Xbox Showcase. Journalists were thrilled: Kotaku noted it was “magnificent in every aspect,” and Digital Trends compared it to Hellblade 2.
REPLACED is one of the most anticipated games in the world. The developer studio has so far successfully lived up to the expectations!
REPLACED
Weappy, at the THQ Nordic Showcase, announced The Eternal Life of Goldman, receiving the honor of opening the show. The unique visual style and frame-by-frame animation create the impression of watching an animated masterpiece reminiscent of Studio Ghibli.
The Eternal Life of Goldman
Critics and players around the world called the project one of the brightest new entries at the showcase. Eurogamer, for example, wrote that “The Eternal Life of Goldman drops your jaw.”
Kirill: And, of course, one of the most exciting events of the year was the announcement of the next Heroes of Might and Magic installment at Gamescom by Ubisoft and our portfolio company Unfrozen!
For us, "Heroes" is more than just a game series! We are incredibly proud that through our joint efforts with Unfrozen, we have the opportunity to contribute to the development of this legendary franchise.
Heroes of Might & Magic: Olden Era
Just before Catholic Christmas, the studio gave fans of the series a truly magical gift: it was announced that legendary composer Paul Romero will once again create music for the game, accompanied by Cris Velasco, known for his soundtracks for Mass Effect, Borderlands, and God of War, and the Heroes Orchestra, who will record stunning musical pieces.
We wish all our studios truly mighty and magical (Might & Magic) releases in the coming year!
There are many more significant achievements by our portfolio companies and new deals that we would like to share, but we will do so in the new year of 2025!
How has the market changed for gaming ventures, for those who are ready and willing to invest in the gaming business?
Roman: It's a good time for investments in games. The decrease in company valuations, along with reduced competition among investors for projects, creates favorable conditions for new investments.
The "winter" in the market will not last forever. As the situation stabilizes, experts predict a return of investment activity to previous levels. There are already signs: according to the InvestGame report, 372 deals were concluded in the first nine months of 2024, which is 12% more than the same period last year.
Another encouraging sign was the announcement by major gaming investors of the creation of new funds with a combined capital of over a billion dollars. This will ensure an influx of new investments into the industry, positively impacting its growth in the coming years.
Has anything changed in the investment strategy for studios looking to attract funding?
Kirill: We are observing that attracting financing at mid-stages (Series A) is becoming more challenging for many gaming studios. At early stages (Pre-Seed, Seed), the situation remains relatively stable: investors are eager to support projects with breakthrough ideas or strong teams. At later stages, studios receive funding due to robust financial performance. However, at mid-stages, investors want to see metrics comparable to genre leaders, which isn't always quickly achievable.
This makes it critically important to maximize the effective use of funds raised at the initial stage. If a studio raises early-stage investments and senses investor interest, we recommend increasing the size of the first round. This will create the necessary financial cushion to reach key metrics that will attract attention to the next stage.
Roman: Another important factor for successfully attracting investments is developing industry contacts. Establishing connections with key players – investors, publishers, and platforms – can play a decisive role. Despite the obviousness of this approach, many studios pay insufficient attention to it. In this context, attracting a specialized investor at an early stage can be a crucial step. Such a partner will help open access to major players, who often remain out of reach for young studios.
Our experience confirms the effectiveness of this approach: having an extensive network of contacts has repeatedly helped our portfolio companies secure major deals with corporations like Krafton, Ubisoft, Tencent, Microsoft, and others.
What strengthening or emergence of investment trends do you expect in 2025?
Kirill: Next year, we expect several key trends in the gaming industry to develop and strengthen.
First and foremost, we are witnessing increased interest in alternative app stores. We anticipate that opening the market will lead to a breakthrough in this area in 2025, with the emergence of the first strong players. One striking example is our portfolio company Skich, which is actively working in this direction and preparing to launch its own store. Its key feature will be an advanced search and game recommendations, making it particularly user-friendly.
Roman: Another noticeable trend is the growing interest of developers in premium monetization model games for PC and consoles. According to the State of Free to Play on Steam in 2024 report by VG Insights, 88% of the platform's players belong to the top 25 titles, most of which are older projects with an average age of over seven years. Intense competition and market saturation are causing many studios to shift towards the premium model, often integrating elements of in-game purchases. The success of Arrowhead, creators of Helldivers 2, demonstrated that hundreds of millions of dollars can be earned without resorting to the free-to-play model and attracting a huge audience. This example is inspiring more developers to switch to the premium model, and in the coming years, we expect an increase in such projects.
In our interview last year summarizing the year's results, we noted a steady trend of crossover between game IPs and video content (movies and series). Judging by the successes of the Fallout series, the second season of Arcane, and the animated anthology Secret Level, this trend continued in 2024.
For example, the Fallout series sparked a rise in the popularity of games within the same universe. For instance, the daily revenue of the mobile game Fallout Shelter increased from $20 thousand to $80 thousand upon the series' release, while the daily audience of Fallout 76 temporarily increased to 1 million players at that time. This case clearly demonstrates how owners of a game IP can attract a new audience and stimulate sales of their games.
Bioshock, Death Stranding, Metal Gear Solid, Ghost of Tsushima, Sims, Minecraft – these are just a few gaming IPs that have upcoming films and series in the pipeline. Considering this, we are confident that this trend will continue to grow and strengthen at least for the next year.
What are the fund's plans for 2025?
Kirill: The year promises to be filled with game releases from our portfolio companies, which we eagerly await not only as investors but also as players.
And, of course, we continue to select and support the best teams in the gaming industry. We have several deals in the pipeline, which we are excited to share with you later this year. So, lots of exciting news ahead – stay tuned!
This is a translation into Russian of an interview given to Game World Observer.
