Over the past decade, the gaming industry has evolved into one of the hottest sectors of mobile internet services. VentureBeat recently reported that in the trailing twelve months of Q3 2014, gaming accounted for $18 billion in trade exits and IPOs. A prime example of this is Amazon's acquisition of game-livestreaming startup Twitch for $970 million in August of this year. Gaming is also currently one of the more profitable parts of the mobile internet sector, boasting an average 9.9x return on a three year investment.
Venture capitalists have recognized this trend and many of their portfolios now contain a sizable slice of gaming companies. In October, VentureBeat reported that the gaming industry took in $1.1 billion in new investments over the past year. Earlier this month, Execution Labs, a Canadian-based accelerator for gaming startups raised $5.3 million to invest in new gaming projects. Next Games, which develops mobile games like the much-anticipated The Walking Dead, raised $6 million earlier this year from investors including IDG Ventures, Lowercase Capital, and the company's original investor, Jari Ovaskainen, who was also an early investor in Supercell.
Some companies have brought in particularly large sums in later-stage financings. Playstudios, a maker of social casino games, announced in October that it had raised $20 million in a third round of funding led by Jafco Ventures. Plain Vanilla, a mobile games company based in Iceland that offers a real-time social trivia platform for mobile devices, raised $22 million in December 2013.
Companies that focus on gaming technology, rather than the actual games themselves, have also received substantial financial backing. DeltaDNA raised $3 million for its game analytics platform that helps gaming companies better market their products toward specific types of gamers and tech startup Overdog raised $1.8 million to develop an app for a second platform that matches Xbox players based on their interests. In addition, InContext Solutions, a 3D virtual simulation technology company, announced in August that it raised $12 million in Series D funding to increase its global presence and its flagship product, ShopperMX.
Making headlines for 2014, Magic Leap, a Florida-based startup, raised $542 million in a Series B financing round led by Google (versus Google Capital or Google Ventures) last month, to complete its product development and commercialize what its CEO Rony Abovitz describes as a "hardware, software, firmware, and development platform" for "cinematic reality". Other investors included Qualcomm, Legendary Entertainment, Andreessen Horowitz, and Kleiner Perkins. Many commentators have opined that the potential applicability of the technology is not limited to any one field. This may explain the valuation of Magic Leap, which at approximately $2 billion (as the Series B investment round was a minority investment) rivals the valuation of Oculus Rift. However, Magic Leap currently has no revenue and no products available on the market.
Magic Leap's secrecy around its product development has left many industry commentators speculating, but what little has been released implicates a variety of possible uses in interactive entertainment. Magic Leap's website shows a dancing animated elephant elevated above human hands, described as a mixture of reality and virtual reality, or cinematic reality. In a written release from February, Abovitz described that Magic Leap is making "what we believe will be the most natural and human-friendly wearable computing interface in the world." Company insiders have distinguished Magic Leap's product from virtual reality products, which provide flat images floating in space at a set distance, noting that Magic Leap's product will provide integrated 3D digital objects that look like physical objects appearing in the real world.
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