Why venture capitalists support NFT games

by James · November 2, 2022

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You might think that venture capitalists only invest in low-risk projects with a long history and a proven track record. The statement, “They would never invest in NFT games or metaverse initiatives,” no longer holds true.

According to DappRadar’s latest BGA Games Report, venture capital investment in NFT games has reached $1.3 billion – although this is not a final result yet. But what makes NFT (non-fungible tokens) games worth billions of dollars?

In this article, I will discuss five reasons why venture capital firms believe in the future of the industry.

They conducted research

To begin with, although venture funds have significant potential resources, it is a mistake to think that they are willing to support unrealistic or too risky ideas. Profits are the primary goal of venture funds, as they are of any business.

So if they invest in NFT gaming initiatives, their long-term polls, interviews and research have proven that this concept can bring them money. They used these tools to predict how demand for NFT games would evolve over time.

According to BlueWeave, a renowned consulting firm, the global NFT market has the potential to grow at an impressive CAGR (compound annual growth rate) of 23.9% between 2022 and 2028, reaching a market size of $19.57 billion.

At the same time, ultra-optimistic reports, such as one from Verified Market Research, predict that the market will reach $231 billion by 2030. That’s a compelling reason for venture capital firms to invest now.

They see the utility and real value in games

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Venture capitalists are looking for innovative and outstanding ideas. However, venture capital firms still want these bright ideas to meet some criteria and most importantly to be practical or implementable in the real world.

What does that mean? This means that the monetary rewards that users receive, for example, in a game, can be converted into other currencies and used as payment – or the land that the players create can be bought or traded.

In other words, the possibilities are not limited to the game space and expand beyond it. The logic is simple –if something has real value, it’s less likely to disappear one day because it’s not dependent on a single game.

They believe in NFT

After the NFT market crashed, many began to believe that the technology was too young to be taken seriously or nothing more than a passing fad. However, venture capitalists do not share this view.

They examined various successful NFT cases in real estate, gaming, digital art, etc. They even see the example of Romania, an Eastern European country, where the government is developing an institutional NFT marketplace.

By allowing people to stamp their official government documents and cards on the blockchain as non-fungible tokens, the Romanian government hopes to significantly reduce the bureaucracy required to replace or update these documents. Why wouldn’t they if a country trusts the technology?

They want to profit from the current market conditions

Statistics show that despite the boom, in 2021, the number of investments was significantly lower than this year, even during the market collapse. A bear market is ideal for venture capitalists because the purge eliminates most fraudulent projects. Initiatives that lack strategy are no longer supported by hype.

Venture capital firms understand that if a project survives difficult market conditions, it has a good chance of being a hit when the bull cycle resumes. They know that if they invest in NFT games during a bear market, the uptrend will bring them huge profits.

Because big brands do

Consider the number and scale of companies pumping money into NFT initiatives. It is enough to mention a few examples – Facebook, Visa and Samsung. In September, Meta announced that users in over 100 countries would be able to share digital collectibles on Facebook and Instagram.

In March, Visa launched an NFT creator program to bring small businesses into the digital economy. In May, Samsung introduced the Samsung NFT Platform, which allows people to enjoy their favorite NFTs on their TV screens.

Of course, there are still concerns that need to be addressed, such as volatility and the threat of cyber attacks. However, the presence of venture capital firms and renowned institutions in the area indicates that the NFT market’s best days are yet to come.

I know that the more creative options users have and the more secure they feel playing NFT games, the faster mass adoption will happen.

Jamie Thomson is CEO of Vulcan Forged.

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