The Danish gaming industry has lacked dedicated investors since the closing of Capnova. But the industry is changing again, and Bumble Ventures and Accelerace want to cash in on the potential.

The Danish gaming industry has produced a number of large and extremely profitable companies in the past decades. Yet the number of Danish investors who specialise in the industry is easily overlooked. Especially after the gaming-focused investor and innovation space Capnova closed a few years back. But that may be about to change.

Since Bumble Ventures was founded in September 2019, the fund has invested in five startups, four of which are gaming-related: Astralis, GamerzClass, Hiber from Sweden, and, most recently, Grid from Germany. This is not because they see themselves as a gaming fund, but because the progress the industry has experienced during the pandemic has made it an exciting sector to invest in.

“We are a generalist fund. We have no particular themes, industries, or markets that we invest in. But there is no doubt that 2020 has been a good year for the gaming industry, at the same time we have a strong approach to the gaming space because of the Better Collective founders, who also co-founded the fund,” says Carsten Gjørtler Salling, Investment Manager at Bumble Ventures.

Carsten Gjørtler Salling, Investment Manager at Bumble Ventures.

Shovels and pickaxes

Even though Bumble Ventures has opened up to gaming, so far the fund has only invested in esport and platforms and not classic game studios. And that is not by coincidence.

“We have a few opinions about what is particularly interesting within the gaming space, and also what we are not so interested in – and these are traditional game studios. There are a lot of those out there, but we do not feel that we are the right ones to assess them. We are generalists, and it is difficult for us to find the successes among the many who try,” says Salling.

Having said this, the fund would like to be exposed to the rapid growth that the industry is experiencing, while maintaining a risk profile they can handle. Therefore, Bumble Ventures focuses more on the infrastructure around the gaming industry. This is comparable to Gamerzclass, which sells esports classes, and Hiber, which is a platform where players can develop games themselves.

“Instead of investing in the gold mines, we invest in shovels and pickaxes. It is difficult to know which mine will strike gold, but they all need picks and shovels,” explains Salling, who leaves the door open for change at some point in the future:

“It’s definitely an issue of risk, and our self-knowledge is that there are others who are better at selecting the right game studios. But there are many investment opportunities in game studios, and there are also some that we go ahead with because it looks exciting. So at some point, it may well be that we invest in a traditional studio. We have just not gotten the appetite for it yet.”

New business models make it recognisable

Accelerace also recently completed its first investment in the gaming industry — a very early investment in the game studio Digital Devotion Games. The fact that this game studio became a part of Accelerace’s accelerator program was not down to chance – it was a conscious decision to take a greater interest in the industry.

“There are not a lot of game developers who view themselves as startups, but Digital Devotion Games do just that. That mindset appeals to me. And the market is growing and fast becoming ripe for the taking. It is not just for children, everybody is gaming. It’s this factor which brings about change in the market,” says Michael Rohde Böwadt, Business Accelerator & Investment Manager at Accelerace.

The fact that the gaming industry has found new business models has been crucial for Accelerace. Today, games no longer have to be stand-alone purchases like movies. They can also be built as “Games as a Service” (GaaS), which borrows from the “Software as a Service” model that investors around the world cannot get enough of.

“We have previously not invested in games, as the business model has not suited our strategy. With the shift to the Games as a Service model, we see that the potential is different and potentially larger, and we, therefore expect that we will invest further in GaaS studios in the future,” Böwadt says.

If game developers manage to incorporate that kind of thinking into their business model early on, he also thinks they will have an easier time speaking the language of venture funds – and thereby attracting more investments.

Michael Rohde Böwadt, Business Accelerator & Investment Manager at Accelerace.

Q&A: Vækstfonden’s relationship with the gaming industry

Due to a simplification of the business support system, the innovation environment Capnova, which focused on games, was closed down, and the investment money was put into Vækstfonden.

Vækstfonden has supported companies like Blast, Rokoko, and Unity and provided loans for the more classic game development companies. But they also have a broader take on startups when compared to Capnova.

We asked Erik Balck Sørensen, who is responsible for direct investments at Vækstfonden, how he sees the relationship between the state-owned fund and the gaming industry.

What is your role as investor when it comes to the gaming industry?

“At Vækstfonden, we want to help drive innovation and new technologies. Here, the gaming industry is interesting because there is potential to build a Danish position of strength. We have many creative companies that need capital for scaling, and we have Danish capital partners who focus on gaming investments. Here, Vækstfonden wants to be the piece that can help finish the financing puzzle.”

What specific opportunities and risks are connected to the gaming industry? And: Are there any factors that limit your opportunities as an investor?

“We have a talent pool and good education in Denmark, which gives us special opportunities to create a position of strength in this area. Unity Technologies, Kiloo / Sybo, IO Interactive, Tactile Games and several others are obvious examples of companies that have managed to put Denmark on the world map in this area.”

The industry specifically lacks more risk capital for early-stage investments. Is this a demand that you also experience?

“What the companies need depends on the stage they are at. Early-stage financing can be one of several ways to go, but we also have several gaming companies in our portfolio that have received financing through loans. We always talk to the companies about the different options.”

In your opinion, have you done enough to take the baton from Capnova after their closure?

“At Vækstfonden, we help develop many different technologies and companies. And of course, we also keep an eye on gaming. There are many opportunities for the gaming industry for financing through Vækstfonden, and fortunately, we also have many skilled partners. This way we can help support the many exciting companies together.”