Venture capitalists getting taste for videogames

After reading articles like the one below, I find myself questioning whether or not mobile gaming will surpass the console market in the coming years?

LOS ANGELES (Dow Jones/AP) — Venture capitalists have traditionally ignored the videogame business — until now.

With the Electronic Entertainment Expo, or E3, getting underway in Los Angeles this week, videogame developers and enthusiasts won’t be the only ones attending. Venture capitalists also will be rubbing shoulders among them.

“Traditionally, venture capitalists have stayed away,” said Craig Cooper, a partner at Softbank Venture Partners, who plans to attend the show. “For a long time, it’s been a developer-publisher-finance model.”

Under that model, big videogame developers like Electronic Arts Inc. or THQ Inc. financed game development in-house, while smaller boutique studios signed distribution and co-development deals with bigger firms.

“It used to be very simple,” Cooper said. “Gamers developed and funded internally their development. A developer might partner in exchange for an upfront payment as well as an ongoing royalty.”

Not anymore.

“Now, they go straight to venture financing,” Cooper said. “And it’s not until the tail end, either. It’s the more traditional model of investing in the beginning.”

Mobile-game companies, in particular, have drawn venture financing. For example, last year, LimeLife, a mobile content publisher in the San Francisco Bay area, raised more than $5 million in its Series A round. Blue Frog, a company based in the Seattle area that sells mobile games, drew $16 million in a first round of funding.

“You’re seeing a greater interest in consumer (technology), which includes videogames, and I think that you’re going to see this area expand,” said Mark Heesen, president of the National Venture Capital Association.

Of particular interest in this area are so-called “casual games” — simple games that don’t require a lot of upfront development cost and allow users to easily learn the rules and play. These types of games have drawn the eye of Mark Menell, a partner at Rustic Canyon Partners, which is sending three people to E3 this year…. Source: siliconvalley.com

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