Venture Capital Backs Off, and Boston Development Suffers

Venture capital investments in U.S. video game efforts dropped by more than $60 million from 2008 to 2009, of particular concern to developers in strong but outlying areas such as Boston.

The Boston Globe reported today on the beatdown dealt to game development reliant on venture capital. In 2008, 35 projects were funded at a total investment of $214 million nationwide. In 2009, just 25 companies, to the tune of $153.7 million.

Naturally the worsening economy is a factor, as VC firms shift to a more conservative posture. One partner at an investment firm told the Globe that there's probably "too much" capital available for game developers.

Boston, home to Irrational Games, Harmonix, and startups like Curt Schilling's 38 Studios and Quick Hit Inc., is more inclined to feel the pinch because culturally, investors there aren't as familiar with the value in video game development as they might be on the U.S. West Coast, said Quick Hit's Jeff Anderson, formerly the CEO of Turbine, which also is Boston-based.

"It's harder to find people who understand the business that you're in," Anderson said. "Therefore it makes it more difficult getting VCs to invest."

The Globe says the slowdown has shifted investors' attention toward those providing casual games over Facebook, and to companies that provide components and services of value to established players in the games industry.

Investors Bet Less On Video Games
[The Boston Globe]