With a tumultuous 2022 in the rear view, it is an opportune time to reflect on the past year and look ahead to what's in store for digital entertainment. The secular trends underpinning the decades-long evolution and expansion of the game industry remain intact despite substantial macroeconomic headwinds. This may be cold comfort against the current backdrop of geopolitical and fiscal uncertainty, layoffs, and challenging revenue growth. Still, game industry M&A deal value in 2022 grew to a new record of over $100 billion, once again delivering a 3X increase in value over the prior year, which was also a record. In the three years since Transcend was founded, the M&A baseline in games has grown approximately 10X and the number of gamers worldwide is on track to hit 3.5B by 2025. Our long term view on the digital entertainment industry remains correspondingly strong and we continue to find remarkable teams and opportunities targeting exceptional returns at the intersection of technology and entertainment.
Even in the current climate, the long term value of gaming IP continues to compound. The opportunity space for games to connect with and grow audiences across the modern media and tech landscape is increasingly broader than but rooted in gameplay. Arcane, the Netflix series set in the League of Legends universe, was #1 in 52 countries and one of the few Netflix shows to maintain a 100% critic average on Rotten Tomatoes. The second-biggest debut for HBO in the last 13 years was the recent adaptation of beloved Naughty Dog franchise The Last of Us. Microsoft, Apple, Google, Netflix, and Facebook have all made acquisitions over the last five years in games to progress their respective long term strategic agendas in the space. The biggest deal in Microsoft history in fact is in games - its $68.7 billion bid for Activision Blizzard around this time last year. These acquisitions not only bring wider audiences to each platform, but can enable individual franchises to reach their fullest potential across the broadest spectrum of discovery and community. The next generation is not only game-first in their entertainment preferences but, as digital natives, are keen to engage with their favorite content across a multitude of services and devices. Watch this space.
At Transcend we also enjoyed strong growth throughout the year, not only across the portfolio, but within our own team as well. The firm doubled in size, adding key members to further enable our exploration of high growth opportunities across the digital entertainment landscape. In partnership with our founders, it has been inspiring to begin to celebrate some of the exceptional achievements the teams have been hard at work on. Here are just a few:
thatgamecompany raised $160M from Sequoia and TPG in March 2022. Later in the year, the studio launched Sky: Children of Light on PS4/PS5 and hosted a virtual concert with the artist Aurora pulling in an incredible 1.6M concurrent viewers.
Transcend led the oversubscribed $4.5M seed round for Gardens, founded by gaming veterans Chris Bell, Lexie Dostal, and Stephen Bell. With experience from top grossing hits like Sky, Journey, Fallout, Skyrim, Spider Man, Ratchet & Clank and The Hobbit, the team is committed to creating deeply meaningful multiplayer social experiences.
Jeff Strain and the team at Possibility Space have quietly made tremendous progress on their first title with a major announcement coming in 2023. Jeff and Transcend also cooperated on a second studio under the Prytania Media umbrella called Crop Circle Games and raised $25M from Transcend and other investors. With this investment, Prytania has assembled another all-star team that deeply understands the power of storytelling and has played key leadership roles in creating some of the biggest franchises in gaming.
Stress Level Zero released BONELAB at the end of Sep 2022. Within an hour, it became the fastest-selling app in Quest history. By the end of the year, the game earned Steam's Best of VR Platinum ranking becoming the company's second title to do so after Boneworks achieved Platinum in 2019, 2020, and 2021.
Transcend led the oversubscribed seed round for Ruckus Games, a leading AAA PC/console developer. Ruckus was founded by veteran developers formerly of Gearbox Software and Riot Games. The 7-person co-founding team has been instrumental in the creation and success of the Borderlands IP, Elder Scrolls Online and collectively have made over 25 games across multiple platforms that have grossed in the billions.
Palia, the hotly anticipated cozy MMO from Singularity 6, completed multiple play tests with the community to refine core elements of the game. Several major announcement coming in 2023.
The Trioscope collaboration with Game of Thrones franchise creator George R.R. Martin won the 2022 LA Shorts International Film Festival award for best sci-fi. The company also launched the patented Trioscope Platform for third-party content creators, with a John Malkovich project as one of the first to license the platform.
Methodical Games, founded by Francesco Gigliotti, Adam Bellefeuil, and Dave Ratti, raised a $15M Seed round led by Lightspeed with participation from Transcend. The team are industry veterans behind some of the most successful gaming franchises in history, including Call of Duty, Fortnite and Apex Legends, with over $52B in combined lifetime revenues.
Polygon made remarkable progress against their mission to bring the world to Ethereum, partnering with an array of leading companies including Disney, Nike, Meta, Coca-Cola, Reddit, Starbucks, and the NFL.
Spatial took their immersive audio technology to the next level, announcing Spatial Kit X. This revolutionary technology allows clients across entertainment, retail, wellness, and healthcare to set up immersive audio installations in a fraction of the time. And the industry is taking notice – Spatial was awarded one of the most promising products of 2022 at CEDIA.
Crypto Unicorns from Laguna Games launched in May 2022 and quickly became the #1 game collection on Polygon. The studio also announced plans to expand the franchise with four new games on Android and iOS.
Roboto Game founders Mathilde Pignol and Curt Bereton, who have designed and scaled games to over 65M+ players, raised a $15M round led by a16z with participation from Transcend to craft meaningful multi-platform experiences that are “Good Alone. Great Together.”
Venly raised a $23M Series A from Transcend and other investors, won The 2022 Deloitte Rising Star award, and partnered with Stripe on their fiat-to-crypto onramp pilot.
Heroic Story came out of stealth to announce a $6M Seed round and their community-owned, world-building game platform that reimagines the traditional gameplay of pen-and-paper role-playing games.
Chess Universe from King of Games was selected as the launch game for the collaboration between Tilting Point, Polygon, and IndiGG.
Category leaders Polygon and YGG partnered to build IndiGG, the world’s biggest gaming guild by onboarding the 500M+ gamers in the Indian subcontinent. Transcend invested in their $6M seed round led by Sequoia Capital.
About Transcend Fund
Transcend is a top performing early stage venture capital firm that partners with the boldest founders in the industry to collaboratively build the future of interactive entertainment.
Founded in San Francisco by gaming veterans, the Transcend portfolio features a preeminent group of high growth digital entertainment companies around the world.
About Shanti Bergel
Shanti is the founding partner of Transcend and a 30 year game industry veteran.
His global operating experience spans every major platform and business model transition of the last several decades and is animated by a career-long fascination with how changes in technology and distribution affect products, services, and communities.
Shanti is a recognized member of the Techcrunch List, speaks fluent Japanese, and is a frequent speaker on early stage investment, M&A, and strategic partnerships in digital entertainment.