Engage Digital (formerly Virtual Worlds Management), the leading producer of trade events and media that focus on user engagement, announced findings from a comprehensive study of public transactions showing that investors put nearly $14 million into five virtual worlds-related companies in Q2 2009. Correction: The full tally was $16.1 million invested in six companies.
The total dollars and number of companies funded indicates a steep decline in investment both sequentially and year-on-year. Last quarter, from January through March 2009, more than $68 million was invested in 13 virtual worlds-related companies. For the same quarter a year ago, investment in 16 companies totaled $161 million.
The decline in Virtual Worlds funding in many ways reflects the overall lull in venture capital activity across all sectors. A widely covered investing conference in San Francisco elicited sweeping opinions that the venture capital industry at large was due for a wake-up call of epic proportions. "I personally believe and I think the evidence proves that the venture industry has gotten too big, the funds have gotten too big," one investor told The New York Times recently. Except for the high profile launch of a new fund, Andreessen Horowitz, formed by Netscape cofounder Marc Andreessen and a well-known private investor Ben Horowitz, VCs across the board have far fewer dollars to spend today than they've had in a very long time. The Wall Street Journal reports that the amount of capital raised by US venture capital firms -- the money they use to take positions in start-ups and pre-IPO companies -- plunged in the first half of 2009 by 63 percent. The Journal goes so far as to call present times a "grim environment" for VC funding.
In spite of the current conditions, there was some significant funding in the Virtual Worlds sector: Proving that kids' virtual worlds are still an active area, Canadian virtual worlds creator Tribal Nova picked up $2.5 million in funding; finance-focused Minyanville, also targeted to kids, picked up $2.2 million in funding. Big Stage Entertainment, which provides technology for users to create personal avatars and insert them into various media, landed almost $3 million in funding. And Forterra Systems, a virtual worlds stalwart, added $1.2 million to its kitty from a lineup of investors already with a stake in the company.
Our sister site, VirtualGoodsNews.com, in its research, found that investors put more than $237 million into eight companies that monetize at least in part through sales of virtual currency and goods in Q2 '09. (Further information and discussion of the virtual goods business space will take place at Engage Digital's Virtual Goods Conference to be held at the Engage! Expo in San Jose, September 23-24.)
Not included in the final tally is a $4.1 million investment in GameGround. Falling outside the realm of virtual worlds, this as-yet-not-fully-detailed venture is designed to inform and link gamers -- through updates of high scores, achievements, etc. -- via the social networks they belong to. Also not included is the equity position in Linden Lab taken by Stratim Capital, a San Francisco-based institutionally funded private equity firm that secures equity positions via the secondary market. The firm said in June that it "bought almost the entire position of an existing [Linden Lab] shareholder."
This update includes the addition of Minyanville to the quarter's list of company's receiving funding.
You can find the full list of companies and investments here.
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