Investment Study Case-in-Point: Virtual Worlds Hysteria!
Virtual Worlds Management has just released a list of accountable transactions it culled from the boom of venture capital, tech and media firm investment news around virtual worlds in the past twelve months. Notably, the report assumes a total of $1 billion in investments spread across 33 companies, and of those, Disney's acquisition of Club Penguin accounted for $700 million, if you recall.
Oddly, however, the report includes Intel's recent $110 million acquisition of Havok, styling the company as a "3D virtual worlds graphics technology" company. It's a bit of a stretch to call Havok a virtual worlds company, since the Ireland-based company's modular run-time tech and artists' middleware has been used for console and PC video game physics and behavior for almost a decade, most recently on big sellers BioShock, Stranglehold and Crackdown, to name only a few.
Even more misleading is the inclusion of independent gaming pioneer GarageGames, who is best known for its proprietary Torque game engine. Same with Emergent Technologies ($12 million from Jerusalem Venture Partners), whose cross-platform C++ game engine, Gamebryo, launched in 2003 and has since been used in PC games like Civilization IV and, notably, critically-acclaimed single-player hit The Elder Scrolls IV: Oblivion.
Others included in the report fall into somewhat of a gray area -- for example, PlaySpan, who received $6.5 million in Series A funding from Easton Capital, Menlo Ventures and Asian investors, could apply its technology equally to gaming networks as to multipurpose virtual worlds. The taxonomy of virtual worlds is a bit tricky to define and will continue to be under discussion for some time, to be sure; similarly, it can be anticipated that many video game companies may broaden their involvement into the virtual worlds space (such as Entropia Universe's graphics upgrade to Crytek's CryEngine).
But it's less useful, and more misleading, to use such arbitrary delineation when trying to quantify an industry by investment numbers -- certainly virtual worlds are enormously attractive to investors, with large dollar amounts involved, but it would seem $1 billion is somewhat an inflated number.
Comments
Wow. That report really blurs the lines when it comes to what's considered a virtual world. To the point of rendering the report meaningless.
Oh except for the headline, of course. We can expect the "$1B Invested in Virtual Worlds" line to appear around the web and in PowerPoints everywhere.
Posted by: Adrian Crook | October 4, 2007 8:11 PM
The $1 billion number is virtual world companies - which includes technology companies behind virtual worlds as well as the worlds themselves. Intel's $110 purchase of Havok falls into this category as does GarageGames and Emergent. We believe all the companies listed in the data to be either world providers themselves or technology companies in the virtual world value chain. The fact that these companies also provide technology used in games does not make them irrelevant to the virtual worlds industry.
Similarly PlaySpan is essentially a virtual goods sales enabler no matter what trademarked definitions they use on their web site
Play with the entire grouping of numbers as you please - they are all laid out on our web site - and no matter how you slice them Virtual Worlds companies (companines throughout the value chain) still garnered a respectable amount of investment capital in the past 12 months. There was no intent to mislead. As you suggest the taxonomy of virtual worlds is a bit tricky. I invite you to review the numbers and provide your own analysis.
Posted by: Chris Sherman | October 4, 2007 9:56 PM