Venture capitalists claim that GameFi funding is no longer driven by FOMO.

Venture capital firms rushed into blockchain gaming projects during the previous bull run, but industry executives now claim that they are adopting a more mature and sustainable approach. Shi Khai Wei, the founder of LongHash Ventures, a cryptocurrency-focused VC firm, described the previous investment frenzy as “insane.” He revealed that some GameFi projects received up to $100 million in funding with only a small team and ambitious promises. Keiran Warwick, the founder of GameFi studio Illuvium, who recently secured $12 million in VC funding, shared similar sentiments, stating that the previous investor frenzy was driven by a fear of missing out (FOMO).
Warwick emphasized that venture capitalists have since expanded their due diligence checklists. They now require evidence of gameplay, artists, developers, security audits, and more. This more comprehensive checklist helps firms like LongHash Ventures weed out less legitimate projects. Wei explained that his firm has been more involved in GameFi this time around, as top-tier projects have already launched or are nearing launch, and their valuations are more reasonable. LongHash Ventures has invested in several GameFi projects, including Yield Guild Games, Guildfi, Snack Club, Moonveil, and Ignite Tournaments.
Wei added that GameFi has become a recent focus area for LongHash Ventures, and he hopes his firm will be ahead of the curve by 6-12 months when the next wave of FOMO hits. Gabby Dizon, the co-founder of Yield Guild Games, noted that VCs are now more aware of the cyclical nature of cryptocurrency markets. Many of them made poor investments at the peak of the last bull market, causing them to experience setbacks.
In recent months, several GameFi projects have also received funding. Illuvium.io secured $12 million in a Series A funding round led by King River Capital, Arrington Capital, and Animoca Ventures. Other GameFi projects, including Helika Games, Parallel Studios, and Elixer Games, have received funding amounts of $50 million, $35 million, and $14 million, respectively. According to RootData, over $2 billion was invested in GameFi projects in Q4 2021, but funding amounts declined for six consecutive quarters after the first quarter of 2022. However, the trend was finally reversed in the third quarter of that year, and the GameFi sector has seen three consecutive quarterly increases since then, culminating in $268 million in the last quarter.