Why Apps Are Beating Games for Investments

Gaming startup funding hit roughly $627 million in the first half of 2025, tracking toward the weakest annual total in over a decade ( Crunchbase) . 54 billion raised in all of 2024.   Meanwhile, consumer apps are swimming in capital.

a16z raised $15 billion in January 2026 , including a consumer-focused Apps Fund.   The money hasn't left venture capital. It has left gaming.

And this is why. The Math That Broke Gaming VC (Source: Aream Quarterly Gaming Report ) Venture capital is about betting on outsized returns. A typical VC fund aims for 3x in roughly ten years, with a handful of winners carrying the portfolio.

To make that math work, investors need both predictability and scalability. Mobile gaming has been both predictable and scalable since 2012. The compound annual growth rate (CAGR) was in double digits.

Venture capital flowed into new and scaling companies that used to fuel new game development and user acquisition. After 2022, the industry ran into two problems. First was consolidation.

The acquirers got acquired . Zynga was bought by Take-Two. Activision Blizzard was absorbed by Microsoft.

King had long been folded into Activision. The companies that used to write $50M to $500M acquisition checks for small and mid-size studios have fewer reasons to keep buying, and there are fewer of them doing it. That means fewer exits.

And investors need exits to justify their existence. Second was distribution. When Apple deprecated IDFA, it reset the efficiency of mobile marketing overnight.

Less targeting data meant less effective ad spend, lower payback periods, reduced marketing budgets, and ultimately fewer downloads and lower revenue. We're back to growth hacking K-factors, IP integrations, and celebrity endorsements. For startups without those levers, it's a brutal environment.

Here's how those dynamics show up in the actual fund math.   With today's compressed multiples, that's a company generating somewhere between $300M and $700M in revenue. How many independent mobile gaming companies can you realistically see reaching that valuation in a market where distribution is handicapped, and the natural buyers have been bought?

The bigger the fund, the worse the math gets . And in the COVID boom, gaming funds got supersized: A $20M to $50M acquisition returns $2M to $4M for the fund at 8-10% ownership A $100M to $200M exit returns $10M to $14M at 7-10% ownership A $500M exit returns $25M to $50M at 5-10% ownership The supersized funds raised during the COVID boom need multiple lottery wins just to return capital to their LPs (Limited Partners is what the investors into funds are called), let alone generate profits. But the capital that's leaving games isn't going to the enterprise AI and defence industry alone.