Q2 began with a roar here at BITKRAFT Ventures as we launched our third early-stage gaming fund (“BV3”). We also enjoyed conversation and libations at GDC (largest gaming conference held in SF)  alongside industry leaders, welcomed a new team member and researched the cutting edge of Web3 and XR. Plus, we saw plenty of portfolio activity in addition to major industry developments around games and media crossovers, expanded XR interoperability, the breakout Web3 hit Pixels, and more.

Let’s dive in!

The launch of this new fund marks a significant milestone for us as we strive to support and drive innovation in the gaming industry. Our investments have positioned us as a key player in shaping the future of games and fostering entrepreneurship in the digital entertainment sector. We are looking forward to nurturing and accelerating the growth of promising companies with this fund!

It was exciting times for us at GDC! In addition to having almost 90 meetings with a variety of diverse and innovative companies, BITKRAFT held a lively reception alongside Xsolla, CMS and Silicon Valley Bank. Roughly 250 founders, investors and industry leaders were in attendance, sharing great food, great drinks and even better conversations. GG!

Hi everyone👋! I’m Stephanie Llamas, the newest member of the BITKRAFT team and the firm’s Head of Content! I come to BITKRAFT with a robust background in researching and writing about the academic, business and governance sides of games, XR and Web3.

I began my career in marketing and PR before moving on to do academic research on games at New York University. I was then the third hire at SuperData Research, a market research firm focused on games, gaming video content and XR that was acquired by Nielsen. There I served as head of research and strategy, driving many aspects of the business including data, insights and content.

Following my time at SuperData/Nielsen, I led metaverse governance research at the World Economic Forum. I have a BA in Liberal Arts from Northwestern University and an MA in Media, Culture and Communication from New York University. 

(And for what it’s worth, I’ll be writing these newsletters for you going forward 🙂)

Jabali, an AI company advancing game engines and empowering visionary game designers and developers, announced that it has raised a $5 million seed round led by BITKRAFT Ventures. The company's generative AI-powered game engine intends to let users create new types of games and interactive experiences without needing extensive game development knowledge.

Forge, a leading games rewards and engagement platform, announced the launch of the Forge API. Designed to empower game developers by providing a seamless solution for creating and managing “battle pass” experiences, the Forge API allows them to reach new gamers, drive sustained engagement, and reward players for their commitment.

Forge has also entered into a partnership with Xterio, a Web3 gaming ecosystem and platform. This agreement combines Forge’s gaming, identity, and marketing platform to connect gamers to Xterio’s growing content library of first- and third-party Web3 games, like Age of Dino, Overworld, Palio, and many others.

Carbonated, the studio behind MadWorld, shared that it has raised $11 million in fresh funding from prominent backers. MadWorld, a post-apocalyptic shooter game for iOS and Android, opened up registration for its early access playtest in March, giving players an opportunity to test out its NFT-based territory control elements.

Series AI has unveiled its Rho Engine, an AI-driven tool that automates many of the processes of game development. The Rho Engine stands as an AI-native, multi-modal full-stack game development platform, created to revolutionize the way games are created, powered by generative AI.

Final Fantasy developer and publisher Square Enix has partnered with Web3 games platform HyperPlay as it aims to explore new avenues within the Web3 gaming realm. HyperPlay have announced that they will use the funds to expand and scale its game store as well as add more platforms, stores and entertainment features in future updates. As part of the collaboration, Square Enix's SYMBIOGENESIS, an art experience centered on digital asset ownership and powered by MetaMask, will debut on the HyperPlay storefront.

Higgsfield AI, a startup focused on democratizing social media video creation, announced $8 million seed funding. The new funding round marks a significant milestone in Higgsfield AI's mission to bring video AI generation and editing into the mainstream with its proprietary video model Diffuse. Diffuse enables users to create highly personalized and realistic human characters from a single selfie, offering a new dimension of engagement and creativity in video content.

Studio369, the indie game developer behind Ethereum action game MetalCore, announced that it raised $5 million in new funding to launch the PC game on the Immutable zkEVM scaling network. MetalCore is currently planned to launch in open beta in May, letting anyone hop in and play the combination of mech suit combat and boots-on-the-ground shooting action. And if the planned timing works out, the game will also launch its token around the same time.

Avalon, an independent game studio working on online games and experiences, raised $10 million in a funding round led by BITKRAFT. The investment will be used to develop their debut eponymous title, Avalon, a next-generation massively multiplayer online game with interoperability of assets and progression between worlds designed for Web2 and Web3 gamer appeal.

• Following Embracer’s sale of Gearbox to Take-Two for $460M (PCGamer), Embracer announced it will be splitting into three companies separately focusing on AAA, indie and mobile, and tabletop games (The Verge)
• Blizzard renews agreement with NetEase to bring games back to China (VentureBeat) 
• Fortnite Festival lets users play on virtual Coachella stages (Variety) 
• Disney Games expands leadership team to invest further in games (VentureBeat)
• The gaming cold war begins? Russia is reportedly considering making their own PC gaming handheld and operating system which would replace the likes of Steam, Steam Deck and SteamOS (Dexerto)

Yet another TV show featuring gaming IP has caused a revival of old titles. Based on the 27-year-old game franchise, Amazon’s Fallout has received a rating of 94% on Rotten Tomatoes, along with generally favorable reviews from critics. On top of that, Amazon says the show boasted 65 million viewers in its first two weeks. Bethesda's Fallout games have collectively more than doubled their concurrent players on Steam with the release of the TV series. 

So what? Games are becoming a larger part of the media zeitgeist as they are featured on TV and in film. Adaptations such as The Last of Us, Twisted Metal, Arcane, The Super Mario Bros. Movie and the Borderlands film have sparked conversations about the growing perceived legitimacy of games as part of the larger media landscape. Not only that, but there is a feedback loop emerging as adaptations are causing renewed interest in older IP. And that’s happening in both directions: TV and film are breathing new life into gaming IP, games like Hogwarts Legacy are bringing more traditional media IP back into the spotlight, with the game selling 22 million copies in 2023 and earning revenue that rivaled Harry Potter box office sales from over 10 years ago. Meanwhile, there are implications that episodic content is providing regular boosts, with Jim Ryan, CEO of PlayStation, stating that “each week an episode (of The Last of Us) dropped, we sold a lot more games.”

What’s next? Many, many, many more game adaptations. It has been demonstrated that not only is gaming IP ripe for other media, but the games industry is benefitting from the cross-over. Despite the fact that gaming revenue surpasses that of other media types, it has struggled in the past to gain legitimacy in relation to other types of media but adaptations are showing a shift in this respect. But on a more micro scale this is most beneficial to AAA IP, so it may pull players back to larger titles and away from indies. 

The Khronos Group, an open consortium dedicated to tech standards, announced the OpenXR 1.1 specification. This release evolves the widely adopted OpenXR open API standard for high-performance, cross-platform access to VR, AR, and mixed reality (MR) — collectively known as XR — platforms and devices.

Meanwhile, Niantic 8th Wall now supports the Apple Vision Pro via its Metaversal Deployment. This means developers can build spatial experiences once and deploy across devices and platforms using 8th Wall’s WebAR capabilities, which allows for augmented reality functionality within a web browser.

But the news that is currently breaking the internet comes from Meta: they have opened up their operating system to allow creators to build content for other headsets. In short, they are becoming the Android of XR.

So what? Technical and usage interoperability are among the key capabilities needed to facilitate growth of the industry and responsible technological deployment. Khronos and 8th Wall are facilitating interoperability in XR, particularly through open standards and web-accessible content across devices. But with OpenXR and WebAR, the two companies have always been dedicated to democratizing and standardizing the industry. Meta, however, has traditionally kept its walled garden ethos when it comes to VR so this is a massive shift in regard to its overall strategy. It is reminiscent of the late Microsoft Mixed Reality model, which was shut down. It seems the industry wasn’t ready for Microsoft, so is the industry ready for the Meta Horizon OS? Most likely, now that penetration rates have increased and the technology has moved up on the S-curve.

The impact on content creators is clear, though: As interoperability increases across devices, developers presumably have more opportunities to build for, and earn from, XR’s entire ecosystem and user base. This helps mitigate challenges that the XR industry has faced when attempting to entice developers to build experiences. More experiences means more incentives for users to hop into a headset and adopt the technology, so it behooves the industry to build opportunities for both creators and users to jump onboard through interoperable capabilities.

What’s next? It will be interesting to see what new hardware will arise now that the Meta Quest is just one on the Meta’s Horizon OS. This could be a massive opportunity for OEMs to access a wider audience with increasing competition that could help create better devices. And with the entrance of the Apple Vision Pro, the industry is seeing new potential investment opportunities given signals that technology could be on the verge of a platform shift. It will still take time for a critical mass in XR – especially in regard to headsets – but in order to create user growth, content creators must see opportunities for wide access, as well as financial support, to build attractive experiences. Interoperable innovation is also likely to grow access to privacy, security, identity, ownership and accessible design, building up user trust and technical usability that will continue to drive people to XR. 

• Lattice announced the mainnet launch of Redstone, an L2 built on the OP stack specifically designed for ambitious onchain games and worlds (Redstone Chain/X)
• Illuvium secured $12 million in Series A funding for its blockchain gaming universe, raising total funds to $60 million (PG)
• Gunzilla Games raised $30 million for "Off the Grid," a cyberpunk battle royale, and "Gunz," its blockchain platform (VentureBeat)
• OKX and Immutable are partnering to introduce a GameFi launchpad in OKX's NFT marketplace, supporting games on the Immutable zkEVM network (Immutable/X)
• Blockchain game studio Parallel has secured $35 million in funding to expand its Web3 trading card game, Parallel, and other projects, boosting their total raised funds to $85 million and valuing the company at $500 million (NFT Plazas)

Social RPG and Web3 sweetheart Pixels has emerged as the most popular blockchain game since December of 2023 as it has propelled the Sky Mavis (of Axie Infinity fame) blockchain Ronin to new heights: Ronin peaked at 1.2 million daily active unique wallets in Q1 of this year.

The Big Blockchain Game Report report set the stage by highlighting that in the blockchain gaming sector, sentiment has fluctuated. As such, some blockchain gaming projects have focused on providing real benefits and services to players, like faster and cheaper transactions. These projects have attracted more capital from investors who saw potential in their practical use. 

So what? Investments are increasing in the face of successes like Pixel’s, boosting the opportunity for a growing Web3 audience. With easy onboarding and the mainstream attractiveness of farming sims, it is a way for Web3 newbies to easily enter the foray. Likewise, Ronin has brought on plenty of newbies itself and other Ronin-based projects have experienced a halo effect. As a result, the Web3 consumer base is widening.

Pixels has shown innovation in recruiting seasoned users as well. Instead of paid advertising, they are making use of collaborations with other Web3 projects through community events and competitions, rewarding active community members with the $PIXEL token. Plus, players can use NFTs like CryptoPunks, Pudgy Penguins, Bored Ape Yacht Club, and Moonbirds inside the game. 

What’s next? While Pixels is leveraging Web3 tools, it is also elevating Web2 development through user-generated content. Users are already building their own games and cosmetic items within the game. This could further widen the addressable audience by bringing them into the (metaverse) platform in a similar way to Roblox. Ronin and Pixels are making Web3 less scary for novices and could be a driver for expanding the user base. As Pixels releases new content, something they’ve been doing regularly, they can facilitate new waves of users and seek to build off of an exponential rise. 

Our very own Technical Analyst Ben Naylor from the Web3 team had the privilege of building a game using two emergent engines: MUD and DOJO. In his article Dungeons and Dojos: Exploring Onchain Game Development with MUD and DOJO Ben takes a deep dive into his journey, demonstrating the unique qualities that blockchain brings to gaming—such as permanence, permissionless composability, and interoperability—as well as the ingenuity behind these tools.

Stephanie Llamas explores the Apple Vision Pro and its implications for the XR industry in her recent article entitled Apple Vision Pro and Beyond: Unveiling Investment Horizons in the XR Revolution. In this piece she investigates the potential investment opportunities arising from this technology shift. Stephanie looks at the potential of XR technologies in revolutionizing various sectors and how investors seek to capitalize on these advancements.

Our portfolio companies are currently looking to fill roughly 300 positions in a variety of functions. If you’re on the hunt for something new, or know someone who is, take a look at our database of open roles. Be sure to follow our very own Brooke Grabrian and Amanda Rose Timm for real-time announcements.

Connect, follow and subscribe: Scan the QR code below or click here to subscribe to our newsletter, learn about us and connect on socials. 

Got a pitch? Be sure to send your pitch decks and requests to pitch@bitkraft.vc and our investment team will review.

Investor questions, anyone? Reach out to us at investor-relations@bitkraft.vc.

Specific investments described herein do not represent all investment decisions made by BITKRAFT Ventures. The reader should not assume that investment decisions identified and discussed were or will be profitable.  Specific investment advice references provided herein are for illustrative purposes only and are not necessarily representative of investments that will be made in the future.

All material risks of investment

Not an offer: This document does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only and on the understanding that the recipient has sufficient knowledge and experience to be able to understand and make their own evaluation of the proposals and services described herein, any risks associated therewith and any related legal, tax, accounting or other material considerations. To the extent that the reader has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, prospective investors are encouraged to contact BITKRAFT Ventures or consult with the professional advisor of their choosing.

Third Party information: Certain information contained herein has been obtained from third party sources and such information has not been independently verified by BITKRAFT Ventures. No representation, warranty, or undertaking, expressed or implied, is given to the accuracy or completeness of such information by BITKRAFT Ventures or any other person. While such sources are believed to be reliable, BITKRAFT Ventures does not assume any responsibility for the accuracy or completeness of such information. BITKRAFT Ventures does not undertake any obligation to update the information contained herein as of any future date.

Forward-looking statements: Certain information contained herein constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events, results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. Nothing contained herein may be relied upon as a guarantee, promise, assurance or a representation as to the future.

Past Performance: There is no guarantee that the investment objectives will be achieved. Moreover, the past performance is not a guarantee or indicator of future results.