BGMI maker Krafton to invest $150 million on Indian gaming and entertainment startups

In recent months, the company has expanded its scope to include the creator economy and consumer-facing deep tech startups.

Among its portfolio companies include mobile game development studios Nautilus Mobile and Lila Games, game streaming platform Loco, Indian language storytelling platform Pratilipi, and audio content platform Kuku FM, besides Nodwin.

Audio romance and friend discovery startup FRND, conversational media platform Bobble AI, music NFT marketplace FanTiger, in-game NFT exchange GGX and influencer marketing platform One Impression are also part of Krafton's startup bets in the country.

Where will the investment go?

Sean Hyunil Sohn, CEO, of Krafton India told Moneycontrol that they are currently scouting for startups with deep tech capacity (deep learning and AI) which can change how content creation works and how content platforms work for Indian consumers.

"We firmly believe in India’s potential as a key player in the global gaming and technology industry. We are dedicated to having a transformative impact not only in the gaming and tech industry but also in the wider content landscape" Sohn said.

Krafton intends to allocate at least one-third of the $150 million corpus towards existing companies for their future growth initiatives, and another one-third towards deep tech companies that can provide differentiated services and offerings to consumers, he said. The remaining one-third will go towards other new startups, he said.

"We are not as mature as a growth stage investor, but not as early as seed stage one. We are positioning ourselves in this sort of area where the startup has proven the product market fit, and revenues have started to kick in, but they need a sizable funding to speed up the growth" Sohn said.

That said, he mentioned that they are selective with new deals since they prefer having a relationship with founders and are not passive investors in a company. "We generally prefer to have at least 10% of the shareholding in the company and then we want to sit on the board, we want to be more proactive in terms of advising them and introducing new business development opportunities," he said.

Krafton, which has already invested in early-stage venture capital funds such as Lumikai and 3one4 Capital, is currently looking for similar VC fund investment opportunities in the country, Sohn said.

Earlier this week, Japanese mobile entertainment giant Mixi also launched a $50 million corporate venture capital fund dedicated to the India market. The fund will look to back early-stage startups in the gaming, digital entertainment, and consumer services sector in the country.

Meanwhile, Lumikai launched its second fund in June 2023 with an aim to raise $50 million to back early-stage gaming and interactive media startups in the country. It also set up a dedicated $10 million AIF (Alternate Investment Fund) for Indian limited partners to attract domestic Rupee Capital. This will bring Lumikai's total assets under management (AUM) to $100 million.

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India has been dubbed as the fastest-growing games market in Asia, both in terms of revenue and gamers, with its mobile and PC gaming revenue projected to reach $704.5 million in 2022, according to Niko Partners, a market research and consulting firm that covers video games, e-sports, and streaming in the continent.

This is set to grow at a five-year compound annual growth rate of 21.1 percent to touch $1.4 billion in 2026. This does not include revenue generated by real money games. About 34 percent of gamers in India spent money on non-RMG titles in 2022, the firm said.

India's overall gaming industry revenues increased from $2 billion in FY21 to $2.6 billion in FY22 and is expected to expand at a compound annual growth rate of 27 percent to $8.6 billion in FY27, as per a report by Lumikai.

A quick snapshot of India's video gaming market

Expansion of India games portfolio

Krafton also recently expanded its portfolio of games in India in the country with the launch of Defense Derby, a real-time strategy game developed by its independent studio RisingWings.

With this launch, Krafton now offers four titles in India that include a real-time strategy game Road To Valor: Empires, and a battle royale game New State Mobile, apart from BGMI.

"The metrics that we are seeing from Indian gamers are very different from global gamers. It's kind of a tough journey" Sohn said.

For instance, Sohn said some games which have worked reasonably well in other markets haven't necessarily worked in the same way in India.

"I think Indian people are a bit conservative or less familiar with a new gameplay or a new genre. In my humble opinion, Indian people spend most of their gaming time in Ludo or some kind of card and board games, and BGMI or other battle royale games. These games may account for more than 50 percent of people's gaming time here. But I believe that there is huge potential with strategy games, racing games"

Although they are a global gaming company, Sohn said they intend to become a local publisher who can "bring global games or new games from India which can open eyes for gamers. It cannot work overnight but we will continue to learn"