Why Hiro is bullish on UK and EU game dev funding after helping The Chinese Room and Bulkhead go independent
VC firm Hiro Capital has a new advisory division, Hiro Advisory, which has been instrumental in facilitating the independence of The Chinese Room and Bulkhead Interactive from their respective parent companies. This move is part of a broader market shift, where consolidation is giving way to fragmentation, and many talented individuals are leaving larger corporations to form new studios.
Hiro Advisory's partners, Spike Laurie and Mike McGarvey, believe that this is an opportune time for advisors. They have successfully guided The Chinese Room and Bulkhead through their transitions, showcasing their ability to help management and teams navigate the challenges of the games industry.
The narrative surrounding these transitions is one of British-founded companies returning to British control. Laurie and McGarvey highlight the UK and Europe's world-class talent and their potential to create exceptional intellectual property (IP). However, they also point out the issue of custodianship, where American or Chinese companies acquire studios, publish their games, and take the rights, often diluting the IP's value.
Hiro Capital emphasizes the importance of retaining and growing IP in the UK and Europe, where the talent is. This region is becoming increasingly attractive for companies eyeing the games business due to its expertise, lower costs compared to North America, and restrictions on Chinese investment in the United States. The regulatory landscape is shifting, making Europe the primary market for M&A and investment in the games space.
The funding landscape for game studios is currently considered hostile, with a shift from a seller's market to a buyer's market. Developers need to demonstrate unique strengths, such as genre expertise, IP, and technology, to secure funding. Hiro Advisory focuses on helping companies position themselves effectively and make strategic pivots to maximize their chances of raising capital.
Looking ahead, Laurie and McGarvey predict a lean period where studios will tighten their belts and budgets will decrease. However, they believe that the future is bright, with sophisticated buyers seeking high-quality assets and publishers returning to support great games. This will lead to a resurgence of funding opportunities for talented teams, with a focus on short-term prototyping and tighter management of development deals.
