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Great games cost money to build. They always have and always will (even with Gen AI!)

You can moonlight on the side. Work for hire to fund your own IP. Bootstrap your way to a soft launch. But at some point, if you want to build something that reaches millions of players, you need capital.

The real question isn’t whether games need funding.

It’s what kind of funding, from whom, and at what stage.

Imagine a 6-person studio in Helsinki. They’ve built something real: Day 30 retention is 9%, early monetization is working, and they’re doing $60K/month in revenue. Players love the core loop.

But content runs dry after week six. The meta isn’t deep enough yet. LiveOps tooling is thin. They’re too early for scaling, but too far along to go back to pure experimentation.

This is where many promising studios live, and also where today’s funding ecosystem often breaks down.

In a perfect world, the answer would be simple:

Match the capital type to the risk type.

• Use equity to fund product discovery, when failure rates are high
• Use structured convertible debt to fund content and infrastructure build-out once something works
• Use cohort financing or other forms of debt to scale user acquisition once unit economics are predictable

In otherwords – the right capital at the right stage. That’s not how the industry is structured today — but I think it could be.

This post is a proposal. A manifesto for a healthier investment climate in gaming, one that encourages innovation and creativity without forcing founders into premature dilution or investors into mispriced risk.

Over this three-part series, I’ll lay out what that model might look like:

• Part 1 (this post): The framework — how we got here and what the three stages could be
• Part 2: The Grey Zone economics — portfolio math, downside protection, founder alignment
• Part 3: Seed fund construction — why small funds may outperform bloated vehicles in gaming content

How We Got Here

2015–2017: The Disciplined Era

Gaming was always considered to be a hits business.

Early funds run by sector experts made focused bets on exceptional teams. Fund sizes were modest, equity stakes were meaningful, and everyone accepted the power law.

2018–2021: The Flood

Then cheap capital arrived.

New gaming funds raised $200M–$500M vehicles with aggressive deployment timelines. Studios raised large Series A rounds where the primary use of funds was user acquisition — deploying equity into what were ultimately scaling activities.

2022–2024: The Hangover

Many of those studios became zombies: not dead, but not venture-scale either.

Venture capital moved to AI infrastructure, consumer apps, “anything-but-games”. Gaming content became, for a time (and remains) structurally difficult to fund.

What We Learned

Even the likes of Supercell can’t manufacture hits consistently which is why they and others have pivoted toward M&A and investment strategies to keep growing.

Studios learned they need to self-publish to create acquisition value.

Founders got smarter about capital efficiency. And games cost less to build thanks to GenAI: two-person teams can now ship what required full art departments in 2020.

Most importantly, one key thesis has been validated:

If a game can’t fund its own UA, it’s probably not worth funding with equity.

A Three-Stage Capital Model (A Proposal)

Here’s the model I think the industry should build toward.

It’s a suggestion for how gaming studios could be funded if we were more disciplined about matching capital to risk.

Stage 1: Seed Capital (Discovery Equity)

Small, focused venture funds run by gaming experts making portfolio bets on product discovery.

• $25–50M total fund size
• $500K initial checks
• 50–100 investments
• Meaningful ownership stakes
• Goal: soft launch and retention proofThe goal here is simple: Prove the game works.

Stage 2: Grey Zone Capital (Build-Out Convertible Debt)

This is the missing layer — and largely a market that doesn’t yet exist in a coherent way.

Your game has signal:

• Day 30 retention of 8–10%
• Early revenue of $50K/month
• A core loop that clearly works

But content runs out at Day 45. LiveOps isn’t ready. Meta depth is thin. Localization and infrastructure are incomplete.

You’re stuck between:

• “Interesting experiment”
• “Scalable business”

This is where many good studios die: too strong to shut down, too early for scale debt, too expensive for another equity round, where many VCs have deprioritized gaming.

Traditionally, the only option has been to raise a ~$5M Series A, give up ~25% of the company, and spend it building content.

But I think there’s room for a different instrument:

Convertible build-out debt. Not bank-style venture debt, but something sitting between equity and pure credit.

A structure could look like:

• $1–3M facility, deployed in tranches
• 12–15% PIK coupon (compounding)
• Senior liquidation preference for downside protection
• Meaningful warrants (eg 5%) or conversion optionality tied to repayment or breakout outcomes

Investors would receive private credit-like returns in base cases, with equity upside in breakouts.

Who might provide this?

Not traditional VCs for sure.

Potential providers could include:

• Regional development bodies supporting local ecosystems
• Strategic investment from large gaming studios building acquisition pipelines
• Credit-oriented investors seeking yield plus optionality
• Family offices wanting gaming exposure without pure VC risk

Grey Zone capital is, in my view, the biggest structural gap in gaming finance today. Not for the faint hearted, but potentially the missing link?

Stage 3: UA Scaling Debt (Proven Economics)

Once LTV > CAC is proven, UA becomes primarily a math problem — not an existential creative risk.

At that point, studios shouldn’t need more equity.

They need credit facilities that understand cohort economics and should use either Cohort financing (longer breakeven periods) or AR/Factoring (short breakeven periods).

The Journey (In an Ideal System)

• Year 0–1: $500K seed → soft launch → $50K MRR
• Year 1–2: $1.5M Grey Zone → build-out → $300K MRR
• Year 2–3: Cohort debt → scale UA → multi-million revenue

These time frames could even be compressed depending on the genre of game being developed and also the agility of the team, but the concept is the same – Equity funds discovery. Convertible debt funds build-out. Pure debt funds scaling.

Why This Might Work Now

This model only becomes plausible today because the infrastructure exists:

• GenAI tools: development costs have collapsed
• Self-publishing is the norm: LiveOps and monetization are democratized
• Data transparency: cohort economics are measurable and financeable

In 2015, you needed a publisher with cash and infrastructure.

In 2026, you may simply need the right capital structures. And a great game…

Who Would Win

Founders could maintain meaningful ownership and control.

Seed investors would get disciplined portfolio exposure and potentially great fund returns as dilution is not expected in to this model as subsequent equity rounds not envisaged.

Grey Zone investors could earn attractive risk-adjusted returns with downside protection and upside optionality.

Debt providers would finance scaling of what is already proven to work.

And the ecosystem would get more games made.

What’s Next

To be clear: this is not the default model today.

It’s a proposal for what gaming finance could evolve into if we stop forcing equity to do the job of credit, and start building instruments designed for each stage of risk.

In Part 2, I’ll break down the Grey Zone economics: portfolio math, downside scenarios, and alignment questions.

In Part 3, we’ll explore seed fund construction — and why small funds may outperform bloated vehicles in gaming content.

👇 Subscribe for Part 2 — we’re going deep on the Grey Zone math.