Metaverse gained rapid momentum in 2021 and 2022, with big tech giants like Meta, Apple, and Microsoft investing heavily in the sector. However, the momentum slowed in 2023, with less than expected adoption and a high interest rate environment dampening the sector growth globally. Furthermore, the rise of artificial intelligence (AI) and platforms like ChatGPT resulted in a significant shift from the metaverse to AI in H1 2023. Microsoft and Google are among the many tech firms that have announced multi-million-dollar investments in AI-related startups.
Although artificial intelligence has taken over the metaverse buzz in H1 2023, innovation in the sector continues as early-stage startups raise funding rounds from venture capital and private equity firms.
The metaverse gaming space is the one where a lot of startups globally are seeking to drive innovation. Avalon, in the United States, is building a platform for games that could one day take advantage of the metaverse. Similarly, in India, AvatarLife enables gamers to play skill-based games in its virtual world. The game-building company for the metaverse offers a range of games including play-to-earn and free-play. Furthermore, the firm also enables creators to develop and operate their games in the metaverse.
To further accelerate research and development and improvement in its platform offering, the firm announced that it had raised US$1.5 million in a seed funding round from Info Edge Ventures. In addition to this, the firm is also planning to utilize the capital for community building as well as global team expansion.
The Indian metaverse market is expected to grow by 45.6% on an annual basis to reach US$17.5 billion in 2023, according to TechInsight360’s estimates. Growing at a compound annual growth rate (CAGR) of 37.8% from 2023 to 2030, the metaverse spend value in India will increase from US$12.08 billion in 2022 to reach US$75.08 billion by 2030. Based on these estimates, it is projected that more venture capital and private equity funding will enter the Indian market over the next five years, as investors seek a high growth metaverse market.
In the United Kingdom, too, early-stage metaverse startups are raising funding rounds from investors. Karta, for instance, announced that the firm had raised US$1.1 million in a funding round in July 2023. The capital round, led by GameTech Ventures, will enable the firm to develop innovative metaverse experiences and meet the growing demand for such experiences. Furthermore, the firm is also seeking to expand its footprint in the regional market from the short to medium-term perspective.
LandVault is another firm operating in the United Kingdom metaverse market that raised a funding round in 2023. The firm, in April 2023, announced fundraising of US$3 million in an extended Series B round. Notably, LandVault raised US$25 million in its Series B round in 2021. The firm is also planning to invest capital into research and development to complete its project called Matera.
There are several startups operating in the metaverse space all over Europe. Gemba in the United Kingdom and Flying Sheep Studios in Germany have also raised funding rounds in 2023. These startups, coupled with big tech giants, are projected to aid the metaverse market growth in Europe from the medium to long-term perspective. However, to reduce the dominance of big tech giants over smaller firms, the European Commission is expected to enforce regulations before the end of 2023.
Despite the fading interest in the metaverse sector, many startups are still innovating in the sector and raising venture capital and private equity funding. This trend is projected to further continue in H2 2023, thus supporting the global metaverse market from the short to medium-term perspective.
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