The virtual reality sector recorded its strongest year to date due to private UK fundraising, with over £150m worth of capital raised in 2021, a 72% increase on 2020.
This is according to an analysis by Arden Partners (Arden), the institutional stockbroking company, which revealed that £154m worth of capital flowed into the private virtual reality sector compared to less than £90m in 2020. This was driven by an unprecedented surge of investment in Q4, with the £72m raised smashing the previous record of £46m in the final quarter of 2018.
Increasing growth of virtual reality spaces
Founded in 2002, Arden believes that the video gaming industry is set to record exponential growth over the long term thanks to the rapid acceleration of the metaverse and virtual reality that is peaking investor interest.
The rise of virtual spaces, where players can create new environments to explore through online avatars, has prompted technology giants such as Facebook to hire thousands of employees to work on their development and focus on becoming leaders in the virtual reality space for consumer and professional services, Arden said in a report released in late 2021.
“Significant technological developments in virtual reality and the metaverse are laying the foundations for the advent of new disruptors challenging the likes of Facebook, Apple and Google that are putting a lot of energy and investment into taking advantage of the potential returns from the virtual reality space,” commented Alex DeGroote, Research Director at Arden.
As virtual ways become widespread, investment is on the rise
The COVID-19 pandemic has helped spark the growth of virtual reality in the games market and analysts have suggested that improvements to VR hardware, such as the introduction of smaller and more fashionable devices, will support the increased adoption of VR by consumers and across industries. 2021 was a successful year for Gaming companies listing on the AIM market, for example, Devolver Digital raised $261 million and became the largest ever US-based company by market capitalisation to be admitted to the London Stock Exchange, and the second-largest company ever to trade on AIM.
TinyBuild, a video games publisher and developer, raised gross proceeds of £36 million while At IPO, with the market valuing it at £340 million on Admission. According to Arden, the UK AIM IPO market is buoyant right now, and the company considers virtual reality a very attractive sector for new capital.
DeGroote explained: “The unprecedented level of private capital investment in the virtual reality sector, and particularly in the final quarter of the year, indicates how much investors are really starting to see how this market is set to explode. We have also seen a wave of companies in this space turning to the public equity markets and expect this to continue.
“With new virtual ways of operating becoming much more widespread in many consumer and professional sectors post-Covid, we envisage an exponential rise in both private and public capital investment into the virtual reality sector as consumers and companies look for new ways to communicate and operate.”