Web3 Gaming Investors Shift Focus From ‘Axie Killers’ to Sustainable Projects

The Web3 gaming landscape is undergoing a significant transformation as investors become more selective with their capital. After a period of rapid investment, which saw numerous blockchain-based games claiming to be the next big thing following in the footsteps of Axie Infinity, funding is now being channeled into projects that demonstrate long-term sustainability rather than hype.

Investors Demand Substance, Not Hype

Sky Mavis co-founder Jeffrey Zirlin told Cointelegraph that Web3 gaming is not facing a unique set of challenges, but rather is experiencing the same tightening of capital seen throughout the broader crypto industry. According to Zirlin, the days of investors blindly pouring money into every new blockchain game claiming to be an “Axie killer” are over.

“Investors are no longer throwing money at projects that fail to deliver,” Zirlin explained. “It’s not that investment has dried up entirely. It’s just that the focus is now on sustainable projects that provide real value to players and investors alike.”

The term “Axie killers” was coined to describe the numerous gaming projects that promised to outshine Axie Infinity, Sky Mavis’ flagship Web3 game, which dominated the blockchain gaming space for a while. However, many of these projects failed to live up to expectations, leading investors to rethink their approach.

A Shift Toward Fundamentals Over Speculation

In February, Theodore Agranat, Web3 director at Gunzilla Games, likened the Web3 gaming sector to a "game of musical chairs," where the same capital circulates between projects, but no new money enters the ecosystem. Users, too, hop from one project to the next, often extracting value before abandoning the platform in search of better opportunities.

This speculative cycle has started to slow down, evidenced by the layoff announcements from Web3 gaming companies such as Illuvium and Sky Mavis. In February, Illuvium announced a 40% reduction in its workforce, while Sky Mavis trimmed 21% of its staff in October 2024 to optimize its budget for future initiatives.

Despite these moves, professionals in the space maintain that capital is still available for well-executed projects. Investors are no longer attracted to games simply for their speculative value but are looking for strong fundamentals and a sustainable approach.

The Fableborne Exception

While the broader investment climate is cautious, there are exceptions. Zirlin pointed to Fableborne, a mobile Web3 game, which saw oversubscription of 16,000% despite the prevailing market downturn. This indicated that fresh capital was still entering the space, particularly in projects that showed promise.

“If you have a strong project with a well-thought-out plan, capital is still available,” Zirlin said. “But it’s important to note that investors are no longer blindly investing in projects hoping they’ll become the next Axie Infinity.”

Less Randomness, More Focused Investments

Sebastien Borget, co-founder and COO of The Sandbox, disagrees with the characterization of the Web3 gaming industry as a “game of musical chairs.” Borget believes that the market is evolving and that the days of unpredictable, hype-driven investments are behind us.

He emphasized that the success of blockchain-based games now depends on their ability to meet traditional gaming metrics. This includes creating engaging content, delivering compelling gameplay, building sustainable in-app economies, and nurturing a loyal user base.

“Investors are more cautious now, but that’s a good thing,” Borget said. “It’s pushing developers to focus on building quality games that appeal to a broad audience, not just crypto enthusiasts looking to make a quick profit.”

NFTs Are No Longer a Magic Bullet

Josh Gier, CMO of the gaming tournament platform Coliseum, pointed out that the speculative phase of blockchain gaming—where projects could raise millions simply by integrating NFTs—has come to an end. However, Gier stressed that capital is still available for projects that focus on enhancing the player experience rather than relying solely on financial incentives.

“Investors are looking for games that use Web3 elements in ways that enhance the gameplay experience,” Gier said. “Simply adding NFTs to a game and hoping for funding isn’t enough anymore. The focus is now on the overall game experience and the long-term potential of the project.”

The Shift Toward Sustainable Growth

Vineet Budki, CEO of venture capital firm Sigma Capital, added that blockchain gaming is a long-term investment, with projects requiring more time to develop than other sectors. He acknowledged that raising funds for Web3 gaming has become more challenging, as investors are increasingly focused on the fundamentals of the games they support.

“Gone are the days when a flashy video and attractive tokenomics could raise millions. Now, investors are looking for teams with the experience and knowledge to build great games and effectively distribute them to the right audience,” Budki said.

Conclusion

The Web3 gaming industry is maturing, and with this maturation comes a shift in investment strategies. No longer will projects be able to rely on speculative hype and promises of being the next Axie Infinity. Instead, investors are placing their bets on sustainable, well-designed games that prioritize user experience and long-term growth.

As the market stabilizes, the focus is now on building quality projects that offer real value. This shift towards more discerning investment practices could prove beneficial for the sector, fostering the growth of blockchain-based games that are here to stay, rather than ones chasing fleeting trends.