Gaming focused VC Lumikai unveils Fund II, eyes $50 million corpus

The Delhi-NCR-based venture firm, which has so far tied up commitments worth roughly half of the fund corpus, expects to close the fund over the next 6 to 12 months, it said on Thursday.

The so-called Fund II follows Lumikai’s first fund that raised $40 million in 2020, a year after its inception. It has backed startups like Loco, Elo Elo, and Bombay Play previously.

“We have already deployed 75% of the funds from Fund I, and both the funds will have a maturity horizon of ten years,” said Salone Sehgal, founding general partner at Lumikai. The firm is already in term-sheet stage conversations with three investee firms from the second fund, she added. A term sheet is a nonbinding agreement outlining the basic terms and conditions under which an investment will be made.

Fund II includes limited partners (LPs) – who invest in venture funds—like South Korean gaming behemoth Krafton, listed Indian gaming firm Nazara, and Napster CEO Jon Vlassopulos.

The Indian gaming sector has raised $2.8 billion from domestic and global investors in the last five years, according to data from the national investment promotion agency Invest India. Funding in the sector has risen nearly five-fold from 2019, according to the agency.

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“The Indian gaming industry is not just pre-revenue products and the deployment should be pragmatic… access to capital for middle stage companies with a good model will help them scale phenomenally,” said Akshat Rathee, co-founder of Nodwin Gaming and a limited partner in Lumikai’s Fund II.India has a flourishing gaming sector, with an estimated 400 to 500 million gamers in the country, according to a report by Deloitte India and Lumikai. This includes gamers playing casual games like online Ludo, competitive games like the immensely popular Battlegrounds Mobile India, and real money games (RMG) like Dream 11.

This has meant a number of larger venture firms like Kalaari Capital and Matrix Partners India taking an interest in the sector. “I think Lumikai still has an edge in gaming due to their deep sector expertise that other diversified VCs don’t… Lumikai also has been much better and quicker at connecting us to larger gaming firms and gaming investors in the US and Japan when compared to diversified investors,” said Ashwin Suresh, founder of Loco, a live game streaming app that Lumikai invested in as part of its Fund I.

But that does not mean the sector has been left unscathed by regulatory woes.

Krafton’s enormously popular Battlegrounds Mobile India has been banned multiple times in different forms by the government. The RMG segment, for its part, has seen troubles around differentiation from gambling operations and clashes with individual state regulations, though in recent months it has seen federal regulatory action smoothen out some hurdles.

Lumikai has mostly stuck to investments in the casual and other non-RMG sectors, besides one investment in a firm called Buystars. “I think the regulatory environment in RMG has only started clearing up now… we are a diversified player so we won’t discount investments in RMG entirely,” said Justin Shriram Keeling, founding general partner at Lumikai.