2021 a record year for virtual reality investment

The privately owned virtual reality market recorded its strongest year of private fundraising in the UK to date, driven by a surge of investment in Q4

Virtual reality (VR) is the fastest-growing market segment, as revenues grew by 31.7 per cent and are projected to increase at the same rate over the next five years.

£150m worth of capital raised in 2021 - an increase of 72% on 2020.

Analysis by Arden Partners plc (‘Arden), the institutional stockbroking company, reveals that £154m worth of capital flowed into the private virtual reality sector compared to less than £90m in 2020[1]. 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.

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. 

Virtual reality (VR) is the fastest-growing market segment, as UK revenues are set to grow by 31.7 per cent in 2021 and are projected to increase at the same rate over the next five years.

Technology conglomerates hire thousands  

In a report released in late 2021, Arden said the rise of virtual spaces, where players can create new environments to explore with other people through online avatars, has prompted technology conglomerates 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.  

The COVID-19 pandemic and repetitive lockdowns have also helped spark significant growth of virtual reality in the games market, shattering revenues, user, and growth records. Every quarter in 2020 broke its respective revenue record.

This has led to significant M&A activity in the UK stock market, with the acquisition of Sumo Group by Tencent and Codemasters from EA for a combined $2.5bn. Meanwhile, 2021 was a successful year for Gaming companies listing on the AIM market - with highlights including the flotation of Devolver Digital, raising $261 million and becoming 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.

The UK AIM IPO market is buoyant right now, and Arden considers virtual reality a very attractive sector for new capital.

Alex DeGroote, Research Director at Arden, 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."

“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.” 

[1] Source: Arden analysis of data from the Beauhurst platform, which tracks investment activity in privately-owned UK businesses. Analysis conducted on 4 January 2022.