Israel's gaming scene

I have been today in IDC's gaming conference in Tel-Aviv. For those of you who don't know, the Israeli gaming industry is waking up these days, and when I say "waking up" I am not sure it is the right term, because it never really existed up to a few years ago...

There are more and more Israeli gaming companies (about 40 according to one of the speakers), and more investments in gaming from Israeli VCs. This is a new trend, since Israel is more known for its achievements in more "solid" areas such as information security (i.e. CheckPoint), enterprise software, infrastructures for telecom etc. And since Israel gained recognition for these areas, most of the VCs focused in these areas.

But in last couple of years, something has changed, and VCs here are starting to fund gaming companies, or more accurately companies that offer technologies for the gaming market. Among the VCs that state that one of their investment focus is gaming are: Benchmark, Genesis, Giza, Gemini and of course JVP that invest in gaming companies usually at first through its incubator, JVP Studio (They invested in GamearraY)

One of the factors for that change is probably Oberon Media's success. Oberon is a true leader in casual online gaming, and is now expanding to other areas such as mobile gaming, after its acquisition of Cmate and Blaze. And speaking about mobile, I believe that the new opportunities in the mobile content market, and more specifically the mobile games market that led to the founding of companies such as GameStream, Cmate and of course GamearraY, has awakened the interest also in online, PC and consoles gaming.

In addition, the rise of non hardcore games that are targeted to a broader audience (i.e. Second Life), have shown that the opportunity here can be big. And last but certainly not least, a strong influence factor is the entrance of US-based VCs to the Israeli market in the last couple of years or so such as Greylock, and Battery with offices in Israel (joining Benchmark and Sequoia) and other American VCs with no local office, but with "agents" that are constantly on the lookout for new technologies in Israel. These VCs are not "afraid" of investments out of the narrow bounds of traditional Israeli investments.

However, as much as everybody is talking about gaming, most of the gaming companies backed by Israeli VCs can be defined at best as gaming-supporting, still relying on the more known infrastructure, software and hardware areas.

Take for example Lucid, a graphics acceleration solution provider supported by Genesis, Giza and Intel Capital. This company is sometimes described by its VCs as a gaming company, while in the actual portfolio pages it is classified (correctly) as a Semiconductors company. And like Seinfeld said, "not that there's anything wrong with that"...

And the situation is not that different for many other Israeli gaming companies. You still don't see here the "real thing", and maybe that has to do with the high barriers of competing with the gaming kings on the west coast (Someone said EA?...)

I guess the closest thing to a "real" gaming company is Funtactix, backed by JVP Studio and Benchmark. They just started less than a year ago and haven't released yet, but it is going to be interesting to see them launch. Their success can fuel other gaming start-ups, so I really hope they do.

To sum up, gaming is certainly gaining some altitude here, but we are still flying low, close to the well known ground of more traditional areas. I hope to see us flying higher, but for that to happen VCs have to take some bold moves and actually invest in real gaming companies.

P.S. - On the spectrum between gaming-supporting to real gaming I consider GamearraY to be somewhere in between: we are much closer than hardware companies since we do develop our own content and game concepts, but our strength lies within our robust platform for user generated games creation, cross-platform content delivery and more.