VCs drawn to video game industry.
.Creators look for alternatives to industry's traditional way of financing titles. .
LOS ANGELES ? Venture capitalists traditionally have ignored the video game business. Not anymore.
Video game developers and enthusiasts weren't the only ones attending the Electronic Entertainment Expo trade show last week. Venture capitalists were there, too.
"Traditionally, venture capitalists have stayed away," said Craig Cooper, a partner at Softbank Venture Partners who planned to attend the show.
"For a long time, it's been a developer-publisher-finance model. It used to be very simple," Cooper said.
The industry didn't necessarily need or welcome venture firms. Big video game developers such as Electronic Arts Inc. or THQ Inc. financed game development in-house, and smaller boutique studios signed distribution and co-development deals with bigger firms.
"Now, they go straight to venture financing," Cooper said. "And it's not until the tail end, either. It's the more traditional model of investing in the beginning."
Mobile game companies
, in particular, have drawn venture financing. For example, last year, LimeLife, a mobile content publisher in the San Francisco Bay area, raised more than $5 million in its Series A round. Blue Frog Mobile, a company based in the Seattle area that sells mobile games
, drew $16 million in a first round of funding.
"You're seeing a greater interest in consumer (technology), which includes video games, and I think that you're going to see this area expand," said Mark Heesen, president of the National Venture Capital Association.
Of particular interest in this area are "casual games," simple games that don't require a lot of upfront development cost and allow users to easily learn the rules and play. These types of games have drawn the eye of Mark Menell, a partner at Rustic Canyon Partners, which sent three people to the Electronic Entertainment Expo this year.
Earlier this year, Rustic Canyon made an investment in a company called PlayFirst, which provides downloadable casual games.
With casual games "you can produce a game for much less money," Menell said. "Plus, it's an Internet distribution model, which provides for frictionless distribution as compared to the traditional retail channel."