Gaming VC fund Lumikai launches $50M Fund II with plans for category-leading bets in India

Lumikai, an investment fund focused on gaming and interactive media, on Thursday launched its second fund (Fund II) targeting a $50 million corpus from global investors. These funds will be utilised to support promising gaming and interactive media entrepreneurs in India, ranging from pre-seed to Series A investments.

Additionally, the venture capital fund is inviting domestic rupee capital with the setup of a dedicated $10 million alternative investment fund for Indian limited partners. With this, Lumikai's overall investment in India's gaming and interactive media industry will exceed $100 million, taking into account its previous Fund I, which managed $40 million.

Lumikai's Fund II has notable investors from the global gaming industry, such as Japanese gaming giants Mixi and Colopl, South Korean conglomerates Krafton and Smilegate, Finland's decacorn Supercell, and Indian strategic players including Nazara. In addition, select large Indian family offices such as the Jeejeebhoys, KCT Group, DSP Kothari, and Sattva Group have also joined as investors in the fund.

High net-worth individuals (HNIs) also participated in the fundraise, including Ben Feder (former CEO of Take Two Interactive), Jon Vlassopulos (CEO, Napster), Pankaj Gupta (founder, Gulf Islamic Investments), and Akshat Rathee (Founder, Nodwin Gaming). 

Fund II aims to identify and invest in 18-20 category-leading bets, Salone Sehgal, Founding GP of Lumikai, told YourStory.

The fund will invest in five key areas: gaming content and digital media; UGC platforms and creator economy; tools, technology, and infrastructure; companies leveraging applied game mechanics and interactive touchpoints; and frontier bets such as mixed reality, generative AI, virtual identities, and edge computing.

“Our intention is to be able to build a portfolio of assets across these sectors. It could be Indian companies building for the world or India,” Sehgal said. While Fund II includes a small allocation for emerging markets like the Middle East, its primary strategy remains centred around investments in India, she added.

The VC fund noted that Fund II has a pipeline of planned investments, including three deals at the term sheet stage with industry veteran-led companies focused on content, platforms, and frontier areas.

India focus

Lumikai finds certain trends in India exciting, Justin Shriram Keeling, Founding GP of Lumikai said, adding that in the company’s latest report, they observed in-app purchase, mid-core and hardcore categories are growing faster than any other category.

“We are very bullish on the concept of the next generation of casual and mid-core games that are building in-app purchases natively to their economies,” he noted. 

Keeling highlighted that India is the fastest-growing games market in the world, growing anywhere between 27% to 35% depending on the category. The Indian gaming market touched about $2.6 billion in revenue last year and is expected to grow at a sustained rate to reach about $8.6 billion over the next 4-5 years. 

India, the leading market for game downloads, surpasses the combined size of China and the US, he noted, adding that there has been significant growth in monetisation in the country as well.

Around 4-5 years ago, the average revenue per user (ARPU) ranged from $2-$3, however, in the past year, it has surged to $20, according to Keeling. Lumikai anticipates continued growth over the next four to five years, although it is uncertain whether the ARPU will reach $200 within that time frame.

“It is crucial for gaming companies to prioritise monetisation right from the start. Building a gaming business with a strong monetisation strategy allows for quick revenue generation and reduces the need for extensive capital,” Sehgal remarked.

Lumikai’s approach in Fund I was to identify companies with the calibre and experience necessary to build successful businesses, and this approach will persist in Fund II as well, she noted.

It has already backed gaming and interactive media startups, including Loco, Bombay Play, Elo Elo, Studio Sirah, Buystars, House of X, Gigafun Studios, and several others with its $40 million Fund I, which was launched in 2020.

“Since the beginning, our ambition was to unlock a new asset class for investors by turbo-charging India’s most ambitious founders within the ecosystem. Over the course of the last three years, we have seen 1,400+ deals and seen the industry attract investor interest, deepen founder quality and achieve liquidity events,” Sehgal said.

“We continue to remain bullish on the long-term potential of the India interactive market, and this is our opportunity to build on the foundation we have laid.”