Behold Management, a Swedish game venture capital firm, has raised $59.2 million, or 550 million SEK, to invest in European game companies.
The fund, led by founder and managing partner Karl Magnus Troedsson, a former triple-A game developer, got started in 2021, announced its fund in 2022 and it has invested $21 million in 18 companies to date, said Troedsson, in an interview with GamesBeat.
The funding is a good sign that investors in Europe and elsewhere are still willing to commit money to a fund that is investing in game companies in the Nordic region. Of the investments so far, three were in the United Kingdom and the rest were in the Nordics.
Troedsson said the 54% of the capital resources came from Europe, 44% from Asia and 2% from North America. Originally, the firm was only trying to raise $52.9 million, Magnus Troedsson said.
Other partners include Sigurlína Ingvarsdóttir, founding partner; Magnus Kenneby, founding partner; and Brynjólfur Erlingsson, principal.
Among the investors, 42 % are institutional, 43 % strategic, 10 % family offices, high net worth individuals, fund-in-funds, and 5% were general partners. Overall, the company is targeting investments in more than 25 startups.
Troedsson said the target remains the same as previously stated: early stage European video game startups with a focus in the Nordic region. It is targeting devs, tools and tech investments.
The investments started happening a few years ago.
“We basically started with the money that we invested ourselves as general partners, and the fundraising went well at that time,” Troedesson said.
Since that time, the company did two more closes and now it’s done with the fund. Along the way, the company made investments as the money came in.
“We’ve been shoeing a running horse when it comes to raising a fund and doing investments at the same time,” Troedsson said.
Since we interviewed Troedsson, the company hired Erlingsson, who previously worked at Mojang, an analytical expert, in Stockholm.
Investment thesis
So far, the company has stayed true to its original investment thesis. The team focuses on European startups and Troedsson doesn’t regret that as there are so many great startups inside Europe, he said.
“We’re also staying true to the fact that we want to build a portfolio that consists of a majority of game developers, but also some tools, tech and infrastructure, when we find something that is suitable, if it’s connected to the games industry,” he said.
The firm is agnostic to business model or platforms. And it’s really looking at firms that target younger audiences. Troedsson said the firm sees the “generational shift happening right now.”
He said, “You can see it clearly when you’re watching the Roblox space and the developers there.”
He said his firm sees the opportunity to invest in companies that make games for younger audience, like Gen Z and Gen Alpha. And it is also partial toward developers who have that kind of experience and a different way of making games than traditional triple-A devs.
He noted, “Overall budgets are very much under pressure in our industry right now. People are questioning the smartness on the risk balancing of investing very high budgets against single content development studios, even if the founders are super experienced. But the young developers, they don’t need as much money to do a lot more. I would say many of them are very frugal with money.”
Troedsson noted that the fund is relatively small and it won’t consider joining super-large rounds, even though those rounds are increasingly rare with the slowdown in game investments. The company is very interested in user-generated content as it sees the concurrent user numbers for games like Grow Your Garden on Roblox.
“It’s staggering,” he said. “We’re really fascinated by this.”
The fund is also impressed with the success of mobile game companies in places like Finland and Turkey, even with the challenges of user acquisition and the difficulty of dealing with mobile privacy issues.
When the company invests, the team size is usually around three to five people and it may scale up to eight or nine. Troedsson favors smaller teams, and he noted getting $10 million to scale up to 25 people in the first round is pretty hard now. The target investment for Behold Management is a few million dollars.
What matters now is making that money last until there is a good proof point.
“That money needs to last until you have something that really can prove to the next level of investors that they should put money in. And this is one of the biggest changes that we have seen, after the pre seed round,” Troedsson said. “There’s nothing until you have proof in market with KPIs and proper tests. Then there is money available out there either from strategics or larger VCs.”
He said that in the boom years, startups could raise a round in mid-production and get money to grow larger. But now teams have to be very frugal and provide evidence of traction or growth.
As for the larger industry, Troedsson he sees that manage people are hopeful that well-funded companies in North America will start producing VC-backed hits.
“I think a lot of people are questioning just investing in game developers, because people don’t really feel that the risk level might be high. It’s not very cool to be an equity right now. We hear that several others are considering project financing as another vehicle for investment.”
The game markets are weaker, macroeconomics are poor, and demand has flattened since COVID.
“We haven’t found the next growth engine in our industry,” Troedsson said. “Our bet is that games are the medium of our century. Games have the opportunity to entertain, to educate, to bring people together, to socialize, and anecdotally, just looking at my kids and their friends, this is how they hang out. They play games together and then they socialize this way.”
He added, “So our bet is that whatever negativity from the financial side of games we see right now, it’s going to pass. We’re going to find our way. Maybe this is the new norm. Well, then we’re going to get used to it, and then we’re going to find our way.”
Troedsson is encouraged that there is more interest from games in traditional private equity when it comes to financing and exits.
“Everything is grim in the West in triple-A, but when you head over to the indie space, the innovation just keeps on happening,” he said. “There is surprise hit after surprise hit.”
Investments so far
The fund has invested in firms including Dead Astronauts, Seven Stars (Finland) and Red Rover. Behold Management also participated in the $7 million investment in Blue Scarab Entertainment, which has a massively multiplayer online role-playing game targeted at broader audiences including women.
Troedsson isn’t sure what will happen with tariffs and other economic disruptions. But he offered his congratulations to Nintendo for getting a new console out the door with the Switch 2.
“I think this is fantastic and we need more of this,” he said. “At the moment, there’s not enough enthusiasm regarding games, be it hardware or games themselves. This is why we have raised the fund, with a lot of strategic money from Asia. There’s a different enthusiasm for games there. People are very excited.”
