We have interviewed the Managing Directors of GEM Capital, Kirill Gurskiy and Roman Gurskiy. Founded in 2017 by PWC veteran Anatoly Paliy, GEM Capital emerged from a vision to catalyze the burgeoning startup ecosystem in Cyprus and Eastern Europe. Since its inception, GEM Capital has evolved into a prominent player in the private equity and venture capital markets, particularly within the Games & Entertainment sector.
In this interview, Kirill and Roman will walk us through the compelling journey of GEM Capital, shedding light on its founding principles, strategic pivots, and remarkable achievements. We’ll explore their motivations for focusing exclusively on investments in the Games & Entertainment sector, their unique approach to international investments, and the distinguishing factors that set GEM Capital apart from other investment firms.
Can you share the story behind the founding of GEM Capital in 2017 and its journey to becoming a prominent player in private equity and venture capital markets?
Kirill: Founded in Cyprus in 2017 by PWC veteran Anatoly Paliy, GEM Capital was born from his vision to unlock the potential of Cyprus and Eastern Europe’s thriving startup ecosystem. It is an open secret that Cyprus and Eastern Europe are a hotbed of innovation. These regions are home to a talented pool of entrepreneurs who are building world-class companies with disruptive technologies. However, they have historically been underserved by venture capital, leaving many promising startups without the resources they need to reach their full potential.
Roman: We decided to fill this void by providing early-stage startups with the capital and expertise they need to grow. GEM’s mission from Day 0 is to identify and invest in the most promising early-stage companies in these regions, providing them with the resources needed to achieve global success. This is the cornerstone of our strategy, a plan outlined a full 2 years before we even started investing in games! Little did we know that 7 years later we would raise further $50 million from our European LPs and become one of the world’s leading gaming investors, with over $100 million in assets under our management.
What motivated GEM Capital to focus exclusively on investments in the Games & Entertainment sector?
Kirill: This is where Roman and I come into play. At the beginning of our journey, GEM Capital operated as a generalist investor. We explored various industries for investment opportunities and sought to define our main focus. The company as we now know it emerged around 2019, sparked by the multitude of pitch decks received from game studios. With game industry revenues reaching $152 billion in 2019, three times larger than global movie box office sales, the video game market stood out prominently. Recognizing its immense potential, we strategically decided to align with this industry. Notably, we became the first non-corporate venture to invest in games in Cyprus and Eastern Europe.
Roman: We identified a significant opportunity in supporting studios from these regions, which harbor abundant creative and talented individuals who adopt a much more cost-efficient approach to development compared to studios from the US and Western Europe. Even those less familiar with gaming are likely to have heard of renowned titles such as World of Tanks, Gardenscapes, Hero Wars, Metro 2033, S.T.A.L.K.E.R., Witcher, and others created by prominent teams from across Cyprus and Eastern Europe.
Kirill: Most importantly, we are experienced gamers ourselves – avid players of League of Legends since Season 1, with our own team of friends named the “Rainbow Ponies of Vengeance.”. Roman is a Diamond-rank player, while I, a mere mortal, am a humble Platinum. I still hope to beat Roman one day, even if it takes me until the next ice age. Jokes aside, this passion for the medium not only motivates us but also makes our work feel like a rewarding hobby. We dream of finding that one unpolished gem, a game with the potential to become the next League of Legends. One that will capture the hearts and minds of players around the world. A title that will revolutionize the gaming industry. And we believe that we already have companies with such potential in our investment portfolio.
What sets GEM Capital apart from other investment firms, particularly in terms of its approach to international investments and scalable business models?
Roman: A couple of things come to mind. Firstly, of course, our regional focus. GEM is playing a vital role in unlocking the potential of Cyprus and Eastern Europe’s startup ecosystem, supporting the best local founders and the most promising teams. We are a proud member of the TechIsland, the largest non-profit IT Association in Cyprus. It was established in 2021 with the mission of turning Cyprus into a world-class destination for world-class talent. We are honored to invest in the future of these regions with companies like Mundfish, Deus Craft, Eschatology Entertainment, Sad Cat, Unfrozen, Weappy, and many other outstanding ventures. Our investment team has a deep understanding of the local market. Simply put, we have our fingers on the pulse of the local scene, and can always get the inside scoop along with a deep understanding of who does what in any given company.
Kirill: To give you an example, after the success of Atomic Heart, we see teams mentioning Mundfish experience in almost every pitch of a PC/console project. We can just call Robert Bagratuni, the founder of Mundfish, and get his feedback on these guys and their real contribution to the project. These “regional roots” are our competitive advantage, and they make it easier for us to identify high-quality investment targets. January’s cover story in Gold Magazine (one of the most reputable Cyprus business media outlets) was dedicated to the games industry of our beautiful island. We are very grateful that 7 out of the 16 most prominent games companies covered are part ofGEM Capital’s portfolio! Our portfolio also includes promising companies from the US, the UK, and other Western European countries, such as Red Rover, with offices in the UK and Norway. We spend a lot of time analyzing potential targets around the world. In such cases, however, we are unlikely to lead, but we would be happy to join the round. As an aside, we apply the same approach to Turkey, whose mobile gaming industry is one of the strongest in the world.
Roman: Secondly, our investment strategy. Thanks to the many years of investment experience of our team, we have managed to assemble a highly diversified portfolio of gaming investments from the very outset, including mobile games, gametech and games ecosystem ventures, mobile market analytics systems and PC/console companies. The same diversity can be seen in our breadth of genres featured – our portfolio includes projects ranging from mobile time management and 4x strategy to AAA premium big-budget projects and multiplayer PvP survival games.
Kirill: At the start we have adhered to the principle of openness to all platforms, genres, and types of monetization, prioritizing a diversified approach. Back then many gaming VCs favored purely mobile game studios. However, today, with intense competition and challenges in the mobile market due to IDFA and the post-Covid hangover, more funds are turning towards PC/Console projects and gametech startups to mitigate risks in the saturated market. Our diversified approach has been rewarded by a multitude of successes including Deus Craft, one of the world’s leaders in the time-management genre, known best for Grand Hotel Mania with a lifetime revenue exceeding $100 million. Our portfolio also includes Mundfish, creators of the renowned Atomic Heart. The game became the most discussed game on Metacritic in 2023 and received a Steam Award for Outstanding Visual Style, along with many other accolades, such as being featured in BAFTA’s The 60 Best Video Games of 2023, Google’s Top 10 Most Searched Games in 2023 and (the somewhat more funny honor) of being among Pornhub’s Top 5 Most Searched for Video Games of 2023.
Roman: Our success and strategy would not be possible without our team. We combine deep industry expertise with a strong investment background. Our small team boasts 3 Chartered Financial Analyst (CFA) Charterholders (the most prestigious professional credential in investments and finance), 1 Accredited Senior Appraiser of the American Society of Appraisers, and 2 Chartered Certified Accountants (the most prestigious professional credential in accounting), with many years of experience in investment and Big Four firms. Our advisors include the most respected games industry experts in the region.
How does GEM Capital identify and select promising projects and startups for investment within its targeted industries?
Kirill: We believe that the true value of any investment lies not in the project itself, but in the people behind it. That’s why we focus on finding and supporting exceptional individuals with a proven track record of success. We look for those who are passionate about their work, who have a clear vision for the future, and who are willing to put in the hard work to achieve their goals. We believe that by investing in people, we are investing in the future of the gaming industry.
Roman: First and foremost, we examine the previous track record of the founders and their team. For instance, if they were directly involved in creating a successful mobile game, and they decide to establish their own studio to develop another project in the same genre, leveraging their extensive knowledge of the earlier product’s strengths and weaknesses, this is highly appealing to us. It doesn’t necessarily have to be the same genre or platform. If the studio heads can demonstrate the value of their previous background and how it can contribute to their current venture’s success, it’s equally valuable.
Kirill: A clear example of this approach is our recent investment in Order Of Meta. The founders, who are second-time entrepreneurs, were behind the successful mobile top-down shooter Tacticool (with a lifetime revenue exceeding $75 million and over 30 million installs). They are now creating a mobile extraction shooter. Even without a track record in a specific genre, we can still be intrigued if a team has delivered an outstanding prototype that exhibits uniqueness and noteworthy mechanics that differentiate it from competitors and can attract players. We believe that this approach is instrumental in building one of the most outstanding gaming portfolios in the region.
Could you discuss the recent developments in the Cyprus mobile studio ecosystem and how GEM Capital is positioned to capitalize on these changes?
Roman: Today, Cyprus stands out as a hub for numerous mobile game developers and publishers who thrive within this ecosystem. The island harbors headquarters for well-known companies in the niche, such as Nexters, MY.GAMES, Vizor, Playkot, Azur Games, Nekki, and many others. Everything from niche indie developers to big mainstream names in the industry – you can find ventures of all calibers here. And that’s for a reason. Firstly, Cyprus boasts a legal system based on English common law principles, offering stability and familiarity to businesses. The Cyprus laws securely protect IPs which is crucial for mobile game developers. Additionally, its comfortable tax system and the Cyprus IP Box regime facilitate effective utilization of intellectual property.
Kirill: The community of like-minded people is also of great importance. Gaming conferences and meetups take place on the island every week, fostering a sense of collaboration and innovation. And let’s not forget the sea, because it’s always more pleasant to build a multi-billion dollar startup with a view of the waves. These factors have contributed to the flourishing community of game studios and related businesses in Cyprus. With the introduction of new legislation that shortens the naturalization period, we anticipate that even more talented studios will choose Cyprus as their base of operations. This expansion of course presents GEM Capital with additional potential investment opportunities.
What challenges do mobile studio founders commonly face, and how does GEM Capital assist them in overcoming these challenges?
Roman: As any experienced founder will attest, in today’s mobile gaming market, anything and everything can go wrong. The introduction of IDFA and market saturation have hit mobile companies hard, forcing them to find new ways to acquire users. Traditional target marketing no longer works. To thrive, companies need to retool their existing processes and find creative solutions. Global trends are also affecting investor appetite. It is now more difficult for mobile companies to raise new rounds of investment than it was in 2020-2021. With investors exercising caution due to current issues with user acquisition, studios must find innovative solutions and demonstrate how they can address this challenge.
Kirill: To support studios during this challenging period, we leverage our strongest expertise in various areas. This involves facilitating investment deals with major players in the industry, assisting with the creation of a PR and UA strategy for the company, making introductions to individuals with top-notch expertise in specific areas of interest and even advising on most important legal matters. As the first team in the region to make deals with global market leaders such as Tencent and Microsoft, we have built a wide network of industry experts that we can share with our portfolio companies. This network can provide invaluable support and guidance to help studios navigate the complexities of overcoming obstacles in the mobile gaming landscape and securing funding.
What advice would you give mobile studio founders when preparing a pitch deck for potential investors?
Roman: This question deserves a separate interview as a pitch deck is one of the most important documents a founder can craft in their career. The Entrepreneur just recently published our article “Avoid These 9 Pitch Deck Mistakes When Asking Others For Money” on this topic. While building a compelling pitch deck demands dedication, it’s not venturing into uncharted territory. Decades of collaboration between startups and investors have illuminated a clear path, guiding us towards a successful presentation.
Kirill: A well-crafted pitch deck should be concise and informative, providing investors with a clear understanding of your mobile studio and its potential. It should include an overview of the market, including the size of your target niche, its historical and predicted growth, market saturation, your major competitors, the number of new successful releases in the recent and failure rate. Investors will also want to know about your team and its track record, as well as the amount of funding you are seeking and how you plan to use it. Don’t forget to include a comprehensive development timeline. By providing this essential information in a concise and compelling way, you can increase your chances of securing investment.
Roman: Make your deck simple and clean, don’t make it too big (10-15 slides is enough) and don’t overload it with unnecessary data. Ensure that all data in your presentation is up to date. We have seen examples of pitches where people show projections for the gaming market based on sources from before or during the COVID-19 era, which is odd considering how the market has changed since then. Additionally, seek feedback to identify areas for improvement. Creating a memorable and persuasive pitch deck is an artform that requires practice and discipline.
How important is it for mobile studio founders to choose the right investors, and what qualities should they look for in an investor?
Kirill: It’s hard to overstate the importance of this choice. Your investors are not merely a source of funding, they are your partners, sharing all the ups and downs of your journey. Therefore, it is an essential question to consider. While financial considerations are undoubtedly significant, it’s crucial not to base your decision solely on them. Take a broader perspective. Delve into what additional value your investors bring beyond capital. They might have individuals who have a background in game development, have successfully launched startups. They may also be able to provide financial consulting or be investment veterans, who can offer valuable expertise to bolster your company. Above all, particularly within the gaming industry, it’s imperative that your partner shares your values and strategic view on the product and its perspectives.
Roman: Choosing an investor is a crucial decision for a startup. To navigate this crossroads, I would recommend soliciting feedback from the investor’s current portfolio companies. Delving into their investment portfolio can also provide valuable insight. Do they boast prominent companies within the industry? Or perhaps, on the contrary, their portfolio bears a number of failed ventures. The answers to these questions will give you an understanding of the investor’s financial standing and clout in the industry.
What common mistakes do mobile studio founders make when seeking investment, and how can they avoid them?
Kirill: I would say the most common mistake is excessive focus on the product itself and ignoring work with the community. Today, there is a growing demand to see a thriving community supporting the game and a memorable IP that can help overcome challenges with UA. These days you need to work out a marketing strategy from the inception of your mobile game. Therefore, it’s crucial to start building your player base as early as possible. Maintain active social media profiles, create a Discord server, YouTube channel, Reddit community, and other platforms to engage with your audience. By nurturing a strong community around your game, you not only enhance its appeal but also increase its potential for success in a competitive market.
Roman: As an example, we can highlight one of our portfolio companies, Made on Earth Games, who are currently developing a mobile 4X strategy game Everbright. This studio actively engages with its audience by sharing artwork on various social media platforms and prioritizes the creation of a memorable IP complete with its own narrative and distinctive characters.
Despite all the challenges facing the mobile games, Made on Earth Games successfully raised an investment round in 2023.
Can you share insights into GEM Capital’s upcoming investments in the mobile game industry?
Kirill: We are currently closing a landmark deal for our region, one that is deeply intertwined with the recent major events in the mobile market. It aligns naturally with our portfolio. Stay tuned for more updates!
