Pandemic Success Ends in Fire Sale: Behind the Collapse of Israeli Gaming Startup StreamElements
The American company Razer has acquired the assets of the Israeli startup StreamElements. Once one of Israel's fastest-growing companies during the pandemic, it faced market shifts and was sold at a loss.
The American company Razer is a well-known brand among hardcore gamers. Its laptops, monitors, headphones, keyboards, and even chairs are used by heavy consumers of video games. However, as of this past weekend, the company has also acquired the assets of the Israeli company StreamElements. This startup was one of the fastest-growing in Israel during the COVID-19 years and gathered prominent institutional investors and venture capital funds around it — but market shifts led it to the brink of collapse.
This past Saturday night, the American buyer issued a laconic announcement about the acquisition of the startup's assets. Thus ended the independent activity of StreamElements, which raised about $115 million from investors such as SoftBank, Menora Mivtachim, Mivtach Shamir, Rainfall, GlenRock, and the funds Pitango and State of Mind — according to the PitchBook database.
The sale amount was not published, but it is estimated at a few tens of millions of dollars and is perceived as a loss-making sale by investors. Dozens of the more than 40 employees will move to Razer, and the American company will invest in further developing the network and bringing in its own advertisers — so StreamElements will continue to exist, even if in a different format. It is estimated that the gaming company collaborates with brands such as Pokémon, Dolce & Gabbana, and Lexus.
Innovative economic model
The system that the American Razer inherited from StreamElements is intended for content creators on streaming networks — mainly influencers who broadcast their gameplay to a loyal community. It became one of the largest in the field thanks to its free model: users can broadcast through it as much as they want, and pay only when they raise sponsorships or sell products through the system.
StreamElements
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Field of activity: management tools for content creators and influencers on video-based social networks.
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History: founded in 2016 by Or Perry (CEO), Ram Sherman, Gal Hirsch, and Doron Nir. At its peak, it employed about 220 people. Today it employs about 40.
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Data: raised about $115 million from investors such as SoftBank, Menora Mivtachim, Mivtach Shamir, Rainfall, GlenRock, and the funds Pitango and State of Mind.
The economic model, presented as an innovation at the beginning of the decade, turned StreamElements into an overnight success story: the number of streamers on the platform jumped from 700,000 at the end of 2020 to 1.2 million at the end of 2021. In 2021, the company raised $100 million in a huge round led by SoftBank's Vision Fund 2.
"Reality has changed"
However, in the years that followed, the company carried out several rounds of layoffs and frequent management changes that eventually ended in a fire sale. Senior figures in the gaming market explain that "the rug was pulled out from under its feet, and the reality around it changed beyond recognition." The market it depended on never proved itself economically for long-term growth.
The company based its revenues on partnerships in sponsorships and advertising in two main markets: mobile games and food delivery. In the gaming field, it signed a contract with Plarium, but the mobile gaming market has dropped dramatically since 2022, likely due to the rise of Stories and Reels that take up more of the users' attention. A similar situation occurred in the food delivery sector, where marketing budgets were cut or diverted to TikTok and Instagram.
Company founder Or Perry relied heavily on Amazon's Twitch streaming platform. However, over the years, Twitch's status weakened: the return to routine after the pandemic reduced the time spent on it, and the platform was never actually profitable. The migration of streamers to YouTube and TikTok, as well as publicized disputes over revenue sharing, also harmed StreamElements.
"It is very difficult to support a company that takes revenue from the streamers' share of sponsorships and merchandise sales," says a video game industry expert. "Advertisers come to the big streamers directly, skipping the platforms."
Effort to preserve the community
In recent months, the company made a supreme effort to prevent user churn. It is estimated that the company looked for a home that could preserve the influencer network and pay the highest possible amount to investors. The investors came out with a loss — but with a clear lesson: what rises and grows within a few months due to a global pandemic can also fall at the same speed.
