Another big move for Softbank into the gaming world, and a massive investment for Finnish gaming juggernaut Supercell: the company is selling a 51% stake for $1.53 billion to Japan’s SoftBank and games developer GungHo OnLine Entertainment. This strategic investment, which makes Supercell a subsidiary of Softbank, will be used to fuel Supercell’s global expansion. It effectively represents a quadrupled valuation for 100-employee Supercell to over $3 billion in the last seven months — bigger than that of publicly-traded social gaming giant Zynga at $2.86 billion.
GungHo (which also counts SoftBank as an investor) and Supercell have a pre-existing relationship announced earlier this year for in-game collaboration. Softbank, meanwhile, has been a major investor not just in mobile carrier networks, but also as a investor in services to run across those networks. It’s a major player both in Japan as well as in the U.S. with Sprint and has long held big ambitions to grow its business in mobile overall. In this deal, GungHo is investing 20% of the amount, and SoftBank the remaining 80%.
Under the terms of the deal, SoftBank notes that it and GungHo will jointly establish a special purpose company in Finland “by indirectly investing US$1,224 million (investment ratio: 80%) and $306 million (investment ratio: 20%), respectively.” That SPC will hold 51% of shares in Supercell’s voting stock on a fully-diluted basis for a total $1.53 billion.” Supercell will become a subsidiary of SoftBank, but it will continue to operate independently and maintain its headquarters in Helsinki, Finland, with co-founder Ilkka Paananen remaining CEO.
We heard about the deal earlier this morning. Then a tweet of the 51% stake and its value was the first mentioned publicly by a reporter at WSJ before we were able to get it confirmed by Supercell. (Now Index Ventures and Atomico, two of Supercell’s investors along with Accel and Institutional Venture Partners, are each also noting the deal.)
Since opening for business in 2010 the maker of Clash of Clans has been on a growth tear. On a relatively small portfolio — essentially just Clash of Clans and Hay Day — the company has managed to hold on to the number-one games publisher position between February 2013 and August 2013 in indexes from analysts like App Annie. The two games, meanwhile, have been the top grossing games respectively in 137 and 96 Apple App Store countries. The business model is basic — free with in-app purchases — but combined with compelling content, it’s proven a to be a hit. For example in CoC, you buy assortments of gems to help you fight other clans and “dominate the realm.”
One of its lead investors once told me that he’d never seen growth like it, among all of the companies it has ever done business with, ever. (As a point of comparison on how well Supercell is doing at the moment: right now Zynga, with its bigger portfolio of games, is valued at $2.86 billion.) That trajectory resulted in the company raising a $130 million round at a $770 million valuation in April of this year. At the time, we were able to get some figures on Supercell’s performance: in the first quarter of this year, it made $179 million and netted $104 million of that after expenses and Apple’s 30% cut. In 2012, Supercell grossed $100 million. In April 2013, Supercell was making $2.4 million a day on 8.5 million daily active users. Considering that Supercell has now nearly quadrupled its valuation in the last seven months, those other metrics are likely to have kept growing.
Update: Below is the blog post from Supercell on the deal that we earlier managed to get before it was posted on the site. The photo above of Ilkka Paananen, CEO of Supercell, and Masayoshi Son, CEO of Softbank, is from that post.
The investment comes at a key moment in the question of how popular social and mobile gaming companies can best position themselves for sustained growth. King.com is reportedly gearing up for an IPO, and all eyes are on troubled Zynga and its upcoming quarterly earnings as an indication of whether the public markets are really the best home for fast-growing gaming companies.
In that context, Supercell so far has chosen to take a different route, backing away from turning to the public markets, with all their scrutiny, and instead giving employees and shareholders liquidity through secondary sales and going to VCs for further investments. That seems to be the motivation with taking this investment, too:
“This new partnership will accelerate Supercell towards our goal of being the first truly global games company, and gives us enough time to get there,” Paananen writes in