Kabam Hits $700 Million Valuation With Employee Stock Sale
By Ian Sherr
Wall Street Journal
July 15, 2013, 12:01 AM
Closely held videogame maker Kabam says it is now worth $700 million, based on a recent private transaction that allowed employees to sell $38.5 million of common stock.
None of the money will go to the San Francisco-based company itself, which says it has $50 million in the bank. Kabam expects to notch revenues of more than $300 million this year, up from more than $180 million in 2012.
Kabam CEO Kevin Chou said he believes Kabam’s 700 employees should benefit from the value they’re creating as the company continues to grow.
“In the last 12 months, Kabam has launched North America’s most successful game publishing and platform business, bringing over 20 high quality titles to market,” he said in a prepared statement. “Our talented employees are the ones making these efforts so successful.”
A Kabam spokesman declined to discuss any plans for the company to go public, though Chou has in the past said he expects an IPO by the end of 2014. One of its closest competitors, King, has begun hiring bankers for an IPO.
Kabam’s success contrasts with that of Zynga, whose founder Mark Pincus recently decided to hand the CEO job to Microsoft veteran and leader of the group that makes the Xbox videogame console, Don Mattrick. The move was celebrated by Zynga investors, who were unnerved a string of disappointing quarterly earnings reports.
Analysts say Zynga has been too slow to transition its business to mobile devices and away from reliance on social networking websites, where sales growth has slowed.
Kabam began that transition two years ago, and in December said only 30% of its revenues now come from Facebook customers.
The company, which was founded in 2006 and makes products like “The Fast & Furious 6: The Game,” a racing title based on a movie, offers players access to its products for free. Kabam makes its money by selling virtual items inside the game, such as digital weaponry or other enhancements to improve a player’s gameplay, a business model similar to Zynga.
Unlike that social gaming pioneer, however, Kabam has been able to successfully expand its business to mobile devices, reducing its reliance on social networking websites like Facebook to reach customers. As a result, Kabam said, has been steadily shifting its business away from social networking websites such as Facebook, which was instrumental in popularizing the free-to-play model in the U.S.
Kabam said seven of its titles bring in more than $1 million per month in gross profits, and that one of its most popular franchises, a fantasy-strategy game called “Kingdoms of Camelot,” has grossed more than $200 million in less than four years.
Kabam’s last funding round in May 2011, which raised $85 million, was completed at a valuation of $525 million. Kabam’s investors include Google Ventures, Warner Brothers, MGM, Intel and others.
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