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Billion Dollar Unicorns: Kabam to Stay Private?

Posted on Friday, Mar 27th 2015

According to market reports, the global games market is expected to reach $86.1 billion by the year 2016. The growth in the market will be dominated by the free-to-play model, which attracts new gamers and allows them to try new things without getting them to pay upfront. Billion Dollar Unicorn club member Kabam is hoping to keep cashing in on that trend.

Kabam’s Offerings

San Francisco-based Kabam was founded in 2006 by Kevin Chou, Michael Li, and Holly Liu who wanted to set up a sports community to leverage Facebook. Kabam realized the importance of leveraging Facebook and transformed themselves into being a social gaming company that would provide their gamers with access to free-to-play games. They also diversified from Facebook games to letting gamers play on mobile devices and directly on the Web through platforms including Yahoo and their own portal.

Kabam is convinced about the viability of the free-to-play option. They allow users to play their games for free and instead rely on sale of premium content and virtual goods as their source of revenue. Today, Kabam is best known for their strategy game Kingdoms of Camelot, which has grossed over $250 million in its five years of operation on the freemium model. Besides their own games, Kabam is also a publisher for games developed by third party developers.

They have been growing inorganically and recently announced the acquisitions of game studios TapZen and Magic Pixel. Terms of the deals were not disclosed. TapZen is best known for their game This Means War and Magic Pixel has worked on This Means War and Stick to It besides other PlayStation games.

Kabam’s Financials

Kabam does not disclose its detailed financials. Market reports do suggest that they grossed over $400 million in revenues in 2014. During the year, lifetime revenues from four of their games exceeded $100 million and 12 of their games earned more than $1 million in revenues per month. The company also turned profitable in 2012.

However, despite the relatively strong financials, the market has not been very impressed with Kabam. As of 2013, Kabam was expected to be eyeing an IPO. But in 2014, their management announced plans to defer the IPO, citing unfavorable market conditions as the reason for the delay. Analysts think that other reasons were involved. They believe that the reason for the delay was the very weak performance of some of their new games.

Traditionally, Kabam has managed to deliver strong games by licensing movie IP rights. Their games have been among the top 25 revenue generating mobile games. But their recent launches based on the movies The Hunger Games and The Lord of the Rings received weak reviews and were ranked lower than 200.

For now, Kabam is venture funded with $245 million in funds received from investors including Alibaba, Intel Capital, Redpoint Ventures, Canaan Partners, SK Telecom Ventures, Performance Equity Management, Pinnacle Ventures, and Betfair. Their last round of funding was held in July 2014 when they raised $120 million from Alibaba. Valuation has grown from $500 million in 2011 to $700 million in 2013 and finally over a billion dollars in 2014.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns


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