Supercell: The cash-rich, little-known Finnish startup that could soon be worth $600M
There must be something in this Scandanavian water (other than ice, that is).
The next big thing in gaming comes to you from the land of Angry Birds and unless you saw this brief New York Times blog post, you've likely never heard of it. And even if you read that, you have no idea how much cash their hot iOS games, "Hay Day" and "Clash of Clans," are actually pulling in. Since landing in Sweden, I've heard numbers from one source with knowledge of the company's finances that make Valley app companies look like a humble paper route. Another source confirmed that they were in the right ball park.
How much are we talking?
The 60-person startup is pulling in close to $750,000 every day, according to our reporting. That's 50 percent up from the $500,000 the Times reported in early October. Not bad for a two-year-old company, whose two big-earner games launched in June and August respectively. With those numbers, Supercell clearly doesn't need more funding, but we've heard they've been offered a substantial round to cash out the founders at a heady price of at least $600 million. No word on whether the deal has been accepted or how deep discussions got.
Reached today by phone, Supercell founder Ilkka Paananen wouldn’t confirm the $750,000 figure or the funding deal, but he did say revenue these days is “quite a bit more” than what the company disclosed to the Times in October, and that the revenue is split about evenly between iPad and iPhone.
Supercell’s games are free to play, but they have an in-game currency that players can use to buy virtual items. Unlike a lot of the better-known mobile and social games, the company takes an iPad-first approach.
“We view the tablet as the ultimate gaming platform,” Paananen said. “The entire strategy is to create the best possible game experiences on the tablet, and the interesting side effect of that strategy is that we also make the games better on iPhone, because designing the games for a higher spec is also what makes the games better on the smartphones.”
We’ve also heard that the startup has very low costs, spending as little as $60,000 a day. Again, Paananen wouldn’t confirm that figure, but he did say that user acquisition costs are very low, because the vast majority of its traffic is organic. The games spread by word of mouth because they are inherently social, he said.
And by social, Paananen doesn't mean gimmicks like giving away free stuff if you invite friends. Supercell builds virality through designing a social product instead. “We absolutely didn’t do that [gimmicky stuff] at all,” said Paananen. “Instead what we do is we design our games so that they are better if played with other people and your friends.”
For instance, in the combat strategy game “Clash of Clans,” players can create their own clans and invite friends to join them. Then they can chat with, and even attack, their friends. So there’s no need for FarmVille-like spamming via Facebook. Paananen believes this inherently social approach represents the next generation of social games.
Even if Supercell’s revenues stayed the same as what the company reported in October, it would stand to make $130 million annually, once Apple takes its cut. We're told that if its growth rate continues the company could be raking in as much as $400 million in revenues next year. Of course, that's a massive "if.' Just ask Zynga's investors how predictable hit games are. DrawSomething was once on one out of every five phones in Sweden and Norway and seemed unstoppable. The games are both new, so it might be difficult for Supercell to sustain the buzz.
However, there’s also a chance the revenues could increase further. In one of the very few articles about the company from outside the Nordic region, the Times reported that "Clash of Clans" occupied the No. 1 slot on Apple’s top-grossing iPad game charts in more than 60 countries for weeks. Today, Paananen said that "Hay Day," a farming game that allows players to trade produce at farmers’ markets, is registering 40 million trades per day. In the App Store, "Hay Day" has a rating of 4.5 stars from 38,770 reviews. "Clash of Clans" has a rating of 4.5 stars from 40,780 reviews.
Supercell has venture backing, but not a lot given this torrid growth. It has raised $15 million, including $12 million from Accel Partners alone. Accel is also an investor in Rovio. Supercell has already been the subject of acquisition rumors, with Zynga and EA fingered as chief suspects. But with those companies’ stock languishing, and Supercell’s profits surging, there is no incentive to sell.
Ben Holmes, a partner at Index Ventures who covers the Nordic region, says there is intense interest around Supercell because it has been topping the App Store grossing charts. “They are one of the few companies, along with King.com, who are now on a regular and reliable basis producing winning games,” he said. “Both companies have very good shot at overtaking Zynga in terms of revenue, profits and valuation over the next year.”
Next week, I’ll bring you more news on Supercell direct from Helsinki, Finland, where I’ll be attending the Slush startups conference. I'll also try to answer what it is about Finland that breeds such viral gaming jocks. For a country of just over 5 million to produce a Rovio and a Supercell in just the last few years...well, that can't just be coincidence can it?