Improbable is now worth $2 billion after NetEase investment

Improbable CEO Herman Narula and CTO Rob
Whitehead.
Improbable

• SoftBank-backed Improbable has raised $50 million via a
  strategic investment from Chinese gaming giant
  NetEase.
• The deal will see Improbable expand to China and give
  NetEase access to its core SpatialOS game technology.
• The funding gives NetEase a minority stake in
  Improbable, and doubles the startup’s valuation to more than $2
  billion.
• China is the biggest gaming market in the world, but
  it’s hard for Western firms to establish a foothold.

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Improbable, the buzzy British tech startup backed by SoftBank,
has doubled its valuation after taking strategic investment from
Chinese gaming giant NetEase.

The company has raised $50 million (£38 million) from issuing new
shares, and NetEase has also acquired some existing shares,
giving it a small stake in the startup.

The new funding puts Improbable’s valuation at around $2 billion.
The firm was last valued at around $1 billion in May 2017

after it received a $502 million injection from Japanese tech
giant SoftBank.

Improbable plans to open offices in China as part of the deal,
and cofounder Peter Lipka will move from London to head up the
Chinese business. The firm currently has seven staff on the
ground in the major hub of Guangzhou and plans to build out a
full engineering team, CEO Herman Narula told Business Insider.

“It will probably be one of our larger presences outside the UK,”
Narula said.

China is the lead gaming market globally and expected to bring in
$37.9 billion in revenue this year,
according to consultancy NewZoo, well ahead of the US and
Japan. It’s tough for Western companies to break into the market,
however, with local gaming giants Tencent and NetEase dominating.
NetEase reported $2.2 billion in revenue for the fourth quarter
of 2017, predominantly from gaming and its clone of the
hit battle royale game PUBG, Knives Out,
garnered 100 million registered players alone, according to
company financials.

The partnership with Improbable will give NetEase access to the
startup’s core SpatialOS technology, which is intended to power
online mega-games. SpatialOS is nascent, but gaming studio
Bossa recently launched the first game to run on SpatialOS, the
massively multiplayer online game Worlds Adrift. Improbable also
announced this year that it would
fund a new game running on SpatialOS from independent games
studio Midwinter Entertainment.

The game Worlds Adrift runs on Improbable’s
SpatialOS.
Improbable/Bossa

Improbable will help develop and launch new NetEase games running
on the technology, something Narula hopes will attract other big
developers. 

The company plans to establish a stronger foothold in China,
Narula added. He said it is already seeing a substantial revenue
impact from the country, and believes it will be a big ongoing
driver.

“We’re now talking to everybody, this is in no way exclusive,” he
told Business Insider. “We’ve partly opened the office due to the
partnership with NetEase. But we’re now basically approaching
every major player in China.”

Narula prefers not to talk too much about Improbable’s spiralling
valuation — “it kind of sensationalises the journey of a startup”
— but he believes his company is the first non-public
SoftBank-backed company that has gone up in valuation so quickly.
SoftBank, through its $93 billion Vision Fund, has backed firms
such as Uber and taken a stake in chip firm ARM.

“We’re very pleased with that, we’re very pleased to validate
Masa’s [SoftBank CEO Masayoshi Son] belief in us,” said Narula.
“A big part of the story for us is, here’s a massive strategic
partner, and that says ‘All this stuff is great and we want to
adopt it.'”