- British software startup Improbable raised a record funding round when it took $502 million from SoftBank last May.
- The startup enables third parties like researchers, gaming studios, and the US and UK military to create vast simulations that run on its SpatialOS software.
- The massive round raised eyebrows in the UK and Europe, with one investor telling Business Insider that Improbable’s corporate structure meant he couldn’t invest.
- Chief executive Herman Narula believes SoftBank invested because of a grand vision that people will live through gaming.
When UK software startup Improbable raised a massive $502 million (£360 million) funding round from SoftBank last May, it stunned the wider tech community.
It was the first time a private British firm received such a massive amount of funding in a single round — and that it came from the newly established SoftBank Vision Fund was even more intriguing. The Vision Fund is the Japanese tech giant’s $100 billion (£72 billion) war chest to fund big bets, and it’s put money into Uber, used car startup Auto1, and coworking company WeWork.
But what was also notable was the lack of participation from European investors in that round, though the firm has had earlier funding from LocalGlobe and Amadeus Capital Partners.
SoftBank and Improbable are making a massive bet we’ll all be gamers in the future
During an interview with Business Insider, Improbable chief executive Herman Narula said there were several reasons why SoftBank was willing to commit so much funding, and it boils down to his predictions about the future importance of gaming in our culture.
The company’s main technology is its cloud-based distributed operating system, SpatialOS, which allows third parties to build complex, highly detailed simulations. That could mean massively multiplayer games such as Bossa Studios’ “Worlds Adrift,” or military training simulations.
“I think the tech has always been the thing that’s been most compelling, what we’re trying to accomplish and the team we’ve assembled to go do that,” Narula said. One of the heavy hitters on the team is Bill Roper, chief creative officer and former executive at Blizzard Entertainment.
Narula added: “We believe in a future where games and virtual worlds become basically the most important part of human culture. That might seem like an insane prediction but the market [is worth] $100 billion today.”
It could be worth a lot more, Narula thinks, as people’s perception of gaming shifts away from something young people do in their spare to something that might earn them money. “Underneath the veneer of culture that it’s just for [people] our age, or the generation below, games mean something really different that’s very hard to perceive. People are looking at places where they can earn a living as streamers or content creators.”
He also thinks gaming will be worth more than social media, which he describes as “the regurgitation of interaction and information that concerns the real world.” Gaming, on the other hand, can involve creating new experiences. “People are interacting with each other in ways that are not supported in the real world,” Narula said.
“There are lots of people who looked at Improbable perhaps and gone, ‘How have they raised so much money, what are they doing here?'” Narula added. “Part of the confusion is that the general zeitgeist in tech is very much about AI, for example. What we are doing seems to be weirdly off the beaten track. I think that’s where the value lies, in things that are off the beaten track.”
Improbable has an unusual corporate structure that put off at least one European investor
According to one UK investor, SoftBank as a megafund was one of the few backers that could really afford to put sufficient money into Improbable.
The investor, who preferred to remain anonymous, negotiated with Improbable but said the firm’s corporate structure meant they couldn’t invest.
“When we’re investing a meaningful amount, we want board seats and representation rights,” the investor said. “[Narula] didn’t want to give us any of that. There was a risk … he could have washed us out.”
According to the firm’s public financial filings, Narula retains control of the firm’s board and voting rights. The son of an Indian construction billionaire, he also loaned the company £1.2 million, which was repaid last year.
SoftBank’s massive investment has given the company a board seat on Improbable, though not a controlling stake.
The UK investor described Narula as “inspiring,” and a “talent magnet” and added the SoftBank funding made sense for the firm’s ambitions.
For Narula, SoftBank was all about fit.
“For us, the money and the terms, we learnt this very early, they are not as important as they might seem,” he said. “We can raise more money later, or go to a higher valuation later. The focus is always: Are these people the right partners. … The key thing for us as a company was making sure we were actually able to get that ability to go global.”
SEE ALSO: Buzzy startup Improbable will use part of its $502 million cash pile to fund a new game called ‘Scavengers’
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