Dear Startup Investor,
Kabam is pivoting. Again.
If you invested in the pre-IPO fund we put together with MicroVentures, then you own a piece of Kabam.
By the way, you’re in good company. Such big names as Alibaba, Google, Intel, MGM and Warner Bros have also invested in Kabam.
It’s the third pivot for the free-to-play gaming company. But this one is different.
The other two were a matter of survival. Pivot or fail.
This time around, it’s a strategic choice of going after the part of the market where the most money can be made.
Kabam is being aggressively opportunistic.
It’s already one of the most exciting growth stories and biggest companies in the mobile gaming sector.
It has been profitable since 2012… has more than $150 million in the bank… and has more than $400 million in annual revenue.
Why pivot now? Take a look at this chart…
Revenue from top grossing mobile games have soared in recent years – in the last three years by 1,750%.
Further down in the pecking order – taking the 100 top grossing games – growth has been far less. Since 2012, it clocked in at 295%.
The lesson: It pays more than ever before to go big.
Or, in the words of Kabam’s COO Kent Wakeford: “We are chasing after the big prize.”
He says that the industry is consolidating around the top games. So that’s where Kabam has to go.
Kabam is organizing its studios to make “AAA” mobile games – those that deliver high-end experiences and deliver top 10 revenue.
CEO Kevin Chou wrote “Kabam is one of a handful of companies in the world in a position to capitalize on this global market opportunity.”
The company wants to create $1 billion annual mobile game franchises.
To do so, it will be dedicating more resources on fewer games launched globally.
Chou says the mobile game market is growing “at a blistering pace.”
He cites market researcher IDG. It says mobile games generated $17.5 billion in revenue in 2014. The number will hit $27 billion in the next five years.
Perhaps a handful of industries are growing this fast. The stakes have become much bigger. The opportunity to massively scale is there for the taking.
Chou says “the winners of tomorrow will be much bigger.”
He was talking about the company. But he could just as easily have been talking about its early investors.
Good investing,
Andrew Gordon
Startup Investor Portfolio
