Editor's Note: This is a guest post by Neil Rimer, Partner at Index Ventures and there is an interview for ArcticStartup at the end.
In 2010, the thirtieth year of SoftBank’s existence, its founder Masayoshi Son outlined the company’s vision for the next 30 years. He first set the context by zooming out to talk about how the world and the needs of humanity would evolve over the next 300 years, and stated his firm objective for SoftBank to survive at least that long. And then, zooming back in, explained that in this context, having a 30-year plan was absolutely essential.
SoftBank took an entire year to develop this vision which combined the output of an unprecedented, company-wide, soul-searching exercise with input from consumers responding to questions tweeted by Son himself. At the company’s annual meeting in 2010, Son articulated a vision based on SoftBank’s underlying mission to harness the information revolution to make everybody happy.
Much like Son and SoftBank, Ilkka Paananen and his team are driven by a mission; to build the world’s first truly global game company, and like Son, he owes his company’s success to the unique approach and structure that he has created. Supercell’s homegrown cell-based approach is not predicated on the company knowing what type of game will be the next blockbuster, but rather on unleashing the creative power of multiple independent cells tasked with building their own games quickly and efficiently and letting the audience decide which ones will be hits.
Similarly, SoftBank has shown remarkable agility in moving from publishing technology magazines (Ziff-Davis) to running tradeshows (Comdex) to offering broadband (Yahoo! BB) and finally mobile devices and services, successfully surfing consecutive technology waves. In his 30-year vision presentation, Son quite humbly said that SoftBank will not bet on a single hot technology, implying that by 2040 even the most promising ones would become obsolete. Instead, SoftBank will continue to forge multiple partnerships with leading companies characterized by great vision and energy, to collectively offer products and services to address peoples greatest needs and bring them longer, happier lives. These products would capitalize on the enormous advances in cloud computing over the next 30 years by which time SoftBank predicts single microprocessors will have billions of times more processing power than the human brain, and networks will be measured in petabits per second.
At the very end of his more than two-hour talk, Son spoke movingly about his deep-rooted desire to make his success stand as a symbol of triumph against the adversity and contempt that he and his family endured as immigrants in postwar Japan, to prove, as he proclaimed “that we are all the same; we are all humans!”
The transaction announced today cements a new partnership between the two companies, bolstering them as they pursue their lofty objectives. Although it is orders of magnitude larger than Supercell, SoftBank’s organizing principles champion agility and decentralization to avoid what Son calls “big company disease.” Building on Supercell’s existing relationship with GungHo Online Entertainment-- developers and publishers of the insanely successful Puzzle & Dragons-- the new partnership that has been struck has been intelligently constructed to preserve all of the incentives, processes and culture that have driven Supercell’s success so far. To augment its European base and it’s flourishing presence in the US, Supercell now has unparalleled access to Japanese and Asian markets for its games which combined with the highly-acclaimed launch of Clash of Clans on Android and some other pretty good stuff in the pipeline, makes us very excited about the next stage of the voyage.
Our investment in Supercell was really driven by a deep appreciation of the core principles underpinning Supercell’s unique organizational structure, a belief that these were the reasons for the company’s early success and a bet that they would continue to deliver success over the long-term. At the time of our investment, we outlined the basic tenets of Supercell’s approach: empowering independent self-contained teams to conceive and build their own games, short development cycles, tablet first, systematically killing games that aren’t good enough, focusing on gameplay rather than graphics and optimizing for long-term engagement rather than short-term downloads. We suspect that these aspects of Supercell’s unique culture and organization are also what appealed to SoftBank and its leadership team.
While Supercell and SoftBank have very different origins, they share so many values, principles and goals that they almost appear to be long-lost cousins who are now happily reunited. We look forward to working with and learning from our new partners SoftBank and GungHo and above all, we congratulate Ilkka, Mikko and all Supercellians on the achievement of this incredible milestone and thank them for the ongoing privilege of being their partner.
ArcticStartup: So how do you think the companies got together and arrived at this incredible news today?
Neil Rimer: They obviously all know each other. They are big fans of each others games. Puzzle & Dragons is an incredible franchise and although it is only in a couple of markets - its massive. They struck up a partnership with Gungho to distribute Clash of Clans in Japan. That's when they got to know each other.
ArcticStartup: What about Softbank?
Neil Rimer: Softbank owns 60% of GungHo. Thats why they are related. GungHo is really a part of Softbank and is really Softbanks principle game investment.
ArcticStartup: Now that the news is out, how do you think this will affect Supercell and the resulting company in the long run?
Neil Rimer: I actually think it will bring a lot of positive. I don't think it will bring a lot of negatives, it is a very interesting transaction. It brings the benefits of a big company without becoming a big company. Ilkka's goal has always been to build a truly global game company and this takes him a step closer to that because they will have a really strong distribution partners in Japan and Asia. Lots of financial muscle, lots of learning and expertise around those markets to add to their experience in Europe and the US. So it is really additive. Their [Softbank/GungHo] practice is not to invest in companies and to tell them how to run their business.
ArcticStartup: What about the valuation, when you came on board in April, the company was valued at around $770 million and now just 6 months down the line and we are at over $3 billion. What was the bargaining chip for this kind of number?
Neil Rimer: They have done incredibly well. They have been very open about their numbers at the time we have invested and if you look how they are doing on App Annie, they are still performing really well and they just launched Clash on Android which is doing extremely well. Softbank saw something which they thought was very valuable. Not just in the numbers and the two games but in the creative organization that these guys put together to make new games. And the whole Android thing is just starting.
In addition to that, Rimer noted that he is very proud of the achievement of the company and that a small team from Finland could put up a game on App Store and to see it find fans all around the world and then build a company around it while striking such a partnership. "It is really a testament to their vision, leadership and execution"" Rimer commented.