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The reckoning may be still to come for various other Softbank-backed companies. Will just take a while for them to run out of cash. For example, Improbable als

The reckoning may be still to come for various other Softbank-backed companies. Will just take a while for them to run out of cash. For example, Improbable also got 500M from Softbank a few years ago, and makes 500k (!) revenue at a loss of 50M [0] and cost of revenue of 10M. It's insane. [0] https://uk.finance.yahoo.com/news/softbank-backed-gaming-startup-improbable-burns-50m-huge-cash-injection-131849943.html https://uk.finance.yahoo.com/news/softbank-backed-gaming-sta...? edit: for anyone interested in the details, look at the most recent group accounts file here: https://beta.companieshouse.gov.uk/company/08070525/filing-history https://beta.companieshouse.gov.uk/company/08070525/filing-h...

cdolan 7y ago
I thought you were kidding with the name of the startup, given its situation. There has to be a word for that kind of irony?
- high_derivative 7y ago
  Hah. I have wondered about this particular one a fair bit. First, it seems there is just not market for their product that could possibly support the valuation in the near future. Second, by virtue of already being so large a company, there is no room for evaluation of new small projects that would change direction. Anything must immediately have enough potential to generate millions in revenue. Runway is maybe 5 years, so they got until then to produce enough revenue to raise more funding or become profitable. IIRC they sold approximately 50% of the company for the 500M round. Maybe I got this one completely wrong, but I just don't see how this can go well. What an incredibly inefficient allocation of capital for the ecosystem. Imagine giving 100 teams 5M each instead.
  - leesalminen 7y ago
    > Imagine giving 100 teams 5M each instead. In 2014 I took $250k as an investment and turned it into ~100x that (in cash) in 2017 with a SaaS product. At the time, VCs said it was “too risky” and so we turned to people in our industry for the investment cash. VCs are funny.
    - deleted 7y ago
      [deleted]
    - techslave 7y ago
      just because you succeeded doesn’t mean it wasn’t risky.
    - grepthisab 7y ago
      Respectfully it may have been above their risk tolerance, and of course you being successful with it doesn't make it a prudent investment. That's the "I won the lottery so everyone should have played the lottery" thing.
    - skellera 7y ago
      As the other person said, doesn’t mean it wasn’t risky. But also, people in your industry may have been in a better place to assess that risk.
  - xR172 7y ago
    Hmm, don’t they also have an enterprise/Defence sector? I imagine that would generate more stable revenue It seems natural that they video games business is pretty spikey in terms of revenue, although it’s worrying there isn’t a AAA game that’s using their technology yet, seems still unproven.
    - hummel 7y ago
      Wrong, they never delivered anything to anyone. I got insider sources.
- foobarbecue 7y ago
  Reminds me of https://grift.network https://grift.network
- techslave 7y ago
  There has to be. And it has to be in German.
  - deleted 7y ago
    [deleted]
- lonelappde 7y ago
  It's an Infinite Improbability Investment Drive, topic of Douglas Adams's next novel.
- Der_Einzige 7y ago
  That's what I thought with Soylant but here we are...
- mindfulplay 7y ago
  A better name for their company would have been Oh, The Irony.
zaroth 7y ago
There's nothing wrong in theory with a VC making a large investment into a company which has a long R&D road ahead of it with effectively zero revenue before they launch a revolutionary product. It's amazing if moonshot companies with all-star teams can raise a lot of money on good terms so they can get to work on solving hard problems which have great long-term fundamentals. A gaming engine just really doesn't seem to fit that mold. And for most problems you really can split up the roadmap to be able to launch earlier, make more incremental progress toward your overarching goal, reduce the size of the initial raise, and ensure you are iterating and learning along the way through actual customer contact, not working away in a dark room disconnected from the market realities.
- chii 7y ago
  > A gaming engine just really doesn't seem to fit that mold. if it had been unity or unreal engine, would you have changed your opinion?
  - gbear605 7y ago
    As far as I can tell, throwing 500m at either Unity nor the Unreal Engine wouldn’t be a good allocation of money either, although better than staying in Softbank’s hands.
  - foobarian 7y ago
    Are those profitable to the tune of 500M? Ultimately investors in some of these research projects don't recoup their money. They used to do it because it was the prevailing culture of the day, e.g. see Xerox PARC or Bell Labs. Today it seems they have to get tricked into it.
  - zaroth 7y ago
    It never ceases to amaze me the depth of the world economy, and how seemingly small niches can add up to billion dollar markets. But $500mm is a tremendous amount of money to raise pre-revenue, which would really only be appropriate in an area with tremendous barriers to entry. Gaming physics, AI, map generation, etc. all seem like exactly the kind of thing that you can break apart into smaller pieces to get to market quickly and iteratively. It's not like a molecule that needs to through Phase 3 trials, or a rocket which needs to make orbit, or something with a huge CapEx component. Even rockets can scale up from computer models, to scale models, to rough prototypes, etc.
krak12 7y ago
Improbable is the theranos of videogame, really ambitious vision but poor execution and endless pool of money from Son. Now they are buying companies to justify no product at all in 7 years. Its a complete nightmare that will blow up indies and workers.
dmix 7y ago
> While investment rose, Improbable’s turnover dived from £7.8m in 2017 to just £579,859 the next year. > “Our revenue will be driven by games built on SpatialOS entering the market,” the Improbable spokesperson said. “As such, our commercial progress is not reflected by our revenues. Spikes in revenue will occur along the way related to specific contracts, but our core business is connected to game releases.” > Despite mounting losses and falling revenues, Improbable is in no danger of running into trouble, thanks to the huge cash injection from SoftBank. Improbable had £255.4m of cash in the bank at the end of the accounting period and £360m of assets, including a £97m portfolio of bonds and treasury notes. This isn't totally unexpected is it? Their revenue is tied to future game development being done using their platform. The drop could easily have been due to Unity changing the terms to exclude SpatialOS, which has now been resolved... The only thing that would be concerning if there were signs no games were using it or didn't need it. Not that revenue isn't hundreds of millions during the R&D phase.
- charwalker 7y ago
  If Unity ToS and compatability is a like 90% revenue killer, how sustainable is this model? Are they that big a deal that new development will shift to their platform?
  - redisman 7y ago
    That's App Store ToS and most game companies.
_the_inflator 7y ago
Softbank seemed crazy to me. Wag etc. - this sounded to me like DotCom bubble investments. Also the sheer amount of money that SB put into companies, amazed me.
- charwalker 7y ago
  Recently I've heard/read the Softbank guru described as addicted to risk. He was backed by $45bil in Saudi money after a 45 minute meeting, so maybe he is convincing or knows what he's about, but the risk factor is clear. Maybe one of the investments takes off long term but there are billions gone already.
  - vxNsr 7y ago
    Also listened to the Planet Money Episode[0]? [0] https://www.npr.org/templates/transcript/transcript.php?storyId=767379358 https://www.npr.org/templates/transcript/transcript.php?stor...

cdolan 7y ago

I thought you were kidding with the name of the startup, given its situation. There has to be a word for that kind of irony?

high_derivative 7y ago
Hah. I have wondered about this particular one a fair bit. First, it seems there is just not market for their product that could possibly support the valuation in the near future. Second, by virtue of already being so large a company, there is no room for evaluation of new small projects that would change direction. Anything must immediately have enough potential to generate millions in revenue. Runway is maybe 5 years, so they got until then to produce enough revenue to raise more funding or become profitable. IIRC they sold approximately 50% of the company for the 500M round. Maybe I got this one completely wrong, but I just don't see how this can go well. What an incredibly inefficient allocation of capital for the ecosystem. Imagine giving 100 teams 5M each instead.
- leesalminen 7y ago
  > Imagine giving 100 teams 5M each instead. In 2014 I took $250k as an investment and turned it into ~100x that (in cash) in 2017 with a SaaS product. At the time, VCs said it was “too risky” and so we turned to people in our industry for the investment cash. VCs are funny.
  - deleted 7y ago
    [deleted]
  - techslave 7y ago
    just because you succeeded doesn’t mean it wasn’t risky.
  - grepthisab 7y ago
    Respectfully it may have been above their risk tolerance, and of course you being successful with it doesn't make it a prudent investment. That's the "I won the lottery so everyone should have played the lottery" thing.
  - skellera 7y ago
    As the other person said, doesn’t mean it wasn’t risky. But also, people in your industry may have been in a better place to assess that risk.
- xR172 7y ago
  Hmm, don’t they also have an enterprise/Defence sector? I imagine that would generate more stable revenue It seems natural that they video games business is pretty spikey in terms of revenue, although it’s worrying there isn’t a AAA game that’s using their technology yet, seems still unproven.
  - hummel 7y ago
    Wrong, they never delivered anything to anyone. I got insider sources.
foobarbecue 7y ago
Reminds me of https://grift.network https://grift.network
techslave 7y ago
There has to be. And it has to be in German.
- deleted 7y ago
  [deleted]
lonelappde 7y ago
It's an Infinite Improbability Investment Drive, topic of Douglas Adams's next novel.
Der_Einzige 7y ago
That's what I thought with Soylant but here we are...
mindfulplay 7y ago
A better name for their company would have been Oh, The Irony.

zaroth 7y ago

There's nothing wrong in theory with a VC making a large investment into a company which has a long R&D road ahead of it with effectively zero revenue before they launch a revolutionary product. It's amazing if moonshot companies with all-star teams can raise a lot of money on good terms so they can get to work on solving hard problems which have great long-term fundamentals. A gaming engine just really doesn't seem to fit that mold. And for most problems you really can split up the roadmap to be able to launch earlier, make more incremental progress toward your overarching goal, reduce the size of the initial raise, and ensure you are iterating and learning along the way through actual customer contact, not working away in a dark room disconnected from the market realities.

chii 7y ago
> A gaming engine just really doesn't seem to fit that mold. if it had been unity or unreal engine, would you have changed your opinion?
- gbear605 7y ago
  As far as I can tell, throwing 500m at either Unity nor the Unreal Engine wouldn’t be a good allocation of money either, although better than staying in Softbank’s hands.
- foobarian 7y ago
  Are those profitable to the tune of 500M? Ultimately investors in some of these research projects don't recoup their money. They used to do it because it was the prevailing culture of the day, e.g. see Xerox PARC or Bell Labs. Today it seems they have to get tricked into it.
- zaroth 7y ago
  It never ceases to amaze me the depth of the world economy, and how seemingly small niches can add up to billion dollar markets. But $500mm is a tremendous amount of money to raise pre-revenue, which would really only be appropriate in an area with tremendous barriers to entry. Gaming physics, AI, map generation, etc. all seem like exactly the kind of thing that you can break apart into smaller pieces to get to market quickly and iteratively. It's not like a molecule that needs to through Phase 3 trials, or a rocket which needs to make orbit, or something with a huge CapEx component. Even rockets can scale up from computer models, to scale models, to rough prototypes, etc.

krak12 7y ago

Improbable is the theranos of videogame, really ambitious vision but poor execution and endless pool of money from Son. Now they are buying companies to justify no product at all in 7 years. Its a complete nightmare that will blow up indies and workers.

dmix 7y ago

> While investment rose, Improbable’s turnover dived from £7.8m in 2017 to just £579,859 the next year. > “Our revenue will be driven by games built on SpatialOS entering the market,” the Improbable spokesperson said. “As such, our commercial progress is not reflected by our revenues. Spikes in revenue will occur along the way related to specific contracts, but our core business is connected to game releases.” > Despite mounting losses and falling revenues, Improbable is in no danger of running into trouble, thanks to the huge cash injection from SoftBank. Improbable had £255.4m of cash in the bank at the end of the accounting period and £360m of assets, including a £97m portfolio of bonds and treasury notes. This isn't totally unexpected is it? Their revenue is tied to future game development being done using their platform. The drop could easily have been due to Unity changing the terms to exclude SpatialOS, which has now been resolved... The only thing that would be concerning if there were signs no games were using it or didn't need it. Not that revenue isn't hundreds of millions during the R&D phase.

charwalker 7y ago
If Unity ToS and compatability is a like 90% revenue killer, how sustainable is this model? Are they that big a deal that new development will shift to their platform?
- redisman 7y ago
  That's App Store ToS and most game companies.

_the_inflator 7y ago

Softbank seemed crazy to me. Wag etc. - this sounded to me like DotCom bubble investments. Also the sheer amount of money that SB put into companies, amazed me.

charwalker 7y ago
Recently I've heard/read the Softbank guru described as addicted to risk. He was backed by $45bil in Saudi money after a 45 minute meeting, so maybe he is convincing or knows what he's about, but the risk factor is clear. Maybe one of the investments takes off long term but there are billions gone already.
- vxNsr 7y ago
  Also listened to the Planet Money Episode[0]? [0] https://www.npr.org/templates/transcript/transcript.php?storyId=767379358 https://www.npr.org/templates/transcript/transcript.php?stor...