Venture Capital: Epic Games, Maker of Fortnite, to Raise $750M at $17B Valuation

June 16, 2020 | News, Venture Capital
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After COVID, video games such as Fortnite rank as ‘essential distractions.’

Epic Games, the maker of Fortnite, said to be the world’s most popular multiplayer battle royale game with 350 million users, is raising $750 million. Deal valuation is placed at a whopping $17 billion, post-money. (VentureBeat)

Bloomberg said existing investors including KKR (NYSE: KKR) will participate in the funding, along with new investors T. Rowe Price Group Inc. and Baillie Gifford. However, the deal is still under discussion.

Epic Games finances, according to VentureBeat

Year Revenue ($B) EBITDA
2018 5.60 NM
2019 4.20 0.73
2020 Est 5.00 1.00

 

In April, due to COVID, Fortnite revenues surged to $400 million as home-bound users spent 3.2 billion hours on the shooter game.

The company is privately held, and Chinese internet giant Tencent (HKG: 0700) holds 40% – a stake which it bought in 2012.

Other shareholders include Walt Disney Co. (NYSE: DIS), aXiomatic Gaming LLC, and Endeavor Group Holdings Inc.

In May, Bloomberg reported that Endeavor Group Holdings Inc., which is the owner of a major Hollywood talent agency, may sell part of its stake in Epic to raise cash to support its virus-hit businesses.

Aggregate capital raised by Epic Games to date is $1.6 billion of which $1.25 billion was raised in 2018.

Gaming and entertainment worlds fuse

Fortnite has been a pioneer in bringing stage shows to its gaming user base. In 2019, Fortnite teamed up with Marshmello for an in-game concert.

During April 23-25, 2020, Fortnite and Travis Scott paired to stream the Astronomical virtual concert, which drew a viewership of 28 million fans.

The combination of gaming and live shows may be specially relevant in the COVID era with people hesitant to visit crowded places such as stadia and theaters.

Epic also benefits from Houseparty acquisition

Last year, Epic acquired Houseparty for an undisclosed sum. Houseparty’s free mobile and desktop apps allow people to video chat with friends or family, just like Zoom.

During COVID-hit April, Houseparty reported 50 million signups over a period of 30 days.

Epic also owns Unreal Engine, a software widely used by gaming developers, and said to account for a sizable chunk of Epic’s value.

Related Story:  Andreessen Horowitz’s Thesis – “Multiplayer Game Experiences are the Next Social Networks”         

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