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Our investment into Mojiworks

When I joined Balderton in 2009 we had recently invested in the Berlin-based games company Wooga. I was lucky enough to get involved in the company early on (thanks Jens, Philipp and Roberto); the business is thriving and I am still on the board.

We have since gone eight years without investing in a single games company, and I am delighted that we have finally broken this run with our investment in to Mojiworks.

So, why the long break, and why re-enter the market now?

The answer is that the games market presents a conundrum for venture capitalists. The industry has a unique dynamic driven by rapidly changing technology and consumer behaviour, and as a result the risks and rewards both lie at the extreme ends of the spectrum.

On the one hand games is an enormous global market, with hundreds of millions of players and more than $100 billion of annual revenues. Successful companies are international from day one, and can grow extremely fast.

As a result there are huge startup success stories such as Supercell, and Minecraft, which have achieved multi-billion dollar exits rapidly and in a capital-efficient way.

At Balderton, our previous investments in Natural Motion and Big Fish Games generated a combined total of $1.6 billion of exit value.

Those are the attractions. The risks are commensurate.

Success rates for start-ups are low, and there is a hefty element of creativity (and to be honest, pure luck) involved. Investors worry about investing millions into games that may flop at launch, and about high and rising marketing costs.

There have been recent start-up successes in the mobile games market, such as Playrix which has had great success over the last two years. But the received wisdom is that such companies are the exceptions, and in practice it is all but impossible to enter the mobile games market as a start up.

In short, the rewards or success may be great, but the risks and hurdles to starting up in this industry are seen as so significant that in recent years, many VCs have simply stayed away from the market completely.

At Balderton we have always kept in touch with the sector, in particular mobile games where we have been part of three successful companies and where Europe is a global leader.

We have been biding our time and looking for a company with an unfair advantage or a tailwind that can disrupt the existing players. We believe that games for messaging offer this opportunity, and that Mojiworks is well-placed to become a big player in this new and fast-expanding territory.

The history of games is that every new platform, if it can reach mass market distribution, allows startups to grow to massive scale. A new platform offers opportunity to grow very fast at low cost, through organic and viral growth and by using new marketing channels.

In these moments of change as a new platform emerges, startups are quicker to see the opportunity and by focussing on it 100%, can build great games that are optimized for the features and constraints of the new platform. They are also able to design their monetization approach and business model to make the most of what the new platform offers.

For example, the advent of smartphone games led to the success of Supercell, Natural Motion and Rovio. Facebook’s rise as a games platform led to the success of Zynga, Wooga and Playfish. Going back further, online video gaming helped create Minecraft, Blizzard, Wargaming and Big Fish Games. And, in what in gaming terms is ancient history, the rise of the games consoles led to the success of EA and Take-Two Interactive.

We believe that messaging apps — such as iMessage and Facebook Messenger — are the next new platform for games, creating a rare opportunity for start-ups.

Messaging apps have massive reach, are viral by their very nature, and are used by people in idle moments, or when they are bored — the perfect time for playing games.

Facebook Messenger has 1.3 billion monthly active users and is growing. Globally iMessage usage peaks at 24 billion messages a day, and Whatsapp at 63 billion a day.

In Asia, games are already a strong feature of messaging apps. China’s Wechat launched their games centre in 2013, and saw 570 million game downloads in first 3 months. South Korean internet and messaging group Kakao now draws 36% of its revenue from games.

iMessage was the first western messaging app to open up to games in 2016. This is where Mojiworks started with their first two games MojiQuest and Moji Bowling, achieving top 5 metrics with Bowling.

Facebook’s entry into the messaging games space this year doubles the opportunity. The leading game so far, Everwing, has tens of millions of players and solid retention. Recently, Facebook announced the launch of monetization on the platform.

Europe’s strength in mobile games puts us in a great place to build the next big company in messaging games. My partner Suranga and I have been looking in depth at this market over the last year, and after spending time with Mojiworks we were convinced that this was the team to back in this exciting new market.

Suranga’s post goes into more depth on what we loved about Matthew, Alan and the rest of the team at Mojiworks. They got going early on with iMessage, achieved strong results with their first two games, and are soon to launch their first game on Facebook Messenger. They are 100% focussed on the messaging opportunity, and they have the experience and network to build a very large company.

There are many unknowns ahead, but we like our odds…



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Rob Moffat

Rob Moffat

Partner at Balderton Capital in London, working with Zego, Wagestream, Cleo, Carwow, Mojiworks, Primer, PlayPlay, Dream. Formerly Google & Bain.