Unity raises $181M round at a reported $1.5B valuation
techcrunch.com
techcrunch.com
It looks like there is a lot of talent and founders around the world, but still there is not enough VC and ecosystem to support them outside of Bay Area.
It seems that many people still find it difficult to comprehend what 1+ billion internet/computer users means for technology companies that are capable of scaling.
Technology solves problems, but it doesn't mean every "problem" is actually a problem, or that it's worth solving. There will always be outliers.
Investing in 50 companies and expecting 45 of them to succeed is called being a small business bank.
There are many VC backed companies that never state their valuation.
There are many VC backed companies that do state their valuation after every funding round and buy up all the press releases [on techcrunch, exhibit a] so everybody knows. So their secretaries, banking partners, trophy wives, and sycophants fawn over them more.
All of those companies have completely different 409a valuations, which are MUCH lower, because you can't just say "well 10% was sold for this much, so therefore 100% is this much". Nobody ever posts those.
The FASB accounting standards are also much more intelligent.
These valuations are literally only for impressionable people that don't want an intelligent valuation.
Here's actual data for those curious: https://www.theinformation.com/comparing-common-stock-valuat...
[1] http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/...
For every Facebook there are at least 10 Pets.coms or, worse yet, Enrons. I'm not sure how pointing out a single success justifies all valuations.
I thing this number may be skewed a bit, LinkedIn is more popular in USA than in Europe.
Because of the language borders usually correspond to the national borders of the EU member states. And if not language borders then completely different systems of taxation, employment rights etc.
This is just common sense. The best bet is to proudly foster these small companies which go big overseas and also have an ecosystem of smaller players who don't have huge multinational ambitions, likely also funded by these unicorn exits when the money recycles locally.
Of course, tune and craft laws and regulations to create the most output. But stop trying to fight this clustering effect...
What is the word I'm looking for? Hubris? Shortsightedness?
Employees could also be required to pay taxes on employee stocks - money that they had not earned yet because they had not sold them.
http://www.business.dk/navne/ivaerksaetterskat-skal-ses-efte... http://penge.dk/pension-skat/ejere-af-medarbejderaktier-risi...
That is a major problem in the US system as well.
I'm certainly not an expert, so don't listen to me for any financial or legal advice.
Like most Bay Area tech workers, I'm compensated partially in stock. Every month, X shares of my restricted stock "vest", which means, in practical terms, that I receive those shares. That counts as taxable income at the current market value of those shares. To avoid making me pay a large tax bill come April, my employer actually withholds some of those shares of stock to cover the tax bill.
(I've never been entirely sure how this stock-withholding works from a tax perspective. Do they immediately sell those shares and pay the proceeds to the government along with the rest of my income tax withholding?)
I think that your employer actually sells just enough of those shares at the time of vesting to cover the taxes. Any cash remaining difference is given to you in your next paycheck (i.e. 2 shares at $100 ea. are sold to cover $120 of taxes, and $80 is given to you). Could be wrong though.
This can be a big problem if you exercise stock options, then the price of the stock drops. You might not be able to sell the stock for enough to pay the taxes you owe, and although you can take a capital loss, you can't use capital losses to offset normal income (beyond a fairly small limit each year).
[1] https://www.nceo.org/articles/stock-options-alternative-mini...
Source: I had a fat AMT tax bill precisely because of this. :/
Of course, that probably wouldn't apply to non-public investments, and the caps are two low to be usable by Dane angels (far from home in the Bay especially).
In general people in Denmark don't have a
ton of money to invest after paying taxes.
Ads, Analytics, Labs (VR), various dev relations, and more.
Europe in general have a problem with entrepreneurship. Stockholm, Berlin, London are the exceptions and even they don't really do that well compared to SV.
Zendesk is also Danish originally, Tradeshift is, Podio.. they all end up leaving because the market opportunity in Denmark is very small (6mio) and there isn't easy enough access to talent when you need to scale up
The biggest mistake many entrepreneurs do in Denmark is that they start with Denmark as a test market and so it's very hard for them to actually scale both mentally and practically.
The primary issue in my mind isn't really income taxes (although they do play a role). Denmark have a progressive tax system which means the top bracket pays around 52% or something like that (and cars have 180% taxes on top of the value of the car).
Denmark also have one of the most beneficial holdning company tax rules in Europe which allows for a lot of possibilities for startups.
And keep in mind that it's very easy to be unemployed and build a startup in Denmark. Healthcare is free, education is free, childcare is heavily subsidized, you get social benefits.
What really hinders Denmark is a combination of a small market, small ambitions and the lack of a proper ecosystem with alumni (they leave) and not to forget the in my mind crippling effect of the harmonization of the EU (not the common market which is great) and last but not least. There is very little tradition of scaling a company big (Denmark haven't created a +1000 person company for the last 50 years or something like that)
Isn't it harder/costlier to find talent in highly competitive SV than it is in Europe?
Correction: Europe has a problem with hyper-accelerated, Silicon-Valley-style VC-fueled entrepreneurship. I see a lot of bootstrapped/slower-growth entrepreneurship in Europe, and that is in no danger of going away.
It's a pretty big problem that none of the large tech companies wether social media, search, robotics and so on are built in Europe.
Could you please elaborate on this? I am genuinely curious to know more.
The TL;DR of parts of my theory is that harmonization is trying to solve a lot of problems politically which might as well be solved by startups and technology.
Furthermore when you harmonize things you end up turning things that might be a problem in one country a law in a country where it isn't. Sometimes it's good sometimes thats bad. But it's not without problems.
It's a complex issue and I don't claim to have a bullet proof theory but I think there is something to it.
Is it time for #Denexit?
> Zendesk is also Danish originally, Tradeshift is, Podio.. they all end up leaving because the market opportunity in Denmark is very small (6mio) and there isn't easy enough access to talent when you need to scale up
Podio mostly had a sales-office in SF; most development was in Copenhagen (until Citrix moved most of it to North Carolina half a year back or so)
While I'm not aware of their legal statuses, both Zendesk and Tradeshift has non-trivial amounts of development in Copenhagen.
Realm moved (and was part of Ycombinator, even) and then moved back to Copenhagen.
Falcon.io always had most of their development in Copenhagen and only really moved sales elsewhere.
It generally seem to me that they take a few semesters stateside to get known/funding/... and them move back. I've heard access to talent, employee mentality and "founders' wanted kids to grow up sane" amongst reasons for moving wholly/partially back.
But the fact remains that most who go big aren't.
Podio is now a US company not a Danish one.
Tradeshift CEO has a kid and live in SF.
Zendesk is US.
Skype was never even Danish and was bought by US company twice.
And when Danish startups gets bought it's mostly by US companies.
Universal Robot got sold to a US company.
Even Rocket Internet mostly successful deals was selling to US companies.
The idea that they just take a few semesters is wrong and it's missing the point. Where are all the European companies who buy american startups? Where are the Danish companies who buy Danish or European startups?
There is a general lack of activity in the European startup scene. It's not that it's not possible it's just that it's very unlikely to make it.
To say we Europeans are all defeatist is a bit of an unnecessary generalisation. ;)
Generally speaking, European are more risk adverse than Americans (I'll exclude the UK as Brits are a bit culturally closer to the US).
You will find investors, but it will be very difficult to find someone willing to take risks and bet big. For me they behave more like bankers than VCs.
Don't get me wrong, this kind of investors is fundamental for an economy to function as not all businesses are high risk/high reward and to be honest SV VCs could learn one thing or two about common sense from these folks.
However, it means that if you come with a "crazy idea" or if you are basically saying that you will lose money for several years, it will be very very hard to find an investor in Europe.
The European market being generally also more conservative and much more fragmented, scaling up is also much more expensive.
Last but not least, Americans are very good at finding good European startups and importing them in the USA.
We've had almost 400 years of practice. If we weren't good at it by now then it wasn't meant to be.
[1]http://www.ft.com/cms/s/0/55220458-483d-11e6-b387-64ab0a6701...
I think you're referring to social security contributions for (which pay for healthcare and pension etc.). The amount is in the same ball park as a single freelancer would pay for healthcare in the US.
Do you have to register as a autonomo even if you have zero income? If not, can't you build and start to validate your idea without charging money? That seems to be what a lot of SV startups do.
Does anyone know what (if anything) generally happens to employee stock options in the event of these large funding rounds. Most options schemes are effectively designed around the idea of "liquidity event" which used to mean IPO in successful cases.
These days when we see large investment rounds and acquisitions replacing a lot of what IPOs used to do, where does that leave options holders? I suppose this question also applies to early investors and founders too.
It also makes it more expensive to exercise the options for employees as AMT will be assessed on the difference between the strike price (what the options cost to exercise) and their new higher "value".
[1]: https://equidateinc.com/ - disclosure: I'm an investor in Equidate, and they're my favorite. There's a few others in the space like SharesPost, EquityZen, etc.
If the option holder decides to exercise, they will have to pay tax on the spread between the strike price and the 409a value at the time of exercise. This can be painful if the 409a value jumps significantly. There are a few companies like Uber, Airbnb, etc where the price jumped so much that many employees were stuck with massive tax bills.
If you find yourself in a similar situation, some funds like the ESOFund can help cover the up front cost and allow you to keep future upside.
If you use Unreal Engine / Unity, you have a pretty big pool of talent that is already proficient with the engine and can hit the ground running, rather than having weeks of learning the intricacies of your specific game engine.
> AR-based experiences like the current smash-hit Pokemon Go were also built on Unity Technologies’ game engine.
You can also use a (as far as I can tell) standard C# and a couple of other languages including one called Boo which is sort of similar to Python.
I learned C# to work with Unity rather than have to confuse my brain with strange syntaxes of languages I use in other places.
edit: Here is a link http://wiki.unity3d.com/index.php/UnityScript_versus_JavaScr...
"Why can't they be a company that just makes good tools and sells them to people?"
That in itself can be an endgame. A profitable game development company that makes great tools. However, if they are already profitable, and seem to already do this - why take the money? Hence my question.
Looking to the horizon, post VR hype, they're trying to take this further with experiments like Carte Blanche, which is creating VR from within VR itself for non-technical users [2].
But a consumer-oriented approach isn't in their DNA and isn't well aligned with their core business. Meanwhile, VR/AR startups who are entirely focused on this view of the world will evolve the right DNA and could build significant consumer-oriented value over the next few years. A war chest will come in handy if Unity wants to acquire that value and inject new DNA.
[1] http://venturebeat.com/2015/11/13/unity-has-democratized-gam...
Unreal Engine is better in some aspects, but Unity has a very active community.
My guess is they are going mostly subscription and infrastructure for games. They may one day offer a royalty or force larger companies into a royalty but right now not having one to companies like Nintendo is very attractive over Unreal Engine which takes 5% gross. They are taking money to build this infrastructure that has been in progress for 3-4 years to subscription/services. Their mission is to 'democratize game development' so I hope they always think of the smalls and mediums, not just the bigs. Unreal is really competitive now and if they don't take money they could slip. I have used Unity since 2008/version 2 and love it for mobile. I have also use Unreal since 2003 and love the latest version, they removed tons of unnecessary complexity to compete with Unity but still more for advanced devs and bigger PC/console games over mobile -- though they would like to take the place of Unity.
[1] http://www.gamesindustry.biz/articles/2013-03-22-tencent-pai...
[2] https://unity3d.com/company/public-relations/news/unity-tech...
[3] https://unity3d.com/company/public-relations/news/unity-tech...
[4] http://blogs.unity3d.com/2016/06/16/evolution-of-our-product...
They have some super talented people, but I frankly think they're just strapped for resources. I hope this round of investments will allow them to scale their engineering team and get scripting side of things more solid.
With all the recent C#/.Net open sourcing, they have a lot of tools at their disposal, but from my perspective they're not using them to their full potential.
[1] http://blogs.unity3d.com/2014/05/20/the-future-of-scripting-...
[1] http://blogs.unity3d.com/2016/04/01/unity-joins-the-net-foun...
They do have some kind of mono compiler update in alpha according to their roadmap [1], not for the runtime.
I wouldn't hold my breath, that's all.
"@dsyme working on Mono upgrade which should help. [..]"
In Windows, the only way to run the Editor with any kind of readability is to let the Windows compatibility scaling kick in (as it does by default). So the text is bigger but really fuzzy. If you turn off compatibility scaling the text is much too small to read.
On OSX it's not quite as bad, but the text is still a lot smaller than other OSX apps on this display.
Adding to the trouble is the very poor contrast in both the "personal" (lighter gray) theme and the "pro" (dark) theme. The pro theme is just awful - so little contrast between the text and the background that I can barely read it. The personal theme is better, but still seriously lacking in contrast.
Every other development app I use offers a theme with reasonable contrast and has been updated to work properly on high-DPI displays - except for Unity and Unreal Engine.
Of course I use Visual Studio to edit my C# code. And I'm fortunate to be doing more "systems plumbing" than 3D graphics, so I get to spend more time in VS2015 than in the Unity Editor. But there's still no avoiding the latter.
For those unfamiliar with it, Unity is the go-to game engine for most smaller companies, and many cross platform (mobile/desktop) games. It also has some of the best support for VR.
2. Minecraft was bought for $2.5B which is literally a video game.
I think its a fair valuation given the current landscape for their domain.
First, I think Minecraft was an over-valuation as well.
Second, it's more of a personal affront.
When I first saw Minecraft, I thought it was simple and something that anyone could make. I would rather see 15 unique block-building games made by amateurs gain success than one predictable commercial application. Obviously not the kind of success VC's want to see. Maybe this is because when I was the target demographic age (11-14) I was trying to make a Doom renderer. With the amount of time that your average kid plays Minecraft and with that amount of focus, you could easily instruct a child how to make Minecraft from scratch.
When I first saw Unity, I thought it was similar to what I was trying to achieve programming. This was back when I was working on making cross-platform (homebrew) games that supported PC, Linux, and Sony PSP, plus doing some Wii development commercially and making WebGL games. When you're thinking competitively, every framework is an enemy.
I have to agree that Unity has value, and perhaps this is a fair evaluation of their value, but when I first heard about Unity (2008?), it was unorganized and it didn't seem like the project organizers had the necessary know-how to actually build the project. One of those, I have a really great idea projects. Somehow, they've been able to make connections all over the industry and come a long way since then.
I'm not exactly sure what nearly $200 million will do for them now. For the upstarter, the real capital needed in this field is about $50,000 for development kits for each platform and twice that for licenses to develop as well, and a $100,000 education plus about $1000 in library books and about as much time as Unity has been in existence, a decade or so. That's just for one person, but that would be quite a bit of work for one billion dollars. The point is, the product is worthless unless it's built by experts.
The whole market of video game engines is upside-down, but that's another issue. Another reason to be upset is that lower entry barriers lead to lower quality commercial releases. Many top-selling games now have terrible performance and crippling bugs.
But I'm not an investor.
The video game industry market cap is around 17e9 USD2015[0]. Unity accounts for ~9% of the value. I'm not sure if it's an accurate valuation but it doesn't seem to be a ridiculous percentage given where they are in the production food chain.
[0]http://www.statista.com/statistics/246892/value-of-the-video...
Other than that, I've really lost track of the values of other game companies, other than knowing that EA and Ubisoft want to eat the sun.
1. video games are bigger than movies.
2. MS made most of its profits from its OSs.
Arguably, Unity is just the kind of tool that will allow smaller, more ethical development shops to prosper in the games industry. We have already seen a huge array of wildly succesful games by small dev shops, that is a trend likely to continue.
For interest sake, a recent popular space sim has reached 113 million dollars in crowd funding and it won't be released for at least a year or two more.
People throw money at the mere possibility of a game, there is no shortage of cash flowing through the industry.
So clearly there should be money to be made in the industry selling tools.
ref: https://www.quora.com/Who-makes-more-money-Hollywood-or-the-...