Investment

Unicorn family investors in dreamland as Epic Games sees valuation climb

The decision by a group of Australian family offices to back Epic Games, the US video game and software developer, best known for its Fortnite franchise, looks like a shrewd move. 

To gain access to Epic, Belz Family & Associates (BFA), a Sydney-based investment group, organized a club deal consisting of several family offices, to fund a minority stake in Epic’s last funding round in April 2021. 

It appears to have been a fairytale story for BFA’s families. The $1.25 billion the company raised last year gave it an estimated valuation of $28.7 billion. Less than a year on, it has risen 68% to $42 billion.

As CB Insights revealed in early February that heralded the existence of 1,000 global unicorns, Epic has become the fifth most valuable at $42 billion. 

The $1.25 billion the company raised last year gave it an estimated valuation of $28.7 billion. Less than a year on, it has risen 68% to $42 billion

Belz made the investment via Smash Ventures, a Los Angeles based VC fund that focuses on late-stage investments. Its two founders, Eric Garland and Evan Richter, are former Walt Disney Company executives, with Garland responsible for overseeing venture capital and growth investments at the iconic firm. 

The pair established Smash Ventures in 2018 to seek out consumer technology start-ups. Last year, they raised $75 million for their debut fund, attracting investors such as Kevin Mayer, also a former Disney executive. Mayer ran Disney’s streaming platform, Disney+, before leaving to become CEO of TikTok; a position that proved short-lived with Mayer leaving in August 2020 after taking the reins on 1 June. 

He is now chairman of DAZN, a sports streaming platform backed by billionaire Len Blavatnik, ranked Britain’s richest man in the Sunday Times rich list last year.  

Smash also counts Ed Catmull, co-founder of Pixar and former president of Walt Disney Animation Studios, among its limited partners. The sphere of influence within its network of investors appears to be wide. It has also backed – and since exited – DraftKings, internet search engine DuckDuckGo, Manscaped and Indian edtech platform, Byju’s. 

According to SEC regulatory filings, Smash has kicked off the new year by raising $500 million for its latest fund. 

As streaming technology platforms and media companies – driven by video game developers – begin to morph into something bigger, bolder and more immersive, Smash Ventures find itself at the intersection of a dynamic marketplace.

Discussing how effectively Fortnite and DraftKings connect with end-users, Richter has said:  “The true distributors of media in the future are going to be these technology companies”.  The arrival of the metaverse further illustrates the point. 

The mega-game trend is evident in Smash Ventures’ latest investment in live entertainment discovery platform, Fever Labs, which last month attracted $227 million in late-stage funding led by the growth equity arm of Goldman Sachs. 

Video game developers are certainly riding a wave of enthusiasm at the moment, as M&A activity moves up a gear. On 18 January, Microsoft announced it was acquiring Activision Blizzard – who can boast Call of Duty and World of Warcraft among their catalogue – for $68.7 billion. Microsoft’s CEO, Satya Nadella said gaming was “the most dynamic and exciting category in entertainment across all platforms today”. 

Sony has also been busy, paying $3.6 billion for game developer Bungie, the company behind multiplayer shooter games Destiny and Halo.  Take-Two Interactive has paid $12.7 billion for mobile gaming company Zynga.

After providing Smash Ventures with a larger war chest investors will be hoping it can provide access to the next epic.  

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