- British startup Improbable has raised $US502 million in funding from Japanese firm Softbank and others.
- It’s a huge funding round for the UK tech scene, and the company says it’s determined to stay independent.
- “It’s about sending a message,” CEO Herman Narula said.
CEO Herman Narula says Improbable is determined to stay independent, despite concerns about foreign firms buying out British businesses. The vast funding round is, he told Business Insider, about “sending a signal.”
Improbable is developing software for simulating virtual worlds. Simply put, it builds the tools that people can use to run massive simulations — whether that’s online games or scientific research projects — meaning its customers can get on with the business of simulating whatever it is they actually want to do.
Its $US502 million investment is, by any measure, massive — whether for a British or an American technology business.
But it’s an order of magnitude larger than all of Improbable’s previous funding rounds put together. Before this, it had raised just $US50 million (£38 million) in total.
There’s a history of foreign firms buying out promising British tech businesses
Improbable is staying tight-lipped on how much the investment values it at. Narula said only that it gives Softbank a “non-controlling stake.” That is, Softbank owns less than 50% of the company — valuing it overall at least $US1 billion (£778 million). (He wouldn’t even be drawn on the range or a ballpark figure, saying that he doesn’t “want to create that distraction of high numbers.”)
But the investment does raise questions as to whether Improbable has the potential to be another promising British tech business ultimately bought out by foreign firms. London artificial intelligence lab Deepmind was acquired by Google for £400 million. Twitter dropped up to $US150 million (£116 million) to acquire Magic Pony. Chinese travel company Ctrip bought Scottish firm Skyscanner for £1.4 billion.
Softbank is currently doubling down on its investments, and is launching a vast $US100 billion (£77 billion) tech investment fund (though, per TechCrunch, the Improbable investment is not coming from it). In 2013, Softbank bought a 51% stake in Finnish gaming company Supercell, before upping it to 73% (and then subsequently selling it off to Tencent).
Might Softbank seek to similarly increase its share of Improbable until it has a controlling stake?
“We have absolutely no interest in that kind of deal,” Narula said. “Our goal is to remain independent. The control aspects of this deal were very important to us … The company is completely founder-controlled, and will remain so. We can’t realise this vision as an acquisition of anyone.”
His position then softened slightly: “It’s also personally important to us to, as long as it is feasible, try to create a significant British platform company, and you know, we think we can do that and that’s not something we want to give up easily.”
So would he consider an acquisition offer under any circumstances? If Google came knocking, perhaps?
“I guess I’d say it wouldn’t be about cashing out for us. If such a scenario ever made sense it would have to be because we felt it was the only way to realise our vision.”
And does he consider the number of British tech businesses selling off to foreign firms an issue?
“I think that’s just harder anywhere. I don’t think that’s something unique to Britain. Trying to scale a company beyond this scale is an enormous challenge … I don’t think there is an easy policy of structure that’s going to make this kind of thing repeatable.”
‘Our goal is to literally alter the way we live and work’
Founded in 2012, Improbable’s initial focus was on gaming — but has since broadened its view to everything from science to defence. In late 2015, it unveiled SpatialOS, an operating system for simulations, and launched a beta version in February 2017.
The company is currently generating revenue, but its current focus is on growth.
This new funding will go towards hiring, as well as developing the tech and R&D. The company currently has 180 employees, and opened a San Francisco office earlier this year. iIt plans to grow both teams, Improbable said. (Narula and cofounder and CTO Rob Whitehead are British, and based in London.)
“It’s been a journey to get the fundamental technical problems solved, to show a working product … to see the potential of the market we were exploring,” the CEO said when asked about the rationale for the size of the fundraise. “I guess we’ve now reached the point where we want to double down on that. We see a 10 year, 20 year vision for how we can make possible the massive scale simulations that could be so transformative.
“And it’s not going to happen overnight, and it’s something that’s going to require deep and continued investment. So this is us thinking of the long-term, wanting to remain independent, and wanting to create something really special.”
Even so, Narula doesn’t rule out raising further cash down the line: “Our goal is to literally alter the way we live and work and that may very well require more capital.”
Fundamentally, the exec said, “it’s about sending a signal to the market that we are creating a new space, and we’re building a new ecosystem around us, and that ecosystem is here to stay.”
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