Improbable has warned its gaming software business is “not yet demonstrating self-sustaining profitability” as the SoftBank-backed start-up reported another heavy loss.
The London start-up, founded by entrepreneur and Cambridge University alumnus Herman Narula in 2012, reported a loss before tax of £39m for the 12 months to May last year, trimming its losses from £50m the year before.
The company is developing software called SpatialOS, technology that enables game developers to build massive online worlds for video games, as well as for building training and wargame simulation technology for the defence sector.
The British start-up exploded onto the UK technology scene in 2017 when it raised $500m (£390m) from investors led by Japanese technology giant SoftBank. In 2018, it raised another $50m from Netease, valuing Improbable at $2bn.
Its game hosting and networking technology has been heralded as on the frontier of developing matrix-like simulations – a “metaverse” where thousands or even millions of gamers and AI could interact in massive video games and virtual social networks.
Over the year to May, Improbable reported it had roughly doubled its revenues to £1.2m. This is still down on 2017, after it won a $6m contract with the US Department of Defence to develop its technology that has since lapsed. Last year, three UK games studios ended projects to develop games using SpatialOS.
In its accounts, the company’s directors cautioned the main risk to the company was that its cutting edge technology “is not yet demonstrating self-sustaining profitability”, although its funding from SoftBank had “significantly de-risked this in the near term”.
Operating losses jumped to £64m, but its loss before tax fell thanks to foreign exchange gains. It still has £362m in total assets.
An Improbable spokesman said: “Our 2018-19 accounts show that we spent that period focused on the growth of our company. We increased our headcount by 48pc. We moved to a larger office in London and significantly expanded our operations in Canada and China. This increased our operating expenses.
“However, these results do not reflect major changes to the company which took place in the nine months since these accounts were closed.”
Over recent months, Improbable has embarked on an acquisition spree, snapping up games studios in an effort to launch new video game hits based around its SpatialOS software.
In September, it snapped up Midwinter Entertainment, a US games studio founded by the former creative director of Microsoft’s Halo franchise. It also acquired a 60-person UK games studio based in Nottingham and expanded its in-house games studios in the UK and Canada.
In a talk in April, Mr Narula, who last year was ranked in the Telegraph’s Tech 100, hailed the possibility of video games that could be inhabited by millions of players – and that the “worst thing” would be letting “the same four or five companies” dominate that space.
He said: “There are a billion more people than five years ago playing video games… the economic impact will be profound. The first dollar kids make today might be made in games.”
