SGN, a fast-growing developer of freemium mobile games like “Cookie Jam,” has banked $130 million from Netmarble Games, the top mobile-games publisher in South Korea.
The deal makes Netmarble the largest shareholder in SGN, which previously raised $28 million from Austin Ventures and the startup’s founders. Chris DeWolfe, co-founder and CEO of SGN, declined to disclose the company’s current valuation or what percentage stake Netmarble owns.
With the pact, SGN expects to grow its market share in Asia, while Netmarble conversely wants to tap SGN to grow its footprint in the U.S. and other territories.
SGN will use the new funds primarily for an “aggressive” M&A strategy, eyeing acquisitions of other game studios, as well as to expand TV and online marketing and grow international distribution, said DeWolfe, former CEO and co-founder of one-time social high-flyer Myspace.
“The industry is consolidating,” he said. “There are increasing barriers to entry to new players, and to be a leader requires lots of capital and lots of infrastructure.”
Part of SGN’s strategy is to create games based on Hollywood properties and personalities, including movies, TV shows and celebrities. Last year, it released “Book of Life: Sugar Smash” (pictured above) tied to the animated film release from 20th Century Fox. The “Candy Crush”-style game “continues to grow even though the film is out-of-window basically,” DeWolfe said. His rough target is for 70% of SGN’s titles and intellectual property to be developed in-house, with 30% based on partner brands.
Privately held SGN expects to generate more than $280 million in revenue in 2015. DeWolfe said the company is cash-flow positive, with annual revenue up 300% over the last two years. At some point, SGN may consider launching an IPO but has no explicit plans today to go public, he added.
Seoul-based Netmarble publishes mobile games including Marvel Future Fight, Chrono Blade, Seven Knights and Monster Taming. The company has more than 2,500 employees worldwide. Netmarble has investments from and strategic partnerships with CJ E&M Corp., Korea’s largest entertainment company; Tencent, one of Asia’s biggest Internet companies; and Korean game developer NCsoft.
“SGN is a rapidly growing company with proven experience in developing and servicing top grossing casual games in the West,” Netmarble CEO Youngsig Kwon said in a statement. “With SGN’s many years of experience in global marketing, I am confident that SGN will make a perfect partner for Netmarble to enter the Western market.”
SGN’s games have been downloaded more 500 million times, making it second in the casual-gaming market to King Digital Entertainment (“Candy Crush”). SGN is based in Culver City, Calif., with offices in San Francisco, San Diego, Palo Alto, Calif., and Buenos Aires, Argentina.
In addition to building its core mobile-games business, SGN is plowing R&D dollars into virtual reality and augmented reality technologies. “We’re spending a fair amount of time with folks in those arenas,” DeWolfe said.