Tuesday, March 31, 2020

Cloud Imperium Games Acquires $17.25 Million In Additional Outside Funding

Is Chris Roberts about to lose control of another video game studio?

In December 2000, Chris Roberts walked away from Digital Anvil while the game Freelancer was under development. According to a Eurogamer article:
In the wake of the collapse of Digital Anvil, co-founder and soon-to-be-former CEO Chris Roberts has spoken about his decision to leave the company he founded just four years ago. As we suspected, the company's troubles were down to "wanting to develop not only hugely ambitious games, but too many hugely ambitious games", leaving the company's finances stretched after four years without a single game being released - the sole title to emerge with the Digital Anvil name on it was actually mostly developed by a small British company.

Having left the monolithic corporate world that is Electronic Arts almost five years ago to found Digital Anvil in the first place, it is somewhat ironic that his dream development studio is now being taken over by the monolithic corporate world that is Microsoft, and Roberts has confirmed that his decision to leave the company is simply because he has no desire to find himself in the same situation again.
Microsoft eventually published a scaled-down version of Roberts' dream in March 2003.

On Friday, Cloud Imperium Games announced another round of outside investment of $17.25 million into CIG.
March 27, 2020 – Today, Cloud Imperium announced that existing investors – the Calder Family Office, Snoot Entertainment, and ITG Investment – have exercised a one-time option to purchase further shares in the company. The share prices reflect a discounted option price for existing shareholders that was pre-negotiated at the time of the initial investment in 2018. There were no changes to the Board composition as a result of this transaction. Chris Roberts continues to maintain full control of the Board and Group.
From Cloud Imperium Financials for 2018
Combined with an initial investment of $46 million by Clive and Keith Calder in 2018, CIG has now raised $63.25 million in outside funding. Additionally, as of 1600 UTC on 31 March 2020, CIG had raised $275.4 million in crowdfunding sources such as game and ship purchases. According to the Cloud Imperium Financials post for 2018 released in December 2019, CIG had also raised $43.2 million through subscriptions and other sources through the end of 2018. That is a confirmed total of $381.8 million raised to create and market Squadron 42 and Star Citizen, which does not include the other categories totals for 2019 and the first quarter of 2020.

From Cloud Imperium Financials for 2018
One might think that $380 million is enough for Roberts to finish the project. But if the burn rate displayed for 2018 continues to today, I have my doubts. Through the end of 2018, CIG had spent $249.5 million. If the rate of spending in 2018 continued, CIG has spent almost $320 million on development and marketing costs though the end of the first quarter. If the burn rate settled back down to 2017 levels, we are still looking at spending of around $310 million.

Star Citizen and Squadron 42, depending if the pair are released as one or two games, are on pace to be in the top 10, if not the most expensive, video games ever made. Crowdfunding, no matter how successful, is not enough to get the development of the project completed.  Looking back, I think what I wrote back in December 2018 in the wake of the initial outside investment still holds true.
In the long run, I think having outside investors is probably a good thing for backers of Star Citizen and CIG. The picture spelled out by the financial report is of a company that had outstripped its main source of income and only had 2-3 months of financial reserves when the new influx of money arrived. Despite the record amounts of money raised by CIG from fans, Chris Roberts had spent all of that money and was chewing through the reserve generated by side deals and currency valuations. If CIG can hold to its production schedule, the game still has a chance. Honestly compels me to point out that Roberts' history for the past 20-odd years indicates he cannot stick to a schedule. Failure to produce, however, means more outside investment and eventually Roberts losing control of the company. Roberts' detractors will argue that he has aimed for a buyout the entire time.

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