Kristian Segerstrale, the co-founder of social gaming firm Playfish and former executive vice president in charge of digital gaming at Electronic Arts, has joined Supercell as a member of its board. Helsinki-based Supercell is one of the hottest mobile game companies around thanks to the popularity of two hit games, Clash of Clans and Hay Day. These games are earning millions of dollars per day, and they enabled Supercell to raise $130 million at a $770 million valuation in April.
Segerstrale saw great success with Playfish, a social gaming firm on Facebook, and sold it to Electronic Arts in 2009 for more than $300 million. He eventually became the head of digital games at EA, a retail gaming giant which has been investing heavily to adapt to the new world of social, mobile, and online games. He left EA in February to return to his startup roots, and his move to the board of Supercell is the first part in that plan.
Ilkka Panaanen, chief executive of Supercell, said in a blog post, “What makes Kristian great for Supercell is his unique mix of product instinct in platform transitions and his operational experience growing companies big and small. Kristian’s track record speaks for itself….Very few individuals move as seamlessly between startups and large scale public companies as Kristian, and I would be hard pressed to find someone with a more valuable and relevant set of experiences to help us in our decision making as we navigate the challenges that lie ahead.”
At Supercell, Segerstrale said he will help the team deal with the hyper growth that the company is seeing in mobile games. We interviewed him earlier this week and this is an edited transcript.
GamesBeat: Why are you joining the board at Supercell?
Kristian Segerstrale: Initial Capital, the seed investment fund of the Playfish founders, actually led the first investment round in Supercell. We hold a significant stake. It’s natural for me, having left EA, to take up a board seat. What I’ll be focused on moving forward is helping with growth across the board. Supercell is in this amazing position right now, on the back of these successful games and an amazing set of talent across the company. They have very large ambitions. They want to build the company for the long term. Having grown a couple of startups as well as overseen matters of scale, at EA most recently, I’m hoping to contribute some of that experience in helping to guide the company through the long term, in an industry that is more dependent on more personal screens, like tablets and smartphones.
GamesBeat: This is not going to be an executive role at the company, right? You’re going to remain a board member as far as your participation goes?
Segerstrale: That’s correct. But what they’re doing is so much fun that I’m going to have a hard time keeping away.
Segerstrale: It depends on how you measure it. They released a fairly detailed set of metrics six weeks ago. In revenue terms, in the first calendar quarter of this year, I think they made $179 million in revenue and just over $100 million in profit. It’s fairly significant. In employee terms, I don’t know what’s publicly available, but I believe they have said that they’re less than 100 people.
I just met with the company four days ago at a retreat in Barcelona. The thing that impresses me so much about them is how resourceful and mature they are for an organization that is so young. They’re being very thoughtful about their opportunities. All of their success so far is based on two games on iOS, and it’s much more focused on the Western market. Ultimately, their opportunities span Android, new games, and especially new territories in Asia.
One of the things I found impressive about Supercell is that unlike many teams in recent history, especially in Silicon Valley, they’ve been judicious about what they pursue and what they don’t. They haven’t embarked on some crazy headcount explosion. They continue to be more judicious than ever about hiring and focusing on the company’s founding principles. What Supercell is about is trying to attract the best talent and give them the creative freedom to express themselves.
GamesBeat: It’s an interesting turn of fortune for Supercell. It’s astounding that it could make so much revenue out of just two games. It has also tried it with a number of other games before. It seems to have culled its herd quite ruthlessly.
Segerstrale: That’s right. It’s a combination of having a talented set of creators as well as a thoughtful internal approach to game development and understanding of the business. Sometimes projects aren’t successful. What’s beautiful about how they operate compared to many other places I’ve seen is that they don’t have any kind of greenlight process. It’s novel. What they do is that they trust the folks that they hire to create the best product possible. Then they get it out to real players and they see if the metrics hold up with real players. If they do, it’s ready to go. If not, then they might try again from a different angle, but they’ll celebrate that mix of failure and learning. They’re very transparent about all their learnings.
In some ways, despite the team being quite young, they exhibit a very mature approach to the industry. They’re not taking success for granted. They’re almost paranoid about providing the best experiences for players, and understanding that to deliver the greatest product, you have to take creative risks. Some of them will work out and others won’t.
GamesBeat: How do you help them get into the hard part here, having something like a more regular release schedule, a broader base of hits, all the sorts of things a bigger publisher does? Rovio looks like they’ve had a hard time making the transition. It’s still very successful, but Angry Birds still looks like a one-hit wonder situation. It hasn’t followed it with something as big.
Segerstrale: I think Supercell’s north star on this is talent, trying to find the best talent and creating the best possible environment for it. I’d say that things like schedules are not as important to them. If you hold and retain the best talent and create long-lasting relationships with your players, then the quantity of game releases perhaps isn’t as important as quality.
That said, one of the things that is difficult, as you say, for any company, is how you follow such great success with additional titles. How do you make sure you keep setting the bar at a higher level? But everything I’ve seen says that the planning effort, the focus, the talent, the way that the company goes about thinking through its options moving forward, is incredibly prescient. Between the initiatives for different games and new platforms and new geographies, we’ll see some pretty exciting things this year.
GamesBeat: Do you see them operating in a way that’s very different from EA Mobile?
Segerstrale: It’s a pretty stark contrast across the board. In part, a small company will always operate differently than a big one. But I would say one of the most endearing things about Supercell is how humble everybody is here. The creators of a game like Clash of Clans that’s been so successful are still humble. They’re very ambitious, but very transparent, very interested in feedback from every direction.
In an environment where there isn’t a greenlight process–If you think about Clash of Clans and the updates and new things that happen in that game all the time, there is not an internal approval loop of any kind for that. It enables the company to move quickly, and it creates an environment that’s genuinely creatively led.
Probably the biggest point of difference, of course, is that Supercell’s studios are all in Helsinki. Everyone’s effectively in one place. They have an office here in San Francisco, but it’s more focused on marketing and acquisition and those sorts of things. It enables a flatter, faster culture.
GamesBeat: Did you happen to see Bobby Kotick’s comment about the mobile market on Activision’s last earnings call? He was saying that it was not yet a market where they were ready to invest more money, because you don’t see franchises having the same impact on the top lists every single year, year after year. He sees a lot of games being successful for three months and then disappearing from the charts. That’s one reason they feel like they can’t build a very large business in mobile yet. It’s an interesting observation given how much money Activision pours into three major franchises right now.
What do you think of that. Do you feel like mobile is understood well at this point?
Segerstrale: Tablets and mobile are closely related, but perhaps slightly different also. For sure, they’re still emerging. There are still a lot of things to work out as far as how you take a successful game and create the kind of perennial brand value or franchise value that has become so important for many of the publishers in the console world. What I would say personally is that it took the PC and console world a very long time to understand how that works. There were a lot of PC and console titles that came and went quickly for a long time before today’s anchor franchises came to exist and publishers figured out how to create that value. I expect it to take time on mobile and tablets as well.
With that said, being a keen student of the games industry overall, I think that if you just look at the trends – not just in terms of the amount of phones and tablets sold, but looking deeper at how people consume any kind of media right now — we’re very rapidly experiencing a shift from consumption of entertainment on the shared screen in the living room. We’re seeing that shift fairly quickly, and in an all-encompassing way, toward social experiences and shared experiences. As opposed to watching an episode of a TV series or listening to music or playing games on the sofa in front of the TV with whoever happens to be there, you take that entertainment with you and experience it whenever you want to and wherever you happen to be. That is going to be a very difficult transition for some of the large publishers to accommodate.
What Bobby says is absolutely true in that this clearly is emerging. Everyone has to figure out how this games-as-a-service environment is going to work in relation to creating longer-term franchises. Whether we like it or not, consumers choose how they will experience entertainment in the future. It’s getting it backwards to say that you shouldn’t invest in mobile because there haven’t been long-term franchises created there yet. Consumers are choosing to play on these devices and it’s up to us to figure out how to create that longevity.
Supercell has done well with both Hay Day and Clash of Clans so far. Hay Day just turned one year old and it’s still going strong. It’s in the top five pretty much everywhere. Clash of Clans, which I think is nine months old now, continues to go as strong as ever. It’s growing every month. Clearly there’s a fairly long arc for these products. I think the single most important thing for Supercell right now is finding out how to keep that player base happy, releasing interesting updates and additional content. Some companies I look up to on this are Riot with League of Legends and Blizzard with World of Warcraft – the products that, through their service component and their community, have been able to create a longer-term following.
One last thing I’ll say about that. If you think about how a Call of Duty or a Battlefield sustains itself year in and year out, until two years ago this was about having to re-market the same game every year, again and again. It’s only just now that we’re beginning to get a service component that takes players over from one version to another. It’s an extremely expensive pursuit, this franchise creation in the living room, compared to the efficiency of growing an audience on mobile platforms. That said, it’s a very exciting and interesting platform transition that we’re going through in the next couple of years. Certainly Bobby is right that it hasn’t been done in a major way yet. Supercell is focused on figuring out exactly how it’s done.
Segerstrale: Now that I’m outside the company, I’m not in the best place to comment on it. I think that if you look at EA’s track record over the last couple of years, there’s a growth in digital revenue and operating margins and all that stuff. EA is well-placed. The question is, what does EA do with that moving forward?
The hardest thing for the big console publishers from here on is choosing where they bet their best talent. Do they go after these next-generation consoles, believing that’s going to be a longer-term source of growth for the company? Or do you effectively burn your boats, if you like, and put them against something much less known, something that feels much riskier and much less proven? As per Bobby’s comment, how much do you invest in mobile versus next-gen? That’s going to be the hardest thing for both of those companies. They’re sitting on all those franchises and all that talent. Clearly they have a lot of momentum, and I think EA is initially well-placed, but they have a lot of choices to make. We’re in this interesting place in the market right now, where competition matters a lot less than your relationship with your players and your ability to execute overall.
GamesBeat: Is Supercell a good example of where your interests lie after EA?
Segerstrale: I’d say so. I’ve been a passionate entrepreneur for the past 12 or 13 years. I’m interested in growing smaller companies into bigger companies. With the other Playfish founders, through our seed investment vehicle and initial capital, we’ve invested in a number of companies. As I said, we led the seed round into Supercell, and we’ve taken similar stakes in other companies. What I’m doing right now is helping those grow. Obviously Supercell has done incredibly well and deserves a fair amount of attention. Taking a board seat reflects that, ensuring I can help Supercell in the best possible way with as much time and effort as is required. You’re likely to see me working with other companies as well – not so much as a professional VC, but rather at an earlier stage, helping navigate both product and company growth.
GamesBeat: It’s an interesting twist in the market — the race between Clash of Clans and Puzzle & Dragons this year.
Segerstrale: Yeah. Puzzle & Dragons is one of the most amazing stories in the game industry over the past year, in terms of just the sheer success that a single title can have. I’m a big admirer of GungHo [Online Entertainment, Puzzle & Dragons’ developer]. It’s going to be fun.