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fluid2.jpgVideo games are becoming an addiction for venture capitalists.

Fluid Entertainment, a kid-oriented online video game company, is near a test launch of its massively multiplayer online game and it is the latest to benefit from a round of VC money. The company’s game has relatively simple Flash-based graphics for children ages six to 11 and has an environmentally conscious theme, said Greg Jones, CEO of the Mill Valley, Calif.-based company.

The company has raised $3.2 million in a first round of venture funding from Trinity Ventures and a small amount from the Band of Angels. The funds were raised last August, but the 14-employee company has no immediate need to raise more, Jones said.

Fluid was founded many years ago by Scott Matthews to make games for a variety of publishers such as Electronic Arts. But Matthews always wanted to make his own original game and recruited Jones and Internet marketing veteran Jen Chapin to develop an online game.

Tim McAdam (pictured below), a partner at Trinity, said the investment in Fluid is the fourth major video game investment by his firm. Others include PlayFirst, a publisher of casual games; Hidden City games, maker of trading card games such as Bella Sara; and online games company Trion World Network. He said in an interview that Fluid fits in with the venture company’s belief that casual online PC games are a nascent opportunity.

“The niche here is where Webkinz and Club Penguin have done a good job getting traction with young kids with older technology,” he said. “This will focus on next-generation social play. We think Fluid can be a game changer, no pun intended.”

img-tim_mcadam1.jpgHe added: “There will be a tsunami of interest around virtual goods. You are starting to see it already in games like World of Warcraft, Second Life, and Yaya Online. We believe a combination of subscription, virtual goods, and real-world goods is a way to build a large company over three to five years.”

Jones said that the company is very close to an open beta of its online game and that it will launch in the summer of this year. He said the company will describe the game in the next several weeks.

“We’re not trying to build World of Warcraft,” he said, referring to the hardcore fantasy role-playing online game with 10 million subscribers. “We layer in a meaningful purpose to the game that affects real world behavior around environmentalism and sustainability.”

Young kids haven’t participated in online games due to parental fears of online predators, lack of credit cards, and the lack of targeted content. But competitors who have gotten over those barriers include, as McAdam mentioned, Club Penguin, which Disney bought last year for $700 million, and Webkinz. Runescape, a free online role-playing game, generates $60 million a year in revenue through various alternative models such as micro-transactions.

Jones said that he was aware of the two-part sales process that requires buy-in from kids and parents alike. Kids have to see the games as fun and parents have to see it as safe and worth the price.

Jones said he has been an angel investor for five years. Before that, he started and ran the WorldRes hotel reservation web site.


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