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Star Citizen is the biggest crowdfunded video game of all time, with $211 million raised over the past five years from 2.2 million fans. But that isn’t quite enough to get the game to market, and so Chris Roberts, CEO of Cloud Imperium Games and Roberts Space Industries, announced today that the company has raised an additional $46 million in venture capital.
The money comes from Clive Calder and Keith Calder’s Snoot Entertainment, a couple of moguls in the United Kingdom music business. Under the deal, they will own 10 percent of Cloud Imperium, and Roberts will still retain control of the company and hold 75 percent ownership. The valuation of the company is $496 million.
In an interview with GamesBeat, Roberts said the money will be used to develop full marketing campaigns for the single-player game Star Citizen and the larger multiplayer sci-fi universe, Star Citizen.
On top of that, Roberts finally said that fans can expect the game to debut in the summer of 2020. And to comply with United Kingdom rules, the company is disclosing its full financial picture for the first time. Roberts is laying bare for all to see the previously secret details like how much money came in via crowdfunding, how much the money the company raised each year through crowdfunding through 2017, and how much the company has spent. At the end of 2017, the team consisted of 464 people. That’s a huge project.
Three top investment pros open up about what it takes to get your video game funded.
Here’s an edited transcript of our interview.
GamesBeat: I’ve been working on my Game of the Year for this year. I figure, as long as you give me something I can put on my list, I don’t care how long it takes you to make it.
Chris Roberts: [Laughs] I’m working hard on that one. I think you’ll like Squadron 42. That one’s going to be pretty special. It’s taking a bit of time, but unfortunately in today’s world, with the detail and all the rest of the stuff you have to put into it, it takes a lot longer than it used to in the ‘90s. But it’s fun, having such powerful technology to create a world. That’s one of the things I liked in Red Dead Redemption 2. They spent a lot of effort on creating the world and did a really good job of it.
GamesBeat: This financial information from you guys is pretty eye-opening. I’d love to see the same thing on Red Dead Redemption 2.
Roberts: I know! I saw your article talking about the budget and the mechanics, the amount of people they have. I know how much we spend and how many people we’ve had over time. I was thinking that your early guesses were probably closer to the truth than the later ones, when Take-Two was pushing back and saying, “We didn’t spend that much on it!” [Editor’s note: Take-Two did not push back on our report].
GamesBeat: No, it was more just some reasoning that came in from analysts as well. That kind of pushed my numbers around. But yeah, it was difficult to figure out. Of 3,000 names listed, how many of these people really earned a full salary for eight years?
Roberts: I’d guess what they did was, in the early days, had 100, 200, and then it slowly ramped up. In the last two, maybe three years you’d be in the thousands. They have a lot of content in that game.
I think they have more in the U.S. than we do, but they have a pretty big studio up in Scotland, which isn’t far from our U.K. studio where we have about 270 people. We don’t have nearly as many people as Rockstar does, and we probably pay slightly less than them, but I don’t think we’re too far apart. Our internal costs, I wouldn’t say they’re too far different from theirs. They’ve probably got more established people in the U.S. studios that get paid more, and of course they have Grand Theft Auto and all that stuff that’s been doing well. I’m sure they pay some bonuses on that. Squadron’s not out yet, and Star Citizen is still in a pre-alpha early access state, so we’re not handing out big bonuses to anyone yet. We’re spending it all on development.
But yeah, this stuff is always interesting. People don’t always appreciate how much work and effort it takes to make the modern game, where everyone expects this total detail and fidelity. People will complain that we’re taking it too long, but the flip side is, “Well, what about this beautiful snow simulation? Why don’t you have what this game is doing? You should do it exactly like that!” We all want to do that too, but it takes time and effort.
Gamers see something out there and want it like that, but then they also want it as quickly as possible. There’s always a bit of conflict that comes from that.
GamesBeat: There’s a feeling of raising the bar that you get from some games out there. It seems to put additional pressure on people, on top of what fans want.
Roberts: Oh, yeah. Anyone that’s making a game — all the developers I know, they’re not doing it to punch a time clock. You could probably make better money in business software. But they love making games. No one wants to make an okay game. They want to make a great game. When they see other games doing cool stuff, developers want to do that too, and that escalates a little bit.
And of course in our case, because we’re an ongoing open process, as we’re adding stuff people are coming up with suggestions and ideas. A lot of this stuff is really good, and we of course say, “Yes, we’d like to be able to do that.” On the Star Citizen front, we’re applying a different approach, which is more like — we treat ourselves like a live game. We’re constantly trying to improve it, even though we still have loads of features that we’ve committed to and we still need to do. We’ve made the approach of — it’s a kind of live, iterative process that’s ongoing.
A fair amount of our backers totally get that. They’re cool with that. I think there is some subset of people in the gaming world that don’t quite understand that yet about Star Citizen. They look at it through this lens of, “Is it released yet?” Which is a bit different to us. We’re in this weird early access phase where people are playing and doing stuff, but we’re still wiping the database now and then, doing new releases, changing functionality, and rebalancing stuff.
We’re in this neverland spot, which is, I would say — it’s not completely new to the business. Other people, like DayZ or even Minecraft in the early days, were in a similar status. But it is a newer way of doing stuff compared to the old way, where we did it shut away from everyone until it was finished and went out to the public.
GamesBeat: On some of the details here — were you required in some way to report financials for any particular regulatory reason?
Roberts: We’re split between the U.K. operation, which handles the rest of the world, and the U.S. operation, which handles North America. There are two Cloud Imperium entities. In the U.K., even if you’re a private company, you have to post your financials and board of directors and everything on Companies House, which is this U.K. regulatory body. We’ve been doing that for quite a few years.
Obviously in the U.S. you don’t need to do that, but we’ve always — since we’re so open, so public, there’s always a lot of — every time we post every year on Companies House, there’s always debate. People are trying to do the back-of-the-napkin math. “How much are they spending? Do they have enough money to finish the game?” There’s a lot of financial forensics happening.
We’re open. We’re public. We’re committed to spending all the money we bring in on development. We’ve told everyone on our backer side that the money we raise dictates the level of development spending and scope of what we’re trying to do with Star Citizen. So we’ve long debated–we’re already showing part of the picture, so why don’t we just show it all? We’re already open with how we’re developing it. In some ways we’ve had this internal debate for quite a few years. Why don’t we just publish the consolidated global numbers like you would as a public company so our backers can see where the money goes?
One problem we have is everyone just looks at the headline. “Star Citizen raises $200 million,” and so they immediately think we’re off on a deserted island sipping pina coladas on the back of our super-yacht. We have 500-odd people in five studios spread around the world and it costs money to run an operation like that. The money we bring goes all into development. So we said, “Maybe if we’re just open about it and show the financials people will understand that.” Of course there will probably still be some people that won’t, but we can’t do anything about that.
That was the impetus for sharing the financials with the community. It’s something we’ve discussed internally for a long time, just because we feel like we owe it to everybody who’s supported us. We’re open about development, so why not be open about the other stuff?
GamesBeat: Even with the financials of public companies, like Take-Two and this capitalized software costs thing — it gets a little murky. There’s a lot of mysteries still.
Roberts: Oh, yeah. We went out of our way, in terms of how you treat expenses and capitalized stuff — we wanted to be more like a layman’s style of accounting. Cash in, cash out. We also wanted to be very clear about what goes in terms of development and then what goes in terms of publishing.
I don’t think people understand that we run hundreds of servers in AWS. We have a whole department that has to maintain and run those. We have a community team that manages the community and the forums. We have a player relations team that has to deal with — “Someone came in and stole my game!” There’s a lot of things we do even at an early stage. It’s all what you have to do as a full-on publisher. I think people assume this stuff just magically happens or something.
One thing about doing this — we’re saying, “This is what it costs.” We’re fairly frugal with how we try to do stuff. We have our most headcount in Europe, which is less expensive than in Los Angeles or even Austin, Texas. But even in the U.S. operations, a lot of our online and player relations stuff is in Austin, because that’s a more economical place to do it than, say, Los Angeles. We’re more efficient because we have to be, compared to a big publisher. But it’s useful for people to see what these things cost.
From my standpoint, maybe I’m just a bit of a geek about it. I’d love to know more about what Take-Two’s doing, or even how it goes in EA and Activision’s stuff. They’re so big that it’s all rolled up. You don’t get visibility into what they’re really spending on development versus marketing versus online operations or whatever.
GamesBeat: On the overall financial picture, it looks like you had to spend a lot of what you’ve raised. There’s not a ton of cushion. You’re not riding very comfortably.
Roberts: The counter, I would say — we have five years of revenue history. That’s where I’d point. We don’t operate — I think everyone thinks, “You had $200 million to go make a game, and you spent it and that’s it.” That’s not the way it is. Every day we bring in money. Every day we have new people joining.
We operate very much like a live product. What we do is every year we forecast what we’ll be doing over the year, and that sets our spending targets. Generally we’ve been incredibly accurate on our forecasts over the last four years. We maybe had two to five percent deviation from our forecasts, which is pretty decent.
Yes, you could say, “You have $20 million in the bank, and that’s only so much for operations.” But there’s not ever been a case where we’ve gone to zero dollars. There’s no history to say we would do that. That’s kind of like me saying — yes, if Electronic Arts didn’t bring in another cent, they’d be out of money in short order, because they have pretty heavy running costs.
We’ve also set it up in a way that, if we’re seeing a drop-off, we’d scale back our development ambition. But we haven’t, so we’ve been planning for that and getting stuff out. We obviously anticipate that when Squadron comes out, that’s going to be a big revenue-positive event for us. We have a bunch of people who’ve backed for Star Citizen and pledged for Squadron, but that game has potential to reach millions more people than our current base.
Our approach was that we wanted to — the money we’re bringing from crowdfunding, we’re committed to spending on the game and development. If we saw a change in that velocity or trajectory of the revenue coming in, we would make an adjustment on our internal development spending. We have a few levers to pull, but we’ve been pretty steady as we’ve gone along. We felt comfortable in our planning on that.
It would be great if we sat on a billion dollars and we could work for 20 years without ever bringing any money in. [laughs] But we won’t be anywhere near there until we release Squadron and get a little further on.
GamesBeat: How do you feel about the valuation, around $500 million? That seems pretty good. In some ways it even seems a little low given what some of your ambition is.
Roberts: We actually did a valuation, an investment bank valuation process. The actual valuation, the paper one, which you’ll always discount, and a private one and all the rest — potentially it could be anywhere from, using comparables and metrics, future events and revenues — it could be $700 million to $1 billion. Our end-up valuation, as you would do for a private one, has a slight haircut to it.
I’m pretty proud that we’ve built a company to this point that’s worth almost half a billion dollars. But I think that if it all works, if Squadron comes out and is big, and then Star Citizen turns into this online universe that people just go to — I’m not going to say it’s World of Warcraft-sized, but it has the potential to be that kind of destination. If it does that, you’re talking about a much bigger number than we’re talking about here.
I’m not saying we’re Fortnite, but Epic just had a $15 billion valuation. You see a lot of other companies with pretty large valuations. If the online basis works, you could be looking at a business that does $300 million, $400 million, $500 million a year, which means you’re much bigger. The margins would be fairly high because it’s an online game. You’d be talking about a pretty valuable business.
Clive and Keith have gotten themselves a good deal, I think, and it’s good for us at this point, because it allows us the flexibility and independence that we wouldn’t have otherwise. For me, I’m seeing the bigger game. I want to be up there with the other big online players. I don’t see any reason why we couldn’t match the Riots of the world and so on.
GamesBeat: How did some of the thinking go into raising this round? Did you need this for marketing purposes? Does it have to be designated to U.S. costs or U.K. costs, or do you have more free rein to use this money?
Roberts: No, it’s pretty free rein. There are some constraints. I can’t go and buy myself a $50 million yacht with it. [laughs] But both the U.S. and the U.K. companies have issued shares, and it was invested equally there for corporate purposes. The prime thing that we wanted and needed it for was looking forward to the launch of Squadron 42.
As you said, we run fairly tight on the development side. It’s not like we have a lot of free cash sitting around to spend on marketing. We could potentially launch Squadron and be organic about it, but it felt like that wouldn’t be the best way to do it. We’re not planning on trying to compete with the blanket Call of Duty style of marketing, but we’re certainly going to be doing marketing than we do, and do some traditional marketing as well as our typical viral community style of marketing.
What’s nice about this is, we get to do it. We don’t have to partner with someone. We’re a little different from some other crowdfunded games, because of our scale, but a lot of other companies — the Kingdom Come: Deliverance guys, they partnered with Deep Silver to do the actual release of their game. I think inXile and Obsidian, on their side, they did some partnerships for their physical retail beyond fulfilling the crowdfunded stuff.
From our standpoint, that would be leaving money on the table. We’d rather handle it ourselves and be directly in control of our destiny, which is what we’ve done so far already. I would argue we’ve been pretty successful because we’ve done that, so we wanted to keep that and not have to put our destiny, our future, in the hands of a third party. They may do a great job. I don’t know. But it always feels better when you’re in control.
GamesBeat: It does look like you still retain quite a bit of ownership. It’s different from a lot of other venture-funded companies out there, which do give up quite a bit of control.
Roberts: I hold 75 percent of the company. I have full board control. I have the majority of the votes on the board. The effective control of the company hasn’t changed. We’ve just brought on our first proper outside investor. But we’re talking just over 10 percent. Outside of some rules that — like I said, I can’t spend it on a super-yacht. But they totally buy into what we’re trying to do. They understand what we’re building. They’re actually really excited about it, which is cool.
One of the nice things about this — we went through a process. There were quite a few people we talked to, and some where we thought — I’ve had these discussions and been down this road before with the venture and private equity side. Sometimes I feel like they don’t quite get the vision or the alignment. It’s not a product per se. It’s more like a community. We have this community that we’ve built and that we’ll grow. They love science fiction and they love the universe we’ve created. That’s what we’re building and growing.
We look at it that way. We look at how we can constantly have engagement with the community. You can look at it, if you’re thinking in the business terms of a Microsoft or someone like that, as a userbase. You’re engaging them year-round. That’s how we look at it. It’s less about how we have to release this on this date. It’s all about building this world. It’s the long game, not the short game. We want to make sure that this game and world can go on for year after year and stand the test of time.
Having people who understand more of the longer-term view, and also understand the value of, A, creativity, and B, doing good stuff, is important. Clive’s background is the very top of the music business. One time when we were first meeting, he was telling me about this record — I think it was Def Leppard or someone like that — and he felt like the album needed a few more months to get it right, but he was pushed by the publishing side to get it out for Christmas. He hated that. He said, “I really wish I hadn’t done that, because it would have sold a lot more copies if it had a bit more time.”
For me, as a developer — I feel like it’s all about the game. In the end everybody liked Red Dead Redemption 2 and forgot that it might have been out a year earlier. They delivered. If it came out and didn’t have that extra level of polish, it would have been a disaster. They took the time to make it right. If you look at the game industry, at the very height of it, with the biggest titles that’s very consistently what you see. If you’re just trying to push it out to make a quarter, you end up doing a disservice to the product, to the brand. If you make sure you spend the time to get it right, that’s what burnishes it.
I felt like, from the moment we were discussing this — yeah, Clive and Keith totally get this. I’ve had some discussions on the VC or private equity side that were much more like — they were batting around whatever the catchphrase of the day might have been as far as metrics or whatever they saw as the latest success story. League of Legends or whatever it was. You know how it goes. People focus on whatever they’ve read in an article. I feel like sometimes, when I talk to VC, you have a junior analyst who’s read some jargon and they navigate around meetings like it means something.
GamesBeat: The two new board representatives, Dan Offner and Eli Klein, are they part of the investment team, or are they appointed by the investors?
Roberts: Dan is appointed by Clive and Keith to represent them. I’ve known him for quite a few years, actually. I met him when he was at Oculus. He’s obviously got a fair amount of experience in the interactive world, as well as advising and investing and all that stuff. He was helping Clive and Keith as far as advising them on the investment, and so they’ve appointed him to be their board representative.
Eli has been a personal friend of mine. He’s been advising and helping us since we started to look for potential financing sources for marketing funds for Squadron. When we started that process, he was helping and advising with that. During the course of that, he was part of introducing us to Clive and Keith. I’ve appointed him to the board for us.
As we’re getting bigger in terms of valuation and investment, we felt it would be nice to have a couple of outside board members besides just the internal people. Otherwise it was just myself and my brother and Ortwin Freyermuth, our chief legal counsel, who co-founded the company with us. We felt it would be good to have board members that have some other insights. They can help us as we go forward for whatever business needs and planning.
GamesBeat: In your case it looks like you gave up a little bit of control, but you got a lot of assurance about how much runway you have. You still seem to have the ability to go back and get some more should that contingency arise.
Roberts: That’s true. I don’t give up any control. The difference in control and the operations or planning of the company, or even how the board is run now — the only additional stuff is we’ve obviously added a few extra governance items to protect minority investors. But on the investor side there is no company override of control. As long as we’re not spending on a super-yacht, like I said, it’s cool. I don’t think anyone that crowdfunded the game would be very happy about that either, if I was snapping pictures on the back of a yacht somewhere. [laughs]
I’d much rather put it into the game, because that’s what I care about. It’s my chance to build something I wanted to build my whole life, to a scale and ambition I’ve wanted to do, that I felt like I couldn’t — it would be almost impossible for me to get a big public publisher to back that. It would be too much of an investment. It would take too long and be too risky.
GamesBeat: As we see with Red Dead or God of War, it’s just a handful of games that get to have this kind of development cycle.
Roberts: Rockstar has earned it, because they’ve made so much money for Take-Two. Take-Two is willing to let them take the time. God of War is another example. It’s one of Sony’s key franchises. But it would be hard for me to go to any of these guys and say, “I want to spend $200 million on a space sim.” They’d tell me to get lost. I’m very lucky and very fortunate to be in the position I am.
GamesBeat: In some ways this is a good answer for you guys, because we’ve seen some past media reports that presented a partial picture. It made everyone worry about the project. But it seems like this has answered that.
Roberts: That’s probably one of the reasons we finally decided to do it. You know how a business runs. Contrary to some armchair developers and businesspeople, we actually have quite a lot of people that have a lot of experience in the industry for a long time. We’re not nearsighted in what we’re doing. We feel like we’re running a pretty tight and smart ship considering what we want to get to and what our endgame is. There is a bit of frustration when you see people speculate on half of the information. That was part of the impetus for getting out the information on the finances and all the rest.
In the case of the investment, the other thing we see all the time, and it’s not like we’re not aware of it — “Okay, this is great, you’re doing the game, but how are you going to run the servers? How are you going to launch the game? How are you going to do the marketing? Where will you get that money from?” This is essentially saying, “We know that. We’ve been running our business this way so far and we’ll continue to run it this way. Here is how we’re taking care of some of the additional needs we’ll have to go from development to full launch, without having to rely on a third party.”
For me, I think the investment is very important for our independence, because it gives us the ability to take our time. We have the ability to take care of our marketing and not be beholden to someone else. For the future of the company, it’s a really good sign. And it’s a good sign to show that, even at this stage, the company is worth this kind of money. As we grow and get bigger, it should only increase beyond that. That should give people who are worried about whether we’ll be around tomorrow — they shouldn’t be so worried about that.
GamesBeat: Another interesting thing amid all of this is you do have a launch window now. What sort of confidence goes into that setting that up for Squadron 42?
Roberts: [Laughs] We wouldn’t publish the road map if we didn’t feel pretty good about it. We spent a fair amount of time breaking all the remaining stuff down. A fair amount of the R&D aspects are either behind us or almost behind us. What we’re publishing is what the team themselves has broken down and done a fair amount of estimation based on the knowledge they have, in a way you wouldn’t have the ability to do at the beginning of the project.
We feel that this is as good a guess as we can do this far out. The caveat, obviously, is that some things can take longer than we anticipate. The quality is important. If we feel like some aspects of that need more time, then we’ll take the time. But we’re looking to 2020 to release Squadron, in about Q3 or Q4.
GamesBeat: So you’re not going to tattoo the launch date on your arm just yet, like Peter Moore did.
Roberts: No. [Laughs] Maybe if you have a conversation with me this time next year we can talk about that, but I’m not a big tattoo fan.
GamesBeat: When you do ship, what do you think is still the great proposition for gamers with Squadron 42? What do you hope that it will achieve or do to resonate with fans? What’s the feeling you want them to come away with?
Roberts: The goal of Squadron has always been to have you as the player feel like you’re living this huge science fiction event movie. You’re emotionally connected to it. There’s a level of performance from the various characters around you that gives a human connection and an emotion that potentially you haven’t seen or had before in most games. We’re trying our best to push the tech in terms of bringing the actors in — their likeness, their performance, how they fluidly behave. People have seen some of this stuff in pre-rendered cinematics, but I don’t think anyone’s played it in a game where it’s all fluidly happening around you — where it’s gameplay, but it’s of a cinematic quality.
It’s a fluid immersion in the world. Unlike the Wing Commander games, where you would fly the missions in space from the point of view of flying your spaceship, and then back on your ship you’d click on different characters and talk to them — whether it was done in 2D sprites like Wing 1 and Wing 2, or full-motion video like Wing 3 and Wing 4 — in this case you’re moving around a fully detailed environment with the whole crew going about their daily lives and their own issues and stories.
The difference between this and a movie — every single secondary character has their own arcs and stories. It’s tied quite tightly into how the story unfolds. I feel like, hopefully, if it all works on an emotional basis, it will be an experience that will be pretty awesome for people. As we’re making it, as I’m seeing this stuff as it happens, I can feel how that’s going to be and how people will be taken by it. I’m excited to get to a point where other people can see and experience that.
I know there are elements — whether it’s God of War or Red Dead Redemption 2 or Last of Us 2, other games have similar elements to this. I feel like we’re at a level that’s above that, a level of connection and acting and characterization. But of course, I’m very biased. [laughs] I’m hoping it will push forward that sense of interactive — whatever you want to call it. In the old days we’d call it interactive movies. This story where you are the star, that you’re driving forward.
We’ve crafted it in such a way that you’re making the choices. The difference compared to — in some of our past games, some of the actual choices you make, in terms of character interaction, are made for you, not by you as the player. But in our case we’ve very carefully crafted it so you choose who you befriend, who you hang out with, who you talk to, how you find out what their life stories are.
As the story unfolds and things happen to various characters inside the story — and of course they do, because otherwise it wouldn’t be a very interesting story — then hopefully it’s more affecting for you. If someone gets killed and you spent the time to get to know them and really like them, that should be more emotionally affecting than if you’re told that you should be upset, if you’re crying about them simply because that was constructed into the narrative. We’ve tried very much to be subtle, to paint with texture. When it all comes together, I think the detail of it will be really impactful.
There’s no point in working this hard, for this long, to do something okay. That’s how I feel, and how most of the team feels. Hopefully people will appreciate all that work.
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