Market Insight

Unity secures $181 million in Series C funding

July 14, 2016


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On July 13 Unity announced it had secured its first funding in five years with $181 million in Series C funding from DFJ Growth and including China Investment Corporation, FreeS Fund, Thrive Capital and Max Levchin, Sequoia Capital and West Summit Capital.

Our Analysis

Unity continues to disrupt the game development technology market

Unity has continued to break new ground as a game engine and tool company. It realized early on that a narrowly targeted, expensive game engine would limit the potential market for its products. Realizing that it would be years before it could compete with Unreal Engine on the production values and in mindshare for the AAA developer, Unity wisely turned to the mobile games market. Other engine makers eschewed targeting the mobile development community due to its limited resources both monetarily and technologically. Unity was building a name for itself at a time when engines were still mostly concerned with bigger and better graphics, more special effects and the integration of lighting, sound, artificial intelligence and physics.

Meanwhile, Unity focused on the nuts and bolts of what was becoming important to the mobile industry: How can developers create once and deploy to many different handsets? Things were even more complex then with far more operating systems and environments than two majors, iOS and Android.

Unity disrupted on price too. The company stunned the industry by letting developers access the engine for free and the licensing being anywhere from $400 - $2,500 at a time when it cost six figures just to get in the door with a game engine. Granted the quality and the access where different. But the developers Unity targeted were not that concerned with creating a AAA type game.

At the same time, the company gave developers many different ways to make money including the asset store for developers to sell their talents to other studios, distribution technologies such as the 3D browser Unity Player that enabled in-browser gaming before that was integrated standard in browsers. As the market developed and networking became more important the company moved on to providing analytics services, ad distribution technology, and now collaborative cloud development technology. At the same time the company has maintained its low price point, introduced tiered subscription options and maintained its dedication to true develop once, deploy everywhere capabilities. All the while, the company added features that were more and more competitive with the “bigger” game engines forcing Epic to respond on pricing and features in its Unreal Engine.

Where does Unity go from here?

Unity is reportedly using the funding to expand its development suite in virtual and augmented reality. It is likely no accident that the announcement coincided with the launch of Pokémon Go. Developer Niantic used Unity’s engine to create the hugely popular AR game. And, according to Oculus, 90% of the content for the Gear VR has been created using Unity.

The level of funding is unprecedented in the game engine industry. Traditionally the market for game engines has been limited by the number of games and developers in the market. Unity has evidently successfully convinced some in the VC community that more and more people will be moving in to the development market as VR and eventually AR become more popular. Unity has 4.5 million registered developers, and revealed in March that 1.1 million of those use the personal edition leaving 3.4 million paying users. The writing is on the wall that a round of funding this size is leading up to an eventual IPO which will make the company the first game engine company to go public.

 

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