Kabam Gets $120 Million From Alibaba for Games in China

Kabam Inc., a producer of games for mobile devices, received a $120 million investment from Alibaba Group Holding Ltd. (BABA) as part of a plan to distribute titles like Lord of the Rings in China.

The funds will be used to finance growth, and an executive from Alibaba will join Kabam’s board, according to a statement today from the San Francisco-based company, which is now valued at more than $1 billion. Other details of the investment weren’t disclosed.

The accord gives Kabam a tie-up with China’s largest e-commerce company. Kabam had 2013 sales of more than $360 million, double the previous year. Alibaba is preparing for an initial public offering in the U.S. that may value its business at $154 billion, the average estimate of five analysts surveyed by Bloomberg.

“Asia represents 50 percent of the worldwide revenue for games,” Kent Wakeford, Kabam’s chief operating officer, said in a telephone interview. “The Alibaba partnership gives Kabam a structural advantage in the world’s largest gaming market. That’s a huge advantage for us.”

Lord of the Rings, the first Kabam game offered by Alibaba in China, will be available on mobile applications including Mobile Taobao and Laiwang, the company said.

Alibaba Group joins a roster of Kabam investors that includes Google Ventures, Warner Bros., Intel Corp., Canaan Partners, Redpoint Ventures and Pinnacle Ventures, Kabam said.

Startup Valuations

Kabam has made six acquisitions over the last 18 months, including the purchase of a Vancouver-based company with rights to the “Fast and Furious” brand, Wakeford said. The Alibaba investment will allow the company to make more purchases in Asia. Before today’s announcement, Kabam had $60 million in cash, and has been profitable for two years, he said.

“We see the opportunity to really accelerate that growth through M&A,” Wakeford said.

Many technology startups have boosted their valuations this year to more than $1 billion, with some reaching the 11-digit mark and spurring talk of a bubble. According to researcher CB Insights, 14 U.S. technology companies entered the $1 billion club in the first half of the year, more than double the number of startups that did so in all of 2013.

This month, AppDynamics Inc., a startup that develops software for companies to monitor applications, became a member of the $1 billion club when it raised $120 million in venture capital from investors including Battery Ventures.

U.S. Strategy

Alibaba has been deepening its investment in U.S. startups. Last year, the company started a U.S.-based fund to invest in e-commerce and emerging technologies, led by Michael Zeisser, who previously led Liberty Media Corp.’s Internet strategy. Alibaba’s investments include the ride-sharing application Lyft Inc. and the messaging app TangoMe Inc.

Alibaba, based in Hangzhou, China, also had discussions to invest in the Los Angeles-based messaging startup Snapchat Inc. at a valuation of more than $10 billion, Bloomberg News reported yesterday. Snapchat, run by 24-year-old Chief Executive Officer Evan Spiegel, makes a mobile application that people use to send messages and photos that disappear shortly after they’re opened.

To contact the reporter on this story: Sonali Basak in New York at sbasak7@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net Rob Golum, Reed Stevenson

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