Source: Roblox

Roblox Unearths $92 Million to Challenge Microsoft’s Minecraft

  • Gaming startup’s player base ranges in age from 6 to 16
  • Revenue comes from third-party games sold through its platform

As venture capitalists search for the next Minecraft, their latest bet is on a company called Roblox Corp., which makes a virtual world that happens to look a lot like Minecraft.

Roblox said Tuesday that it raised $92 million in a financing round led by Index Ventures and Meritech Capital Partners. It plans to use the cash to hire coders who will focus on making mobile and social tools, as well as to buy back shares from employees who want to cash out. The San Mateo, California-based company declined to comment on its valuation.

In Roblox, players customize an avatar for use in multiplayer games, such as one where they have to survive a natural disaster or work with others to run a pizza joint. It’s often compared with Minecraft, which Microsoft Corp. acquired for $2.5 billion in 2014, and appeals to a similar demographic, mostly between the ages of 6 and 16. Roblox said it has about 32 million users who play each month and another 16 million who interact with the game without signing up. By comparison, an average of 55 million people play Minecraft each month.

Source: Roblox

Roblox’s business model has an unusual twist. In addition to selling in-game currency to players, the company charges game developers a subscription fee for use of its tools. When players buy items in a developer’s games, the creator receives a cut of sales from Roblox. About 1.7 million people, some as young as 13, have built all the 22 million games within Roblox. Each one can be played on a phone, tablet, computer, Xbox or virtual reality headset from Facebook Inc.’s Oculus or HTC Corp.

Some developers earn upwards of $50,000 a month, according to Roblox. Chief Executive Officer David Baszucki said his company grew threefold last year. In 2015, it reported revenue of $50 million.

But keeping the attention of its core audience will be a challenge for the 13-year-old company. Children and teenagers have notoriously fickle tastes. Once-popular virtual worlds, where users could socialize and play games together, have failed to sustain. Club Penguin, for years an extremely popular social network for children and young teens, shut down in January.

Baszucki said Roblox will prevail because it has the technology needed to evolve with consumers’ changing habits. He noted that, for example, the game already works in virtual reality, which Baszucki sees as the future of gaming and social experiences. The company also plans to give developers more creative freedom to determine the look and feel of their games, which could keep them invested in continuing to come up with new content. He said the flow of new games should, in turn, keep players interested.

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