David Baszucki, founder and CEO of Roblox, will give a presentation at the Roblox Developer Conference on August 10, 2019 in Burlingame, California.
Ian Tuttle | Getty Images
Neil Rimer remembers talking about what became Roblox when he was studying at Stanford in the 1980s. He was a college colleague of David Baszucki, the founder and CEO of the gaming company.
More than three decades later, that idea made Baszucki extremely wealthy – his stake in Roblox is worth $ 4.6 billion after the company’s debut on the stock market on Wednesday. Rimer’s investment firm, Index Ventures, is also benefiting greatly. Its shares are valued at $ 3.7 billion.
Baszucki and Rimer are two of the biggest winners in the direct listing for Roblox, the latest technology company to go public with a massive valuation and generate substantial paper returns for its founders and venture sponsors. Snowflake, Palantir, Airbnb and DoorDash went public from September to December and are now worth between $ 44 billion and $ 110 billion.
Roblox’s largest external shareholder is Altos Ventures, which owns shares worth $ 8.1 billion, followed by Meritech Capital for $ 3.8 billion and Index. Tiger Global controls a stake of $ 2.8 billion, and First Round Capital shares are worth $ 2.3 billion. The CEO’s brother Gregory is on the board and has a $ 1.1 billion stake.
All of the above figures assume that none of the investors sold shares on Wednesday. It is possible that some do, because there is no restriction period linked to the direct listing.
Baszucki founded Roblox in 2004. But he was pitching the idea long before that, while studying electrical engineering at Stanford. Rimer said Baszucki was obsessed with physics and finding a way to do experiments faster than the physical world would allow. His interests clashed with the launch of the Macintosh by Apple and the first graphical user interface available to consumers.
“He wanted to build an engine that in simple 2D grayscale could mimic real-world physics and allow people to build experiments and then run them,” said Rimer, who majored in history and economics at Stanford, in an interview with the website Zoom on Wednesday.
Based on this concept, Baszucki founded a company called Knowledge Revolution in 1989 and sold it almost a decade later to MSC Software for $ 20 million. A few years later, he created Roblox to expand beyond educational use, targeting a more mainstream audience.
‘I kind of kicked myself’
Rimer says that he and Baszucki kept in touch and he followed the company from the beginning. But it was only in 2017 that the Index first invested in Roblox, co-leading a $ 92 million round with a valuation of around $ 500 million. The company continued with additional investments totaling at least $ 34 million, according to the Roblox prospectus.
“I kind of kicked myself for not having invested before,” said Rimer. “When you’re building something like this, it won’t look like much for a long time.”
For Index, which manages billions of dollars, the investment became more attractive after Roblox was proving its popularity on multiple platforms while trying to make money along the way. In 2018, which dates from its prospectus, Roblox generated revenue of $ 325 million. According to research firm SensorTower, Roblox had revenue of $ 45.7 million in 2016.
Rimer may have missed the opportunity to enter the early stage, but he arrived just in time to take advantage of Roblox’s viral growth.
With children trapped at home during the pandemic, revenue last year increased 82% to $ 923.9 million, mainly with sales of virtual items within games, after a 56% jump in 2019 to $ 508 , 4 million. Players spent 30.6 billion hours on the app last year, up 124% from 2019.
Among the millions of games created by Roblox users are titles that allow children to adopt virtual pets, hang out with friends at theme parks and work in a pizzeria. It is all part of Baszucki’s plan to build a so-called metaverse, with users “interacting together playing, communicating, connecting, making friends, learning or just hanging out, all in 3D environments”, as set out in the prospectus.
Rimer, whose company has already invested in the gaming companies Supercell, Playfish and King, said he does not spend much time in Roblox, although he is fully entertained by Baszucki’s demos at quarterly board meetings. Rimer said he attended rapper Lil Nas X’s virtual show in November, which drew more than 30 million visitors in two days.
“I thought it was a very eye-opening experience,” said Rimer. “I really could see how you can imagine going to shows that way with friends and family. It didn’t seem artificial. It seemed like a good use of the medium.”
David Sze of Greylock Partners led an investment in Roblox in 2018 with a valuation of around $ 2.5 billion. Sze, who already supported Facebook, LinkedIn and Pandora, wrote in a blog post at the time about how he remembered Baszucki demonstrating the first versions of Roblox “every year for children at our school’s Science Fair”.
The value of Greylock’s investment has increased more than 15 times in less than three years.
Sze told CNBC’s “Power Lunch” on Wednesday that while games may be the core of the business now, Roblox is in a position to “realize the metaverse idea that was first thought of many years ago by fiction writers as a shared virtual space where people can share all kinds of things. “
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