Unity Technologies, the corporation behind the Unity game engine, has revealed a $400 million dollar investment from private equity firm Silver Lake. Bloomberg reports that the investment values the company at $2.6 billion and that the deal has not yet received regulator approval.
As one of the top two game engines, Unity powers many of the world’s games, from tiny indie titles to monster hits like Pokemon Go, as well as everything in between. The company’s business model is based around selling subscriptions to its tools and services, which include Unity Pro and Unity Plus. Unity claims that games developed using its software reach over 2.4 billion devices.
Should the Silver Lake investment receive regulator approval, about half of the money from the deal will be used to allow employees and some early shareholders to cash out. Typically, equity in a private company can only be redeemed for cash after an IPO or during an internal buyback.
Regarding the reason behind the deal, John Riccitiello, CEO of Unity Technologies said, “A big chunk of it is secondary and that’s because it makes sense to let employees buy cars. In terms of primary capital we don’t ultimately need all that primary capital—the capital is safety when we’re investing to grow as fast as we are.”
Unity Technologies is backed by several Silicon Valley venture firms, including Sequoia Capital, which remains Unity’s largest shareholder. In July 2016, the company raised $181 million in a deal that valued the company at about $1.5 billion. According to Bloomberg, Silver Lake is betting that Unity will continue to grow, not only in gaming but also in virtual and augmented reality. Given the projected growth rate of the global AR/VR market, this may be a feasible gamble.
“The second act that I think attracts a lot of investors and investor interest is the fact that we have about 70 percent of AR and VR content built on Unity,” Riccitiello said. “We’ve got a first wave that is going really really well and we have a second one that is dominant.”