Unity Exceeds IPO Goals in Content and Game Development Launch

Unity Software, a leading platform for interactive content creation and video game development, went public in mid-September. It launched amid a hot IPO market. The company’s shares surged 44% on its first day of trading on the NYSE. Although the market priced its shares at $52 ahead of its market opening, Unity debuted at $75 per share. Underwriters of the IPO shares included Goldman Sachs, Credit Suisse, Bank of America Securities, and Barclays. The IPO raised more than $1.3 billion for the growing company. That puts the company’s total valuation at over $11 billion.

Unity IPO

Call of Duty, Mobile and Pokemon All Used Unity

The company’s development software has been used by studios to create well-known games such as Call of Duty: Mobile and Pokemon Go, and it charges studios a subscription fee based on the size of their studio. The subscription plans range in price from $399 to $2,400 per year.

Unity’s success underscores the significant market opportunities for businesses providing platforms for the development of high-performance, interactive content. Unity’s main competitor is Epic Games and its game development platform: Unreal Engine. Epic Games is responsible for creating the popular online video game Fortnite. Epic is also currently enmeshed in a legal battle with Apple over its removal from Apple’s App Store after Epic allegedly setup its own in-app payment system. Apple takes a 30% cut of users’ spending for apps listed in their App Store, a practice Epic decried as monopolistic. Google similarly removed Epic’s hit game Fortnite from its Google Play Store this summer.

Interactive, Real-Time 3-D Content

Unity is pushing its platform beyond just videogames to cater to the development of interactive, real-time 3-D content more broadly. In Unity’s S-1 registration statement with the Securities and Exchange Commission (SEC), it stated that although Unity is a company born from gaming, it views its future potential in much broader terms.

Indeed, companies spanning a range of industries including architecture, engineering, film, retail, transportation, and manufacturing are deploying Unity’s software. The generation of this type of content in addition to its core gaming content development represents a significant growth opportunity.

Unity Software’s History

Over the Edge Entertainment, the name of the company at that time, launched in Denmark in 2004. When it relocated to the United States in 2009, it changed its name to Unity. The startup attracted its first major investment in the U.S. from Sequoia Capital. Sequoia provided $5.5 million in a Series A fundraising round. Sequoia has also been behind a number of well-known technology brands including Apple, Google, Oracle, Electronic Arts, and Nvidia.

David Gardner, former CEO of Atari and a longtime Unity Technologies investor, remarked: “When I first saw the quality of games which could be produced with the Unity engine in such a short development time and in a web browser, I was blown away. Then I met the people behind the technology and that is what turned me from a product fan to a company fan and investor.”

Content produced on the Unity platform incorporates advanced graphics and enables augmented and virtual reality. Unity’s collaborative content creation tools allow users to simultaneously edit each other’s content. It also features real-time adaptability to user behavior and feedback. Unity built its games so that they operate on many mainstream platforms. The platforms include Windows, iOS, Mac, Android, Nintendo Switch, Xbox, and PlayStation.

Large User Base

As a result of its usability, advanced features, and multi-platform capabilities, the company has been able to scale and attract a large user base. An estimated 53% of the top 1,000 mobile games on the Apple App Store and Google Play Store were created using Unity’s platform. Furthermore, the company boasts 1.5 million monthly active creators spanning over 190 countries.

Unity’s President and CEO, John Riccitiello, previously served as CEO, COO, and President of Electronic Arts. Earlier in his career Riccitiello co-founded the private equity firm Elevation Partners alongside Bono and Marc Bodnick, a founding member of Silver Lake Partners. Riccitiello became CEO of Unity in 2014 after joining the company’s board just a year earlier. He guided Unity through two major fundraising rounds that raised $181 million and $400 million respectively.

Rapid Growth, About 40% Per Year

Like many software companies in recent years, Unity has experienced rapid growth. The company’s most recent numbers show around 40% year-over-year growth. Its revenues have jumped from $381 million to $542 million for the 2018 and 2019 fiscal years. Although net losses have also increased during this period, this is typical of rapidly scaling tech businesses.

The virtual content provider’s shares rallied alongside those of other notable software tech companies that IPOed the same week. Cloud data warehousing startup Snowflake went public just a day earlier than Unity. Snowflake set a record as the largest software IPO in history. JFrog, a software tools developer, also went public the same week and saw its shares rise nearly 50%. The second half of the year has been a busy time for public market activity. A number of notable tech companies went public or planned to go public before the end of 2020, including Airbnb, Palantir Technologies, Asana, and DoorDash.