David Baszucki, Founder and CEO of Roblox, presents at the Roblox Developer Conference on August 10, 2019 in Burlingame, California.
Ian Tuttle | Getty Images
Neil Rimer recalls early conversations about what Roblox became when he was studying at Stanford in the 1980s. He was a college friend with David Baszucki, the game company’s founder and CEO.
More than three decades later, that idea made Baszucki extremely rich – his Roblox stake was worth $ 4.6 billion after the company’s public debut on Wednesday. Rimer’s investment firm Index Ventures is also benefiting significantly. The shares are valued at $ 3.7 billion.
Baszucki and Rimer are two of the biggest winners in Roblox’s direct listing, the newest tech company to go public with a massive valuation and generate hefty paper returns for its founders and venture backers. Snowflake, Palantir, Airbnb and DoorDash went public from September through December and are now valued at between $ 44 billion and $ 110 billion.
Roblox’s largest outside stakeholder is Altos Ventures, which owns $ 8.1 billion of stocks, followed by Meritech Capital, with $ 3.8 billion and Index. Tiger Global controls $ 2.8 billion and First Round Capital’s shares are valued at $ 2.3 billion. The CEO’s brother, Gregory, is on the board and owns a $ 1.1 billion equity interest.
All of the above numbers assume that none of the investors sold stocks on Wednesday. It is possible that some did as there is no embargo period tied to direct listing.
Baszucki started Roblox in 2004. But he had considered the idea long before that when he was studying electrical engineering at Stanford. Rimer said Baszucki was obsessed with physics and found a way to conduct experiments faster than the physical world would allow. His interests collided with Apple’s introduction of the Macintosh and the first graphical user interface available to consumers.
“He wanted to build an engine that would mimic real physics in simple 2D grayscale and allow people to create experiments and then run them,” said Rimer, who studied history and economics at Stanford, in an interview with Zoom on Wednesday .
Based on this concept, Baszucki founded a company called Knowledge Revolution in 1989 and sold it to MSC Software for $ 20 million almost a decade later. A few years later, he came across Roblox to expand beyond education and appeal to a wider audience.
“Somehow I kicked myself”
Rimer says he and Baszucki stayed in touch and followed the company from the start. But it wasn’t until 2017 that Index invested in Roblox for the first time, leading a round at $ 92 million on a valuation of around $ 500 million. The company followed suit with additional investments of at least $ 34 million, according to the Roblox prospectus.
“I kind of kicked myself for not investing sooner,” said Rimer. “If you build something like this, it won’t look like much for a long time.”
For Index, which manages billions of dollars, the investment became more compelling after Roblox proved its popularity on multiple platforms and figured out how to make money the way it did. In 2018, Roblox had sales of $ 325 million. According to research firm SensorTower, Roblox had sales of $ 45.7 million in 2016.
Rimer may have missed his opportunity to get in early, but he was there at the right time to take advantage of Roblox’s virus growth.
With the children stuck at home during the pandemic, revenue rose 82% to $ 923.9 million last year, mainly from virtual item sales within games, after rising 56% to $ 508.4 million in 2019 had risen. Gamers spent 30.6 billion hours with the app last year, up 124% from 2019.
Roblox’s millions of user-created games include titles that kids can use to adopt virtual pets, hang out with friends at theme parks, and work for a pizza company. It’s all part of Baszucki’s plan to create what is known as a metaverse where users “interact with each other by playing in 3D environments, communicating, connecting, making friends, learning or just hanging out,” as outlined in the prospectus.
Rimer, whose firm had previously invested in game companies Supercell, Playfish and King, said he doesn’t spend much time at Roblox, despite being thoroughly entertained at Baszucki’s quarterly board meetings. Rimer said he attended rapper Lil Nas X’s virtual concert in November, which drew more than 30 million visitors over two days.
“I found that to be a pretty insightful experience,” said Rimer. “I could actually see how you can imagine going to concerts with friends and family that way. It didn’t feel like made up. It felt like a good use of the medium.”
Greylock Partners’ David Sze led an approximately $ 2.5 billion investment in Roblox in 2018. Sze, who had previously supported Facebook, LinkedIn and Pandora, wrote a blog post about how he remembered Baszucki showing off the early versions of Roblox “every year for kids at our school’s science fair.”
Greylock’s investment has grown more than 15 times in less than three years.
Sze told CNBC’s “Power Lunch” on Wednesday that while gaming may be the core of the business, Roblox is able to “realize the idea of metaverse that science fiction writers first thought of many years ago virtual common space where people can share all kinds of things. “
SEE: Formerly a Roblox investor on the future of the platform