Why $1.5 billion will change nothing for Supercell, Finland’s newest mobile success story
Supercell was founded in 2010 and currently employs 130 people. It intends to stay relatively small and agile, even after Japanese telecom company SoftBank paid $1.5 billion for a 51 per cent stake in the mobile game developer.
Much of the top floor of Nokia’s old research-and-development building in Helsinki lies unoccupied. It’s painted in Supercell colours and outfitted for developers, but waiting for people to bring the place to life. When we visited the studio previously, in February, much of the space was grey and the building was empty, serviced by a bored receptionist responsible for floor after floor of vacant offices. Since then, a new company, Jolla, has moved into a lower floor and Supercell has expanded to fill its own top-floor space after receiving $1.5 billion of investment from Japanese telecom company SoftBank in exchange for a 51 per cent stake in the company. Now expansion is just the beginning of Supercell’s plans.
“More than anything,” says CEO Ilkka Paananen, “I think this partnership gives us time. What we’re trying to do here is going to take lots of time – and now we have this patient shareholder. At some point, a venture capitalist has to be able to sell the shares in order to make a return, but somebody like SoftBank can basically hold the shares forever. One of our dreams would be to create a game company that can last for decades and decades, and something that will really be loved by the players and employees.”
On the day of SoftBank’s investment, the press likened this dream to some form of ‘Finnish Nintendo’. “For me, if I think of Nintendo, the first thing that comes to mind is I love their games,” Paananen says. “I love their brands, their characters, how they’ve always focused on gameplay, how they’ve always taken their own route no matter what anybody in the industry thinks. If you mention Nintendo in front of people, you get a smile. If in 30 years I say ‘Supercell’ and the reaction is similar, then I think we really will have achieved something. I don’t even want to compete against them. They are an inspiration. It took Nintendo 100 years to get there, so it’s possible it will take us 100 years to get there, and that’s why we need someone like SoftBank as a partner – someone who is willing to see us through the next 100 years.”
“I’ve learned to see the value in these creative geniuses, and I’ve learned to stay out of the way. I’ve noticed the best things happen when I’m not involved” – Ilkka Paananen, Supercell’s founder and CEO.
A 100-year mission is a bold ambition for a studio with two games. It’s made more than that, but its first title, Facebook MMOG Gunshine.net, was abandoned in 2012, and its second, iOS strategy game Battle Buddies, never progressed beyond its limited beta release. Today, Supercell is a two-game company and a permanent fixture atop Apple’s highest-grossing app chart. The studio operates two teams to run its ‘live’ free-to-play mobile games: Hay Day and Clash Of Clans. The first, an impeccably polished and massively expanded iOS take on FarmVille, was uploaded to the App Store on June 21, 2012, and has been continually developed in the months since. The second, a base-building and defence strategy game, went live on August 2 in the same year and has also been updated and maintained throughout the past 16 months.
“The biggest thing with a live game is that it’s important to keep the game running, keep the players happy and listen to them a lot more,” says Lassi Leppinen, a Supercell co-founder and product lead for Clash Of Clans. “We try to summarise what is important and what the big audience is really saying about us and to us. If there’s something that thousands of players are saying, we listen and improve the game. If it’s running, you have players every minute.”
As if to prove the point, the entrance to Supercell’s studio is home to an interactive world map that shows every game of Clash Of Clans and Hay Day being played, updated second by second. Clusters of lights appear all over the map, primarily in capital cities, and hour by hour the lights make their way around the globe. At the centre of the studio sits the 20-strong customer support team, nearly all of different nationalities, providing support in each region’s native language.
With just two games, Clash Of Clans (pictured) and Hay Day, Supercell has been reportedly making $2.4m per day.
At the opposite end, at the edge of the new expanded space, the 17-person Hay Day team currently dwarfs the smaller Clash Of Clans unit. “We’re in the very last part of the office and it takes forever to walk to the kitchen,” says Hay Day’s product lead Stephan Demirdjian, whose team has expanded for the game’s Android launch. “For a year, it was the right decision to focus on iOS, because we had a huge backlog of features we wanted to do. We noticed high-level players didn’t have enough content any more, so that became a number one priority for us before thinking about other platforms. We basically worked two full months on the fishing feature and the fans loved it. That was the main reason we decided against Android at that point. We’re on it now.”
But while support for its chart-toppers continues, in 16 months Supercell has published no new games, only porting its iOS hits to Android. The elephant in the primary-coloured room, then, is just how SoftBank values a two-game company at three billion dollars.
“For me, it’s weird to talk about the valuation of the company and so on,” Paananen says. “When they first approached us, I told them, ‘You must understand that we love what we do, and we’re just getting started, and we’re not going to sell the company to anybody. We want to be in control of this thing…’ And the reply that came back was, ‘Fantastic, that’s exactly what we’re looking for.’ They wanted to get 51 per cent of the economic rights of the company so they can consolidate our financials to their corporate financials, so that’s how they get the financial value. But I feel like what they liked was the specific team and the culture we have here, and the fact that we are here for the long term.”
Supercell’s individual cells gather to compare notes every week, keeping knowledge flowing freely within the studio.
Supercell operates differently to other billion-dollar studios. While the larger live teams work on Clash Of Clans and Hay Day, four smaller six- to eight-person ‘cells’ work on other projects and experiments with almost complete autonomy. These teams, Paananen says, sitting at his desk in the centre of the open-plan space, are in charge of the company’s development. If a cell decides to abandon its project, even the CEO can’t stop it.
“Some resources are shared – for example, the audio,” Paananen explains. “But apart from that, we tried to make the cells self-contained, almost like companies inside a bigger company. That’s where the name Supercell comes from. It’s a lot more fun to work in a team that is less than ten people – you don’t need managers, you don’t need processes because there are so few people, and the teams manage themselves. We now have two great benchmarks internally: Hay Day and Clash. People look up to them and they set a nice standard on how quickly people should move when making a game. It’s really important to get games to the beta stage as quickly as possible. At that point, the power shifts from the game team to the players. From that point onward, the only thing we care about is what the players think.
“We look at metrics for engagement and retention. How many times players play the game per day. How many people came back after the first day, after the third day? Do people love the game? We have a certain type of threshold that the game must reach during the beta.” If the game reaches that point, it’s prepped for global release; if it fails, the team cancels the project and moves on to the next one. “It’s a very simple process,” Paananen says. “But at Supercell, only two entities have control – the game teams and the players. Nobody else has it.”
Supercell has built an arts and crafts area in its renovated space, but in the absence of employees to fill it, an enterprising soul has turned it into a bar.
Abandoned projects, of which there are several, are a source of education for the other cells and each will share their successes and failures with the rest of the studio. “One of the risks, of course, in that type of organisation model is that these cells will turn into these silos where nothing is shared and there’s intense competition within them,” Paananen says. “But we try to share as much as we can. We gather together as a company and we hold a little bit of a party around the decision to kill a game. The team gets up on the stage, they say what they tried to do, what worked and what didn’t work, [and] what they learned. That actually happens quite often. We work on something for two or three months and then it doesn’t work, they kill it and move on to the next thing. We give bottles of champagne to the team to show how much we appreciate what comes out of it.”
Above all, Supercell is a Finnish company with all the cultural trappings to match. The old Nokia building Supercell calls home has two saunas, while the company’s big screen faces the studio’s cloakroom, where shoes are left before a day’s work. Talk to any developer in Helsinki and they’ll tell stories about friends from other studios or of notes shared between firms. While only half of Supercell’s 130-strong team are from the country, the studio culture is resolutely Finnish.
“Nobody thinks anybody is a competitor here in Finland – more of a friend or a colleague,” Paananen says. “It’s definitely one of the strengths of the ecosystem here. I think throughout history, Finns have always been at their best when everybody is in it together. There’s this saying in Finnish: as the situation gets tougher and tougher, you get closer together. That’s just how it is.“
If it continues to attract revenues from games like Hay Day at its current rate, Supercell could return SoftBank’s investment within just a few years.
Supercell is at the centre of Finland’s booming development industry, which has grown from 1,100 employees and 105 million in revenues in 2010 to 2,200 employees and 800 million in 2013. The nation’s expertise comes from one of the best education systems in the world, a culture based on working together, a proactive chapter of the IGDA and the collapse of Nokia. For a decade or more, tech-savvy graduates could count on a career with the nation’s cellphone manufacturer, but now those same graduates have turned to development of mobile games, and the industry is enjoying apparently unstoppable growth across the country. But free-to-play is a precarious arena in which developers are still finding their feet. Former giant Zynga has suffered catastrophic losses following a campaign of investment and expansion, but Paananen and his investors at SoftBank are confident in Supercell’s ongoing success.
“Clash Of Clans was the first western game to make it to the top five grossing in Japan and we’ve been there ever since. I think we’re the only two western games in the top ten, probably in the top 20. That probably got their attention. [SoftBank] contacted us, and we said we’re not looking to sell the company, and they said they’re not looking to buy a controlling interest, they just want the [share of Supercell] so they can consolidate the financials, but we could do whatever we want with the company.
“They said, ‘You guys run the business; you’re in control.’ I think the proof is that there’s 1,300 companies under SoftBank’s umbrella, so they can’t manage all those companies. How would they find the time? I think it’s kind of like a match made in heaven. SoftBank has a 30-year plan and a 300-year mission. We’ve got this great longterm partnership that feels like it will work for decades to come. We’ll have really bad quarters, they’re going to come, maybe the next one or in ten years, [but] that’s the nature of the business. You just need to have somebody you can work for in the long term, who is thinking about the next ten years. What changes after this investment? Nothing. Absolutely nothing.
“I think it’s very important to remain small and agile. If you become this bureaucratic big company, you’re going to lose because you can’t operate in this market unless you move very quickly. Essentially, we are competing against the smartest guys on the planet. It’s such a competitive industry and there are hundreds of new games coming to the App Store every week. If you want to remain successful, you have to be humble and work extremely hard. The minute you lose the focus, the minute you lose your sight on the ball, then you’re dead.”