Funding round values Fortnite maker Epic Games at $42bn

Epic raises $2.7bn in the biggest fundraising for a video game company in two decades.

The Fortnite owner said the funding would advance the company’s aims to build the metaverse and its continued growth. Above, boys sit on pillows outside during the 2019 Fortnite World Cup finals in New York. Picture: AFP

Fortnite creator Epic Games has raised $US2bn ($2.7bn), the most for any gaming company in two decades, from investors including Sony Group.

The funding means that Epic is now valued at $US31.5bn ($42bn), after Sony and Kirkbi, the holding company of the Kirk Kristiansen family, put in $US1bn apiece, according to a statement.

The company, which also counts Walt Disney Co and China’s Tencent Holdings among its investors, was valued at $US28.7bn as of last April. Its chief executive, Tim Sweeney, remains the company’s controlling shareholder.

The company said the funding would advance the company’s aims to build the metaverse – a term used to describe a virtual environment in which people use digital avatars to work, play and shop – and its continued growth.

“As we reimagine the future of entertainment and play, we need partners who share our vision,” Mr Sweeney said. “We have found this in our partnership with Sony and Kirkbi.”

The $US2bn investment in Epic is the largest in the gaming space dating back to 2002, according to research firm PitchBook Data.

The three previous largest investments were also in Epic, with a $US1.78bn investment topping the list before Monday.

The latest funding round comes days after Epic and the Lego Group, which is 75 per cent owned by Kirkbi, said they were partnering to build a family-friendly version of the metaverse.

Epic’s latest valuation will be closely watched by investors after a string of recent deals in the video game space this year.

In January, Microsoft agreed to buy Activision Blizzard in an all-cash deal valued at about $US75bn. Later that month, Sony’s video game unit said it was buying game developer Bungie in a deal valued at $US3.6bn.

The investment from Sony and Kirkbi in Epic is meaningful by itself and by industry standards “because there are very few billion-dollar deals done in the game industry,” said Martin Yang, executive director at investment bank Oppenheimer & Co.

The average size of gaming-industry investments was typically in the tens of millions, with something in the hundreds of millions considered a rare, large-size investment, added Mr Yang.

Josh Chapman, a managing partner at Konvoy Ventures, a venture capital firm that invests exclusively in the video game industry, said the size of Sony and Kirkbi’s investment was rare but not out of the question for Epic because it had been raising capital for a long time.

“This is certainly a very sizeable transaction that makes a lot of sense for Epic by bringing in Lego (intellectual property) plus all of Sony’s assets,” Mr Chapman said.

The Wall Street Journal