Improbable on Thursday announced the purchase of US games firm Midwinter Entertainment for an undisclosed amount — expanding in one of tech's fastest-growing industries.
Founded in 2012, Improbable develops a platform for creating the vast open worlds found in video games and corporate-training programs, which it calls 'SpatialOS.' In May 2017, it raised $502 million in a SoftBank-led Series B funding round, and has raised over $600 million in total.
Though its CEO, Herman Narula, is highly ambitious regarding the software's long-term applications, the firm has focused on video game-related applications in recent years. Prior to the acquisition, Improbable had already been working with Midwinter to develop an open-world, multiplayer survival game called 'Scavengers.'
Currently in development, 'Scavengers' will see teams of players fight for survival in a post-apocalyptic ice age, with players able to either cooperate or fight for the scant in-game resources available. The game will be run using SpatialOS, as well as Epic Games' Unreal Engine. Its release date remains unclear.
While Improbable is loss making, the video game industry is scorching hot: The games market was worth above $130 billion last year and looks set to boom to over $300 billion by 2025, according to GlobalData.
In a statement, Improbable CEO Herman Narula said he was "thrilled to see how [Midwinter] work alongside our global game studios to build solutions and features that help transform the experience of game development."
Improbable's chief technology officer Lincoln Wallen told Business Insider that the company is eager to "really accelerating" its work with Midwinter.
He said: "It's been a very close partnership with Midwinter from the start. [Midwinter] has sort of taken the perspective of Improbable's technology and market offering.
"What we found incredibly effective is working with the Midwinter team and [using] their expertise in creating and trailing solutions, building those solutions within the context of Scavengers, then essentially packaging those solutions and making them available to our wider market.
"In the last 12 months [our relationship] has really accelerated. There's some amazing features we've been able to develop hand-in-glove with the games team at Midwinter, and then make available to other customers."
'We really see this as an inflection point for Improbable – it makes a lot of sense for us to combine forces'
Midwinter is headed by its cofounder Josh Holmes, who was also creative director of the critically-acclaimed 2012 shooter 'Halo 4'. Holmes told Business Insider that the acquisition will "positively impact any number of future titles we might want to pursue."
"Where we really benefit [from the acquisition] is through that tighter collaboration with the platform team," he said. "[We'll have] the ability to tap into the incredible skill and experience of some of the other studio teams that Improbable is building," including one in Edmonton led by Aaryn Flynn, and a London staff being built under John Wasilczyk, he said.
"We really see this as an inflection point for Improbable," Holmes said.
Holmes added that the acquisition "will not affect the day-to-day running "of Midwinter's studio — and says the firm is "committed to keeping its indie-studio feel" and will "retain its creative independence" regarding games development.
"Improbable has been extremely hands-off when it comes to the way in which Midwinter develops games, and the creative [direction] that we pursue with our games."
According to its most recent accounts filed with Companies House, the firm lost £50.4 million ($62.1 million) in the year ending May 21, 2018, a tenfold increase on the previous year's losses of £4.8 million.
Despite these losses, Improbable received a $50 million investment in July 2018 from NetEase, a Chinese games developer specialising in multiplayer online roleplaying games, or 'MMORPGs'. The investment was said to value Improbable at $2 billion.
"All really successful technology offerings into the games industry have had this sort of two-element component: a very strong games team driving content forward, and a very strong technology team," Wallen, Improbable's CTO, said.
"Hopefully that will lead to better success for the game 'Scavengers,' and for anything that Midwinter does beyond that, but also to greater success for our underlying technology."