Improbable chief executive Herman Narula in the company's Spitalfields office
Credit: Geoff Pugh
Most start-ups struggle to find space to work from in their formative years, with employees often spending hours hunched over laptops in coffee shops as they dream of hitting $1bn (£711m) “unicorn” valuations.
For the first two years of video game start-up Improbable’s life, the company occupied several buildings on the Hyver Hall estate, a sprawling Barnet property owned by billionaire Indian construction tycoon Harpinder Singh Narula, who also happens to be the father of Improbable founder Herman Narula.
“We moved from a barn to one of the buildings in the house, which was completely Improbable people,” the 33-year-old recalls. “We had about 20 people here at one point.”
Having an entire start-up working on the estate was a source of tension between Narula and his family, he says with a smile. Every week he would be encouraged to “get them out of the house”, Narula says.
By 2017, prominent investors including SoftBank and Andreessen Horowitz had invested more than $520m (£369m) into the company after being won over by Narula’s vision of a new type of video game where thousands of people could play together in virtual worlds.
Narula, who sports a dark beard and short greying hair, flew to Tokyo to personally pitch SoftBank head Masayoshi Son on his company. That meeting led to a $502m investment led by SoftBank that was at the time the largest venture capital round in a private British business. It helped to boost Narula’s net worth to £450m.
SoftBank head Masayoshi Son led a $502m in Improbable in 2017
Credit: Kiyoshi Ota/Bloomberg
‘Toff in tech’
Four years after that mammoth raise and with Improbable’s valuation now above $2bn, Narula is still attempting to win over the video game world and to convince major studios to build games using Improbable technology.
“Are virtual worlds a business? And if they are a business, are they going to be a big business? I would say they’re going to be a massive business,” Narula says in an evening video call from his London home while dressed in a grey Improbable T-shirt.
Narula’s bet is that video games increasingly turn towards sprawling multiplayer services which require sophisticated technology to keep thousands of players online. His plan is for Improbable to become the new standard that developers use to run their games, with 10m players already playing games run on Improbable servers.
Improbable has hit stumbling blocks along its way to its goal of becoming the next standard for multiplayer games, however.
The company became embroiled in a public dispute with Unity, one of the world’s largest video game technology businesses, in 2019 after Unity blocked developers from using its technology alongside Improbable’s service. The dispute was settled days later with an uneasy truce between the two companies that holds to this day.
Narula, who is unmarried and known to socialise with the world’s rich and famous, was named a “toff in tech” by Tatler. He now finds himself a key player in the $179bn global video game industry.
Earlier this year, The Financial Times reported that game developers had struggled with implementing Improbable’s technology. It highlighted a number of scrapped games such as Nostos and Worlds Adrift that were built using Improbable’s SpatialOS service, a worrying sign that Narula’s ambitions may face an uphill struggle.
Video games such as Nostos built on Improbable's SpatialOS software have been scrapped
“All the feedback was quite painful to read,” Narula says, “because it represented work that is so out of date that the people who were responsible for it are either not programmers anymore or aren’t even at the company. We had to dust off the old records to even know what that was.”
Narula blames the coverage on old versions of Improbable technology built by former employees and criticisms from developers who weren’t paying customers.
“In terms of old school SpatialOS, it was an unwieldy solution. There’s a lot we learned from that,” he acknowledges.
Some video game industry insiders have privately expressed doubts over Improbable’s ability to become a dominant player in the field, wondering if the company has lost momentum following its raise in 2017.
Narula remains optimistic, saying he believes his company has “been misunderstood a bit.”
“We look like a tech company but we’re in a creative industry,” he says. His hope is that a breakthrough game built using Improbable’s technology will soon emerge and convince the industry that virtual worlds are a major business opportunity. “Honestly, these things can happen very quickly,” he says.
The business will soon need to demonstrate that its nine years of work and three acquisitions of gaming companies can generate meaningful revenue.
Its latest set of accounts for 2019 show losses of £64.8m in the last seven months of 2019 on revenues of £10.8m. The business also had reserves of £270m, giving it ample runway to keep trying to create a breakthrough game.
Improbable’s current hope is Scavengers, a free-to-play multiplayer game developed by Midwinter Entertainment, a US studio Improbable bought in 2019.
Narula admits his company is misunderstood, with defence revenue far above video game revenue from games built on its platform such as Worlds Adrift
Credit: Worlds Adrift
More than 500,000 people played the game in its first week of release, Narula says proudly, but its biggest potential may be an experimental mode that will allow over 9,000 people to play together at the same time.
For Narula, a video game fan since his childhood in Delhi who cites Halo as one of his early favourite games, developing the game with key Halo executive Josh Holmes seems to be the culmination of a childhood dream.
“I have always been obsessed with and fascinated by the power and potential of games,” Narula says before quickly listing his favourite consoles.
He’s more measured when asked what he learned from his entrepreneur father. “Everything to do with Improbable has been completely separate from the family business,” he says, departing from his normal pattern of rapid speech.
He says he wants Improbable to embrace “relentless humility,” after “seeing how complicated ego and arrogance can be in a business setting by looking at a successful family business”.
Wargaming pays off
While the gaming side of Improbable is still searching for its “killer app,” early revenues for the business have mainly come from its defence contracting division which has built wargaming simulations for the UK and US armed forces.
Improbable's wargaming technology has led to an £8.3m payday from the Ministry of Defence
Military commanders use Improbable’s technology to plan out battles, adjusting factors such as the amount of ammunition carried by troops and even potential social media posts about battles to see how they might impact events on the ground.
The business has hired three former senior US armed forces officials as it plans to expand its defence business in that region after earning more than £25m in revenues from the British Army.
“The US is a natural market, it’s the biggest market. It makes sense for us,” Narula says.
Improbable has been quick to boast about its defence links while other technology businesses including Google have been reluctant to talk publicly about this lucrative work.
Narula says that working on defence contracts is “part of the DNA” of his business. “We don’t make weapons. We’re not a munitions company,” Narula says. “We’re working on decision support.”
Picking up future defence contracts in the US may prove awkward for Improbable, however, as Chinese technology giant NetEase owns 5pc of the company. Improbable also operates an office in Guangzhou which Narula says does not work on any defence projects.
“The security is so stringent that I don’t even know aspects of things,” Narula says. “There is no information flow that would go to our very, very minor cap table Chinese investors. We look at the work we do in China as basically focused on helping games.”
Looking ahead, Narula says Improbable’s upcoming accounts for 2020 will show revenues “increasing significantly” with “a more even split between defence and gaming”.
And with £270m in the bank and no plans for future acquisitions, the young executive says there are no immediate plans to raise further funding.
“We never rule out raising capital if good opportunities present themselves but it’s not an essential part of our plan,” he says.
Narula’s dream to turn video games into virtual worlds remains a compelling vision, even if the company’s early success seems to have largely been limited to selling that technology to armed forces.
Now the battle will be for Improbable to become a key player in the next generation of video games. “Whether it’s Improbable or somebody else, I think there are going to be some massive businesses built around being the backbone for that transformation,” Narula says.