As it works to turn a former shopping mall into its new headquarters, Cary-based Epic Games is adding another $2 billion to its coffers, bringing its valuation to $31.5 billion — a situation that could have positive spillover across the region, experts say.
Venture capitalists say it’s the biggest fundraise in recent memory — and that it has the potential to attract more jobs and opportunities to the Triangle.
The video game company, which developed the hit game “Fortnite,” as well as the video game development tool Unreal Engine, said the round would “advance the company’s vision to build the metaverse and support its continued growth.”
The round includes investments from existing backer Sony Group Corp. (NYSE: SONY), as well as KIRKBI, the holding and investment company behind the Lego Group. Each firm invested $1 billion.
The latest round comes after Epic Games raised $1 billion in 2021 and $1.78 billion in 2020. Both of those included investments from Sony. In 2018, the company raised $1.25 billion. After the 2020 raise, the company said it was valued at $17.3 billion.
Epic Games remains controlled by its CEO and founder, Tim Sweeney, according to the company. Executives — Sweeney included — declined to speak outside of a press release, according to a spokeswoman.
Michael Pachter, an analyst who follows the gaming industry for Wedbush Securities, pointed to the company’s recent announcement to create a “digital experience” for kids with Lego — “so clearly (they) want a strategic partnership.”
Pachter said the round is “an opportunity for employees to sell shares and (it) allows Epic to provide liquidity for those employees who own stock.”
Last week, Epic and Lego announced a long-term partnership “to shape the future of the metaverse to make it safe and fun for children and families.”
What Epic is saying
In a press release, Sweeney said the company needed partners “who share our vision.”
“This investment will accelerate our work to build the metaverse and create spaces where players can have fun with friends, brands can build creative and immersive experiences and creators can build a community and thrive,” he said.
Kenichiro Yoshida, CEO of Sony, in a statement said the company was “thrilled to invest in Epic to deepen our relationship in the metaverse field, a space where creators and users share their time.”
Søren Thorup Sørensen, CEO of KIRKBI, said that “a proportion of our investments is focused on trends we believe will impact the future world that we and our children will live in.”
“This investment will accelerate our engagement in the world of digital play, and we are pleased to be investing in Epic Games to support their continued growth journey, with a long-term focus toward the future metaverse,” Sørensen said in a prepared statement.
Bigger than Epic
But technology industry insiders say a round like this goes past Epic’s individual plans — and reflects on the entire region. Lister Delgado, managing partner of Durham’s Idea Fund Partners, has no inside information, but says any time a local company gets $2 billion “it is a huge deal.”
He said it points to opportunities in the private equity and corporate arena. While there is some uncertainly in the public markets, private-equity firms and corporations “still have a lot of cash in their balance sheets.”
He also sees the bet on Epic as a signal that the metaverse is going to happen “if not by necessity, by force.”
“Companies are building it now and lots of money is going there,” he said, adding that it's great North Carolina will have a presence in the space through Epic. "I can only imagine a highly specialized labor force locally based.”
Delgado sees that talent pool spilling over into opportunities for existing startups and new entrepreneurial ventures. And he theorizes that a significant portion of those dollars will be spent in the region, “always great for the local economy.”
The round also brings more attention to a region hungry for venture capital dollars.
David Gardner, founder of technology-focused investment firm Cofounders Capital, has no insider information, but said successes like that of Epic and even Pendo, a Raleigh-based product adoption software firm, can help venture capitalists pitch the region to outside investors.
“It shows up as capital coming into N.C.,” he said, cautioning that the industry still needs more. Gardner said if those two companies are taken out of the equation, it is clear that North Carolina "is not getting nearly our share of tech venture dollars especially at the early stages where they count the most towards future economic development (such as) the next Pendo or Epic.”
Gardner said successes like that of Epic are million-to-one shots.
“Many investors stay clear of game development ventures because it takes a lot of money to produce a complex game and they often flop losing all invested capital,” Gardner said. “If they work, like Fortnite did, it’s amazing, but these have about the same odds as producing a blockbuster movie.”
Epic Games has been able to survive through careful strategy — the ability to leverage both its titles and its Unreal Engine, Gardner said. “The success of Fortnite and previous capital raised has put Epic in a very unique position to do about anything it wants. That’s a lot of money being raised.”
While Gardner said he’s not bullish on the metaverse, “if anyone can pull off a truly unique and lasting offering in this space, my bet would be on Epic.”
