Tencent doubles down on game studio Pocket Gems with $90M investment

Chinese internet Tencent has continued its recent investment spree after it backed U.S.-based game studio Pocket Gems to the tune of $90 million.

Tencent invested in Pocket Gems back in 2015, when it put in a reported $60 million for a 20 percent stake. This time around the Wall Street Journal reported the investment as $90 million, which TechCrunch has confirmed independently. That deal, the Journal said, takes Tencent’s equity to 38 percent, giving Pocket Gems a valuation of around $600 million.

That’s particularly impressive given that the company is known for just two titles: Episode, an interactive storytelling game predominantly used by women, and 3D strategy game War Dragons, which is a bigger hit among male gamers.

Pocket Gems, which was founded in 2009, claims to have notched 300 million downloads to date and its monetization efforts appear to be picking up steam. App analytics company Sensor Tower estimates that revenue for April reached $17.5 million which, if maintained, would put the company on course to surpass $200 million in sales this year. Pocket Gems said 2016 was a record for sales and gamers, but it did not disclose figures.

“We think we’re pretty unique because we are able to make products for different audiences and both are successful,” Pocket Gems CEO Ben Liu told TechCrunch in an interview.

Liu said that, to date, Tencent had been fairly hands-on helping his team develop its games and future strategy although it doesn’t have distribution arrangement. Currently, neither of its titles are available in Chinese language — or with localized gameplay for China — but Liu said he is aiming to address that in the future with help from Tencent.

“Our hope is [to be in China] but we’re not there yet,” he said. “Tencent are really expert at taking things that work in the West and making Chinese versions of them, plus they have so much reach, partnerships with celebrities and understand the Chinese media.”

Already, he added, Japan has become one of War Dragons’ top markets, but Liu anticipates that the Chinese gaming market — which is already larger than the U.S. for iOS app revenue — will become more international, giving U.S. companies like Pocket Gems a better chance at success.

Liu praised Tencent and fellow investor Sequoia, which didn’t participate in this new round, for their support.

“Both are long-time-minded and want us to do risky, long-term things. [Our games] weren’t initially successful but they really believed in us and supported us,” he explained.

The money raised this time out is going to be spent scaling the business to the next level. Liu intends to grow the Pocket Gems team significantly from its current size of 220 staff. Right now, the startup is hiring for at least 60 positions with potentially more to come soon.

Strategically, it is developing a new studio focused on making new multiplayer titles for hardcore gamers which Liu said has been quietly in development for a few years. For the existing titles, it is planning to introduce a ‘world map’ feature for War Dragons, and expand its partnerships for Episode, which has already landed tie-ins with Mean Girls, Pretty Little Liars, and Demi Lovato. For the latter, Liu teased the “simultaneously release of a Hollywood property” which is coming soon.

Pocket Gems aside, Tencent’s investments in game companies include League Of Legends creator Riot Games, Supercell, the Finnish firm behind Clash Of Clans, Korea’s CJ Games, and Glu Mobile.