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June 24, 2011 12:40 pm
The British company behind the popular children’s online game, Moshi Monsters, has been valued at $200m (£125m) after an early investor sold down part of its stake.
The deal puts Mind Candy among the most valuable of the cluster of start-ups around east London’s “Silicon Roundabout”, following the sale of TweetDeck to Twitter, the short-messaging site, last month for around $40m.
This week, Spark Ventures announced it had sold half of its stake in Mind Candy for 15 times more than the value of its initial investment in 2004. The transaction, which saw Spark’s stake purchased by existing venture backers and a new private investor, gives Mind Candy an enterprise value of $200m.
Moshi Monsters has more than 50m users all over the world and will generate tens of millions of pounds in revenues this year from in-game payments, as well as a wide range of offline merchandising, including toys, books and trading cards.
The site allows seven to 14 year olds to create their own pet monsters, which they can nurture, house and feed, as well as send them on adventures, solve puzzles and chat to other monsters. Billed as a safe, parent-friendly “Facebook for kids”, combined with Tamagotchi-style virtual pets, the site is popular all over the world, with one in three British children owning a monster.
Mind Candy was created in 2003 by Michael Acton Smith, who previously co-founded online retailer Firebox.com. Although its first game, Perplex City, was unsuccessful, investors including Spark Ventures, Index Ventures and Accel Partners invested $7m in 2006 to enable it to launch Moshi Monsters in 2007.
“We think there is a long way to go” for Mind Candy, said Thomas Teichman, chairman of Spark Ventures. “But after six years, when you see a return of 1,400 per cent, it’s not a bad idea to take some profit.”
The sale will give Spark a cash receipt of £3.1m. Spark recorded an enterprise value of $35m for its stake in Mind Candy just last September, reflecting how quickly the business has grown.
“Since we last valued it, the volume of business has boomed in licensing, subscriptions, selling the magazine in the shops. That is why the value has gone up,” Mr Teichman said. “What’s interesting is that it’s come from digital – online to offline, that’s unique.”
He denied that the valuation leap was a sign of the US bubble in internet stocks spreading to Europe.
“There is worry out there that things have gone too far in the States,” he said. “This is a proper business with proper revenues and it’s priced sensibly, on real metrics rather than dreamy forward numbers.”
Earlier this year, Spark Ventures announced that it was teaming up with ad agency BBH to launch the Black Sheep Fund, an investment group that would provide web start-ups with finance and marketing advice. Mr Teichman said that Mind Candy was a good example of the kinds of investments Black Sheep was planning to make.
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