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InnoGames: A New Home for the Future

General Article By Gareth Harmer on May 13, 2014

Even if you’re a connoisseur of online gaming, InnoGames might not be a name you’re familiar with. Specializing in browser-based strategy MMOs, and recently branching out into mobile, the indie developer has managed to notch up some impressive stats: 50 million registered players on Tribal Wars (its leading title), and some 120 million overall. Intrigued, I went along to the grand opening of their new office, in the heart of Hamburg’s Gamecity, to find out more.

There’s also a surprising story behind the studio’s formation. Launched in 2003, Tribal Wars started out as a hobby project among three student developers: brothers Eike and Hendrick Klindworth, and their friend Michael Zillmer. The early MMORTS was a gradual success, eventually prompting Hendrick to drop out of college to become CEO so they could focus on it full-time. Realizing that their hobby had become Serious Business, InnoGames was founded as a studio in 2007, remaining profitable ever since.

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Today, InnoGames has some 320 employees based at the shiny new headquarters in Hamburg. As I’m being given a tour around the office, I notice that every meeting room has been themed; the studio held a poll to find out the most popular games in the office, with the top responses including Age of Empires, Starcraft II and even classics like Pong. The new facilities are also equipped with a gym, café, and everything else a game studio could need.

Level Up

Transforming a part-time hobby into a games studio with global reach isn’t easy. Back in 2010, Fidelity Growth Partners invested in the firm, bringing not just capital but expertise to help InnoGames grow further. During the day, I managed to sit down with partner Davor Hebel to understand what attracted him to the studio, and where he sees online gaming heading in the future.

Part of Hebel’s remit is to invest in “fast-growing businesses on the technological cutting-edge.” He then went on to explain how InnoGames fits into this area, describing three particular trends that caught his eye. The first was around development costs – console titles are devouring cash at a significant rate, whereas browser-based games in the cloud could be cheaper up-front and much easier to iterate on. “You can develop concepts that maybe from a graphical perspective were not cutting edge, but in terms of the gameplay were very interesting for people to play.”

“The second trend was around free-to-play, and the fact I thought that it was a very disruptive concept – that I thought most people would play the game for free. That doesn’t exist in in other entertainment industries like movies – people don’t let you watch a movie in the cinema for free and then say ‘hey, pay me whatever you think is fair.’ But I think that’s a pretty disruptive trend when actually, when you look at it, it appeals to many more customers and players than the traditional model.”

“And I think in terms of the company, there’s some very unique things. Its ability to develop great products – when we invested it already had three successful games( Tribal Wars, The West and Grepolis) which is pretty rare – it clearly articulates how good a company they are in developing products. It’s not a marketing company, but it’s about developing great products.”

“I think it’s pretty awesome that Hendrick dropped out of school to go do this, and meanwhile he had the vision that he wanted to build a globally successful company. So not only did they build a company of 50 people, and very profitable, with no money when we invested, they also then realized that, to get to the next level, they really had to professionalize the company. So they’re keeping the core focus on products, but we’ve hired a new senior team around the founders – a new CFO and CMO.”

As someone who’s focused on growth potential, I was interested to find out what Hebel thinks the future holds for online gaming. “I would say that my premise is, if you look at Europe, it has very strong clusters of gaming talent. If you look at the UK, if you look at Nordics, if you look at Germany, there’re some fantastic companies. And so I’ve always been of the mindset that Europe will produce a number of billion dollar companies in the online gaming world. So far I’ve been right – King is a billion plus, Supercell’s a billion plus, and there’s no reason why there shouldn’t be other billion plus franchises. I think from that perspective, InnoGames certainly has potential to be one of them in the future.”

Hebel also noted that the perception of gaming is changing. Smartphone games started off as exclusively casual, but grew to include deeper, more strategic titles. Mobile is also filling a gaming void, where people play one genre on console at home and a different genre on a smartphone while travelling. “I think what’s inevitable is there is no more gamer and non-gamer type of definition – I think everyone is a gamer today. Now, the only question is what kind of games are they going to play.” He also thinks that there’ll be a progression, as players who started on more casual titles move up to the ‘midcore’ style that InnoGames specialize in. “Maybe they started with Candy Crush, and they say ‘OK, I want to try something a little more involved,’ so I think there’s going to be more and more people who want to play more midcore titles over time.”

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