Huge Roblox, which has become a hit, has paved the way for users to create their own content and made it mainstream. Roblox is a digital platform where players can create their own worlds and spend time there with others. So the games meta verse.
Even before Roblox became a major listed phenomenon, a few people working for the gaming technology company Unity in Finland became interested in it. They researched its business model and thought they could implement a technically better platform using Unity’s tool and ecosystem.
“Through Roblox, we saw that the future lies in social virtual game worlds and user-generated content. We decided to start our own startup, ”said Yahaha Studios’ Chief Operating Officer Pengfei Zhang says.
Zhang moved from China to Finland in 2008, and studied at Oulu University of Applied Sciences and the Helsinki University of Technology before merging with Aalto University. After his studies, he got a job at the Applifier startup, which develops advertising technology for games. Gaming technology giant Unity acquired Applifier in 2014, and as an employee, Zhang also gradually received Unity stock options.
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When Unity was listed on the New York Stock Exchange in 2020, which was also interesting news in Finnish, as virtually all Unity employees had shares with the stock option plan. At the same time, Pengfei Zhang also received financial security to start a new business.
“It helped because the failure wasn’t scary. Nor did we immediately have to worry about whether we could pay ourselves a salary, ”Zhang says.
Other founders have also worked at Unity’s China office Chris Zhu and Hao Min.
Their Yahaha Studios, which he founded, has grown in silence, and the company already has offices in China and South Korea in addition to Helsinki. According to Zhang, the company already has 95 employees, which means that it already has the ten largest studios in Finland. However, there are only a few employees in Finland.
In complete silence, the company also raised funding of EUR 44 million immediately after its establishment. The amount was raised in three rounds of funding over six months. That’s a huge amount for a newly established game studio. Even more exceptional is how valuable investors defined the company at that stage.
According to Zhang, the value of the company in the financing round was “a few hundred million euros,” but he does not want to disclose the exact amount. The level of appreciation was a surprise to the company’s founders as well.
“We were only aiming for a few million euros in seed funding. Then the word spread and many investors contacted us. Some U.S. investors offered such a high valuation on the terms of the financing that many other investors were left out because they no longer had the money to participate in it, ”Zhang says.
The company there were three reasons for the high appreciation, according to Zhang. First, the corona pandemic that began in 2020 made many gaming companies hotter than before as people’s play increased due to mobility restrictions. Investors saw gaming and online communities as very corona-resistant.
Another reason was Yahaha’s experienced founding team, which had a background in addition to Unity from Microsoft and Electronic Arts. Before applying for funding, the team had built a demo that was already working, and was able to show their vision in concrete terms.
The third reason was that investors were already anticipating the rise of the metaverse to a major technology trend.
“Investors saw that the visions would come true after 2021. We were early in the industry and they wanted to give us enough capital to get us moving well. They saw that there would be competition in the industry, so we had to be well funded, ”Zhang says.
Yahaha’s head office in Finland was established in March 2021. The financing went to a holding company established in Hong Kong at the end of 2020, so technically the investment did not come to Finland.
The main investors in the financing round were 5Y Capital, HillHouse and Coatu. Investors such as ZhenFund, Bertelsmann Asia Investments, BiliBili and Xiaomi were also present. A large proportion of investors are Chinese private equity firms. Coatu is a U.S. mutual fund with previous investments in Reddit, Uber and Doordash, among others.
However, the company only announced the funding now that it is about to release a test version of its game world for a limited group of users to try out.
A picture of the upcoming game world published by Yahaha.
Pending is a Game World where players can build their own 3D worlds and publish them for others to play. There is a library of different visual material that you can take advantage of without having to know how to code yourself.
The trial version does not yet have a earnings model, meaning users will not yet be able to sell or purchase content. It will be included later when the company has first collected information about the player experience.
“We are building an ecosystem where content producers can earn with their creations,” Zhang says.
Metaversum and user-generated content have become trend words in the industry that many are now running after. However, Yahaha has managed to stand out from the crowd.
The company has a product development unit in Shanghai, as Zhang said it would have been impossible to recruit skilled employees so quickly in Helsinki alone. The most talented Finnish artists work in well-known game studios, such as Supercell, Rovio and Small Giant Games.
“Shanghai has a wider range of agents, and it’s easier to recruit,” he says.
The unit, which operates in Korea, brings expertise in building a social entertainment platform.
Due to the strict regulations strangling the Chinese gaming industry, the company has no plans to launch its product in China at all, but is targeting the Western market.
In Zhang’s opinion, setting up a game studio in Finland is otherwise freer and safer.
“There is no public startup funding in China, and no social security to bring security to the family if the startup fails. In Finland, the safety net enables small gaming studios to be creative and experimental. ”
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