PopCap Games Raises $22.5M in First Outside Funding Round

10/6/09Follow @gthuang

Seattle-based PopCap Games dropped a bit of a bombshell this morning. The casual games developer and publisher announced it has secured $22.5 million—the first outside funding in its nearly 10-year history—led by Meritech Capital Partners, a late-stage investment firm based in Palo Alto, CA. Also participating in the round are Larry Bowman, a PopCap board member, and John McCaw, a mobile and finance guru. The funding represents a minority stake in the company.

The news is surprising because PopCap has been profitable since its inception, and has shunned taking outside investment up to this point, even as the company has grown dramatically. From 2003 to 2008, PopCap’s consumer game sales shot up from $10 million to $170 million. Bejeweled, a puzzle game that involves lining up gems in a grid, made up about 40 percent of PopCap’s revenue as of last year.

The funding raises the question of whether the recession, which has hit video games hard, necessitated more capital for PopCap’s operations. The company’s chief executive, David Roberts, said the reason for the funding is to accelerate PopCap’s global expansion and distribution of its games. “We’re excited to have additional working capital that lets us be more aggressive with our expansion into social media and reaching new geographies,” Roberts said in a company statement. “We’ve been pursued by investment firms for many years and have resisted taking outside capital, but we liked Meritech’s style and believe there’s a tremendous opportunity to grow and evolve our business at a time when many other video game firms are retrenching.

Brian Fiete, Jason Kapalka, and John Vechey founded PopCap in 2000. It now employees 240 people in Seattle, San Francisco, Chicago, Vancouver (BC), Dublin, and Shanghai.

PopCap’s news represents the third large funding round for a Seattle-area gaming company in the past year. In September 2008, Big Fish Games landed $83.3 million led by London-based Balterton Capital, and in August 2009, Smith & Tinker revealed it has raised a total of $29 million from DCM, Vulcan Capital, Foundry Group, and others.

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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