Finding the right partner in a consolidating market

[Music] [Music] all right good morning everyone I'm Louis and the Eau Claire sitting with John Peterson from John City we have some questions fireside chat for the jam city strategy for mergers and acquisition maybe we can start with just enjoying yourself before we go right in there so we know who you are yeah so I'm John Peterson I run corporate development for gem city we are based in Los Angeles 500 just over 500 employees now six offices two in San Francisco one in Seattle one in San Diego and one awareness iris yeah we started off in 2010 and we've kind of grown initially

through acquisition we acquired a company called module and then from there we acquired SGN that was our former name b-before gem city we changed a year ago and with that we we acquired a studio called mob Science out of San Diego and what kind of put us on the map was the first game we gave them was called cookie Jim and cookie Jim we've grown from there to Hanna pop which is a number one bubble shooter in the world and a family guy Matz mastery game that came out last year so yeah we're uh we're growing and excited to be here cool so we're talking you know finding saying raising money M&A you guys have been on both sides you did the equation of TinyCo and you've also raised a strategic partnership with netmarble

tell us a bit about the position of that kind of strategy M&A within the overall corporate strategy of gem city yes it was two years ago we are going out to raise raise money and we looked at VC's investment banks and private equity firms etc and and really for us the most important thing was finding a partner that understood our business and got it and that Marvel is a fantastic partner they know exactly what happens when quote-unquote hits the fan or a mobile gaming company they don't freak out they understand they've been through it and also we're not very good in the in the east so when we choose to go there they're there for us and and ready to to

help out in assists and vice versa they weren't very good in the West and we helped them quite a bit there so it was a perfect partnership for us and you know with with that round of financing we had a tranche of cash to go out and make acquisitions and that was our first acquisition was TinyCo so also talking about about that about the position of TinyCo and acquisition of studios what's so you guys have a roadmap you do product what's the position of M&A per say in your growth strategy you're looking forward strategy yeah so we're pretty good at casual games mastery bubble shooting more female skewing games and that's for a long term strategy that's not gonna work for us so we need we need diversification that's why we are looking for you know studios

that had something that we couldn't do we're not gonna go out and try to be a builder studio we're not gonna go out and try to be a mid-course studio we don't do that well so we know casual and we think going out and doing more acquisitions versus organic growth and diversification is important cool so I mean we see it's really important for people to role map where the games that are coming you have a strategy you have a strategy of growth that's both product and end studios obviously what we look when we look at your acquisition you're not hiring four people you're not hiring to increase the staff what do you look for in this to you when you're meeting with all the studios well you look for in them that's that spark that says this is a good target for gem city yeah obviously strong teams that are experts in what they do and you know that have that have

had success those are more established companies and no I know how to run a business because we kind of let them run autonomously with the menu of services that we do offer and yeah for the Indies for the for the companies that are just getting started out creativity teams that that you know have you know potentially had success in the past but you know that have games out potentially in soft-launched maybe even pre soft-launched that have you know certain KPIs that that they're gonna hit and meet and you know need our help I mean we have us we have a pretty good list of of offerings for younger companies and whatnot you a bit machine

learning yeah we just it's exciting to offer that to them so so maybe we can dive a bit deeper and that's fine so when you meet those Studios that have that gem you know that gold star game that you know is going to be successful and you start courting them and trying to get them interested in gem city how do you approach them what's your selling points for gem city you talked about machine learning and anyway but I don't want you to give us your pitch because well maybe again if you want just give us some of the pointers how do you approach that point yeah I mean it's from you know going to events like this and in meeting companies with just incredible passion and you know great games games that maybe we haven't seen before looking at those looking at you know

just we you know relationships with with with bankers and that's how we we find these guys and you know we get test flights out and we play the games and we actually get to really really really dig in and you know know where the holes are and know where we could help and offer advice and so it's multitude of different ways we look at them but you know just really digging in and finding you know the next the next talk company okay so when you travel these shows you meet a lot of Studios a lot of indie devs that you know are trying to make it or trying to to get funding to make their bean game their big games are a dream game what advice would you have to them for them what would you tell these guys if they were here probably some of them are yeah I'll to make this work for them yeah it just just a heads down obviously and you know get the game to

where it's it's playable and if it's in soft launch make sure you hit your KPIs that's super important and know what those KPI should be and if it if at all possible be strategic on how you find your your financing because you truly want to find a partner that understands your business and I wouldn't just take the first check that comes across yeah that's the thing raising money sometimes you find yourself that you only have one yeah one person looking at you and you're in a position strategically to almost pretend that you have more otherwise you're gonna be forced to take whatever check and I think it's a true story for a lot of people out there raising money at the beginning is very difficult so I really want to get to the people's questions but I have more questions that I just came up with so I'm really sorry about putting you on the spot right now I [Music]

you've seems to do some everywhere from Asia Europe North America South America can you give us a big overview of what you see the big difference between the developers in these regions was different from what you see in Europe than what you see in North and South America I'll do your protein studios and what their USBs yeah so really excited about European developers they work super super fast and quick and just iterate iterate iterate and release that's that's great especially a lot different than the u.s. we don't work that fast we want to but it's it's harder for us South America you know talking to some studios down there really really talented talented

developers and it seems they were more geared to just staying within their region and now they're kind of stepping out of it and that's that's exciting and they're coming up with some amazing products yeah so we're talking a few there right now which is it's very exciting so do you see the regional the regional impact being strong so I traveled to South America as well and what I see in South America is they often do games a lot more for themselves where they're gonna start a game with a storyline that's extremely local to Colombia or to Argentina whereas in Europe you don't see that different how do you approach that when their original games market is more focused do you come out and say let's change the theme or I'll do your project you know we're doing right now but luckily they there's there's this

one studio we're under NDA I apologize so I can't name them but yeah I mean in the past they've their games have been you know developed for their specific region and you know we asked him one and they said that's our comfort zone that's what we know but they're coming out with this really great game and and like this is this is way beyond I'm like yep they they totally change the mentality and you know want to go worldwide with this you know we'll see how it goes it's you know it's a long shot but it's you know one that we pretty excited about cool is it's tough to change that mindset sometimes you know you have so much to do when you're making a game staying in your comfort zone of doing again that you know you're familiar with the theme or the story you know sometimes helps so you guys made a partnership strategic partnership with netmarble because they were not that great in the

West you had some trouble in the East do you find those similarities as well when you're looking at studios in the East are you guys able to go there and have a a communication with Asian studios that make sense on an M&A front yeah honestly we haven't really looked looked at closely in the East yet we still think we can do better in Europe and you know North America for that matter and maybe South America and and the East piano pop does really well in Japan and that's really our only game that that does well over there so yeah we honestly haven't strategically looked there yet but there's so many in the closed backyard yeah so before I go to questions I have one last question what do you see is the the next steps for for gem city as all right so you guys are very strong in a casual market are you guys looking at VR and AR are you

expanding through a mini in that fund are you guys looking at PC so just just tell us a bit or what you're looking for in your next road maps and your future yeah no we're not looking at VR and AR as of now mobile only right now no PC yeah and again we're good at it casual so certainly mid course something we're definitely looking at right now a number of different opportunities casual just because we know it so well we we know how to buy for it are you a teams still are at that casino we've looked at a number of different ones and we just haven't pulled the trigger on that so I think yeah we'd certainly look at that but right now there's just some fantastic mid-course to do some in core games out there cool well thank you I

mean we're almost done we had a very short time there's about five minutes left open for question John is willing to take almost any questions that's not under NDA for him to answer so please feel free yes hi oh sorry thank you very much for the talk and to quest to back hey sorry guys could you talk a little bit about evaluation basis particularly just it's very big subject but perhaps particularly the weight put on past performance compared with your future plans and second question if there's time but your acquisitions always hundred-percent acquisitions or are they occasionally smaller stake strategic investments and how do you think about that thankee yeah valuations kind of industry standard you know we used to look at it trailing 12 still do but a lot of times now if you get a hot game

hot stew do you do you know multiples of revenue because they don't have an e bit up enough there if they're new and me and you have to do that so but yeah 3x if you will top-line you know 8 to 13 depending on you know what types - you're looking at even off bottom line and sorry your second question oh yeah yeah thank you no they are not for the most part we do do 100% acquisition but if it's a strategic move you know will will definitely make a a minority investment thank you yes thank you I think I'm about everything be young but young you described hence these

parts of the language you sound more like your strategic imparts to something your investor almost like a financial investor but then also like a strategic company you can see yourselves as a as a blend of both where do you see yourself as a you know we often think of not having a financial investor as one style of investment and we think of a strategic as a different style of investment but something James City is a hybrid of that is that I wouldn't say so [Music] we do invest but generally we want we invest in in you know what we need is a company we want to grow when we have ambitions to IPO in the next you know years of Tears so as far as you know an investor we invests not just in you know we'll take a percentage of this company it's generally a hundred percent of the companies to grow and diversify what we currently have if that makes Tim excite

all right thank you guys [Music] [Music]