In 2003, in a basement in Stade, 40 minutes outside Hamburg, two brothers, Hendrik and Eike, and their best friend Michael began to sketch out a browser based strategy game to build (and defend) medieval settlements. As Tribal Wars took shape they shared the prototype with their friends who shared it with theirs, and so on. Five years later, the company InnoGames was officially founded.
A few themes help explain how by October 2016, Swedish media giant MTG was able to buy 35 per cent of InnoGames from Eight Roads and the founders in what became the most highly valued software and games transaction in Germany in 2016 at a valuation of €260m.
Controlled growth – InnoGames experienced 13 consecutive years of truly controlled growth, never expanding beyond what they were comfortable with. The team launched new games, expanded into new office space, and recruited but always at a pace they were comfortable with. There were rival companies in the market that grew very fast and collapsed even faster.
Unlikely breeding ground – There's no Silicon Valley centre of excellence in Europe but great ideas can come from anywhere, in this case: Hamburg; and from any group of founders, in this case: university dropouts.
Professionalising talent – InnoGames was profitable and growing fast when Eight Roads invested so it wasn’t so much about money as it was about building proper structures to scale from 50 to 400 employees. It was crucial to attract a strong Chairman and Gerhard Florin, a seasoned EA executive who later also became chairman of King.com, built a small but efficient board which brought in strong executives from companies like Pro7, Zalando and Jagex.
Focus on the product – InnoGames is a true product company. It relentlessly focused on optimising the funnel, churn, and playing experiences of its games, with improved monetisation as a nice incremental benefit. This made InnoGames resilient to new entrants, product and platform shifts and when early gaming companies faltered due to lack of product expertise with customer acquisition costs increasing, InnoGames thrived. Retaining Hendrik Klindworth as the CEO helped maintain product passion at the top of the company. InnoGames is built on the personal passion of its founders for their product.
The switch to mobile – InnoGames needed to move to mobile to ensure its survival but the transition wasn’t easy with contrasts in form-factor, user interface, and distribution channels. Through a carefully planned transition, InnoGames built enough competence to develop a top 20 mobile game – Forge of Empires. InnoGames also never strayed far from its browser business, which remains a major contributor of both revenue and profits. This enabled heavy investment in mobile, well beyond what some start-ups could afford through VC funding.