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Silver Lake Invests $400 Million in Unity

Unity Engine

Private equity firm Silver Lake has agreed to a $400 million investment in Unity Technologies, said John Riccitiello, chief executive officer of the gaming software maker.

The investment values the San Francisco-based company, which makes development tools for video-game creators, at $2.6 billion, according to a person with knowledge of the transaction. Regulators still need to approve the deal, Riccitiello said. The financing follows on the heels of the company’s last round, closed just 10 months ago, in which the company had raised $181 million from investors led by DFJ Growth. Other of Unity’s earlier investors include China Investment Corporation, FreeS Fund, Thrive Capital, WestSummit Capital, serial entrepreneur Max Levchin, and Sequoia Capital, which remains its largest shareholder. When asked about the deals success, the CEO pointed towards its work in VR and AR.

“A big chunk of it is secondary and that’s because it makes sense to let employees buy cars,” Riccitiello said. “In terms of primary capital we don’t ultimately need all that primary capital – the capital is safety when we’re investing to grow as fast as we are.”

Founded in 2004, Unity’s software underpins some of the world’s most popular games, including Niantic Inc.’s Pokemon Go and Tencent’s Honour of Kings. While the game industry is growing, it’s a fickle business, where investors have struggled to pick winners. Unity is somewhat unique because it doesn’t design its own games, so its success may be tied more to the industry as a whole rather than any single title. Games and apps developed using Unity reach 2.4 billion devices, the company said.

Egon Durban, a managing director at Silver Lake oversaw the investment. The 1,400-person company is backed by several Silicon Valley venture firms, including Sequoia Capital, which remains Unity’s largest shareholder. Roelof Botha is now on the company’s board. DFJ, another firm, led a $181 million investment that valued the company at about $1.5 billion in July. Neither firm sold shares as part of the latest round, Riccitiello said.

Silver Lake can easily outspend most venture capitalists. Last month, the firm said it raised a $15 billion technology fund, controlling over $39 billion in assets. Silver Lake is betting that Unity will continue to grow, not only in gaming but also into virtual and augmented reality.

“The second act that I think attracts a lot of investors and investor interest is the fact that we have about 70 percent of AR and VR content built on Unity,” Riccitiello said. “We’ve got a first wave that is going really really well and we have a second one that is dominant.”