Rovio Rapidly Moves the Needle from Game to Brand to Franchise … and Value Moves Even Faster

Earlier this month Rovio, the Finnish mobile app game-maker scored $42M in Series A funding, led by Accel Partners and Atomico Ventures. This “values” the company at more than $200M, according to Finnish business magazine Talouselämä. (SharesPost isn’t listing any Rovio shares right now, but the owners are talking about an IPO on the NASDAQ in three years.)

Let’s look at the sequence.  First there were some really smart people who built games for others, over fifty contracted games, in fact. They not only learned how to build games, through detailed (undoubtedly secret) discussions with their clients, they learned what made games click with audiences.

Then they built their own game, “Angry Birds.” Helped by the rapid proliferation of SmartPhones, the game is a sticky one, with over 50M downloads, and 40M machines still having the app (presumably, most of those have at least one player). So far, the story is just about a game, albeit a successful one.

The key to moving into a Brand is the birds, the characters. (Here you can see what Angry Birds look like.)

“Birds” was not an easy decision for the Finnish group, but it was clearly a solid one. The recognizable characters allowed Rovio to expand into plush toys (over 2M sold, and counting) and related virtual items (according to a recent press release, 40% of new customers on the Apple mobile platform purchase the related “Mighty Eagle” content.”) A blockbuster game with a branded character set is what attracted the funding.  Don’t think mobile app … think toy company.

Clearly, the PE groups see a franchise, taking Angry Birds into international markets, across more platforms (all mobile, social media, even broadcast media), expanding the merchandising opportunity well beyond plush toys.

I am a natural skeptic when it comes to these early valuations. This is a maybe a $10M (revenues) company!  Yet this pattern is textbook (and the adoption growth is “faster than Skype’s,” according to one invested PE executive), and the financing should allow Rovio to take advantage of the opportunities (they plan to roll out an online Angry Birds “experience” towards summer 2011, and Angry Birds games for all major consoles later in the year, and Amazon's new Android app store, which reportedly will come online this Spring, is going to get an exclusive in the form of "Angry Birds Rio," the latest game, the companies have announced), so this will be a fun one to watch.