Roblox CEO is worth $ 4.6 billion and the index share is worth $ 3.7 billion

Neil Rimer recalls having first conversations about what became of Roblox when he was studying at Stanford in the 1980s. He was a college classmate with David Baszucki, founder and CEO of the gaming company.

More than three decades later, this idea has made Baszucki extremely wealthy: his stake in Roblox is worth $ 4.6 billion after the company’s stock market debut on Wednesday. Rimer’s investment firm, Index Ventures, also benefits greatly. Its shares are valued at $ 3.7 billion.

Baszucki and Rimer are two of the biggest winners of the direct listing of Roblox, the latest technology company to be listed on the stock market at a massive valuation and generate strong paper returns for its founders and sponsors. Snowflake, Palantir, Airbnb and DoorDash went public from September to December and are now worth between $ 44 billion and $ 110 billion.

Roblox’s main external shareholder is Altos Ventures, which owns shares worth $ 8.1 billion, followed by Meritech Capital for $ 3.8 billion and then Index. Tiger Global controls a $ 2.8 billion stake and First Round Capital shares are worth $ 2.3 billion. The CEO’s brother, Gregory, is on the board of directors and owns a $ 1.1 billion stake.

All of the above figures assume none of the investors sold shares on Wednesday. It is possible that some did, as there is no blocking period tied to the direct list.

Baszucki started Roblox in 2004. But he was flipping the idea long before, while studying electrical engineering at Stanford. Rimer said Baszucki was obsessed with physics and found a way to do experiments faster than the physical world would allow. His interests clashed with Apple’s introduction of the Macintosh and the first graphical user interface available to consumers.

“I wanted to build an engine that on a simple 2D grayscale could mimic real-world physics and allow people to build experiments and then run them,” said Rimer, who specializes in history and economics at Stanford, in a interview on Zoom on Wednesday.

Based on this concept, Baszucki founded a company called Knowledge Revolution in 1989 and sold it nearly a decade later to MSC Software for $ 20 million. A few years later, it came to Roblox to expand beyond educational use, with the goal of a more conventional audience.

Rimer says he and Baszucki stayed in touch and followed the company from its earliest days. But it wasn’t until 2017 that Index first invested in Roblox, leading a $ 92 million round with a valuation of about $ 500 million. According to the Roblox brochure, the firm continued with additional investments totaling at least $ 34 million.

“I stood up a little bit for not having invested before,” Rimer said. “When you’re building something like that, it won’t look like much for a long time.”

For Index, which has managed billions of dollars, the investment became more compelling after Roblox demonstrated its popularity on various platforms while figuring out how to make money along the way. In 2018, which already dates back to its brochure, Roblox generated revenue of $ 325 million. According to research firm SensorTower, Roblox earned revenue of $ 45.7 million in 2016.

Rimer may have missed the opportunity to enter the first phase, but he got there at the right time to take advantage of Roblox’s viral growth.

With children trapped at home during the pandemic, last year’s revenue rose 82% to $ 923.9 million, mostly from in-game virtual item sales, after jumping 56% on 2019 to $ 508.4 million. Players spent 30.6 billion hours on the app last year, 124% more than in 2019.

Among the millions of games created by the Roblox user are titles that allow kids to adopt virtual pets, hang out with friends at theme parks, and work at a pizza company. It’s all part of Baszucki’s plan to build a so-called metaverse, with users “interacting together by playing, communicating, connecting, making friends, learning, or just hanging out, all in 3D environments,” as the brochure states. .

Rimer, whose firm had previously invested in gaming companies Supercell, Playfish and King, said he doesn’t spend much time at Roblox, though he’s thoroughly entertained by Baszucki’s demonstrations at quarterly board meetings. Rimer said he attended rapper Lil Nas X’s virtual concert in November, which drew more than 30 million visitors in two days.

“I found it to be a very open experience,” Rimer said. “Actually, I was able to see how you can imagine going to concerts that way with friends and family. It didn’t seem artificial to me. I thought it was a good use of the medium.”

David Sze of Greylock Partners led an investment in Roblox in 2018 with a valuation of about $ 2.5 billion. Sze, who previously supported Facebook, LinkedIn and Pandora, wrote in a blog post at the time about how he remembered Baszucki making the first versions of Roblox “every year to the children at our school’s Science Fair. “.

Greylock’s investment has increased in value more than 15 times in less than three years.

Sze told CNBC’s “Power Lunch” on Wednesday that while games may be the core of the business now, Roblox is in a position to “realize the idea of ​​the metaverse that was first thought of many years ago. by science fiction writers virtual shared space where people can share all sorts of things. “

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