Players of the video game Hello Neighbor have to investigate the mysterious guy next door, Mr Peterson, sneaking into his basement to uncover a dark secret.
The survival horror game, launched in 2017, has gained a cult following and such is its popularity that its developer, TinyBuild, was emboldened to go public this year, listing its shares at 169p on AIM in March to raise £154.4 million at a valuation of £340 million.
Since then, they have risen 49 per cent to 251p, giving TinyBuild a valuation of £509 million. Not bad for a business that made $37.6 million (£27.2 million) in sales last year.
The Seattle-based company is a small player in a booming industry expected to be worth $200 billion by 2023. Founded in the Netherlands in 2011 by two gamers — Alex Nichiporchik and Tom Brien — TinyBuild won early backing from Markus Persson, creator of Minecraft. Nichiporchik, 32, had played Warcraft professionally in the early 2000s, starting when he was 13, making enough money to drop out of school and become a gaming journalist.
TinyBuild has since snapped up six development studios, including Dynamic Pixels and Hungry Couch Games, and employs about 150 people.
It has bolstered its board, appointing Neil Catto, the finance director of Boohoo, as a non-executive director. Zeus Capital, Boohoo’s nominated adviser and joint broker, performs the same roles at TinyBuild.
Part of TinyBuild’s success is down to its social media following. It uses influencers to market titles and keeps costs low by using developer teams in eastern Europe.
Its Hello Neighbor series has sold more than 1.6 million copies and TinyBuild is even in early-stage talks to produce a TV series. It is shifting from publishing indie games to more premium offerings, where it will own its own IP — allowing it to boost margins.
By listing in London, TinyBuild joined a growing peer group that includes Worms maker Team17 and Frontier Developments.
TinyBuild enjoyed strong results during lockdown. Sales for 2020 were $37.6 million, a 35 per cent increase on 2019. It made a profit of $7.7 million, compared with a loss of $2.6 million in 2019.
However, after the initial exuberance surrounding its listing, TinyBuild has its work cut out to justify its toppy valuation — it is trading on a forward price-to-earnings ratio of 50.9 times, a premium to its peers, or neighbours.
Jefferies has a 320p target on the stock. TinyBuild needs to venture further into the basement to justify numbers like that’. Hold.
