by George White
[Posted on December 17, 2007 - 5:17 PM]
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DiggLive Gamer Inc. on Monday emerged from stealth-mode with $20 million in Series B funding as it prepares to launch a platform that will allow virtual world gamers to buy and sell virtual property with real money.
The New York startup received the capital from new investor Charles River Ventures of Waltham, Mass., and the returning Kodiak Venture Partners of Waltham and Pequot Ventures of Menlo Park, Calif. Live Gamer received $4 million in Series A funding when it was founded in February, president and co-founder Andrew Schneider said.
The 10-month-old company was co-founded with serial video game entrepreneur Mitch Davis, who serves as Live Gamer's chairman. Davis was the founder of Massive Inc., an in-game advertising company that Microsoft Corp. acquired for between $200 million and $400 million in May 2006. Massive's advertising technology places ads that change every 15 seconds within a video game's background.
Earlier this year, another Davis startup, video game development company Brash Entertainment LLC, raised $400 million in a combination of equity and debt to carve out a slice of the industry centered around the releases of Hollywood movie studios.
Los Angeles-based Brash received the new capital from a syndicate of private equity firms led by Abry Partners LLC of Boston, joined by New York Life Capital Partners III LP of New York, and PPM America Private Equity Fund II LP of Chicago, as well as Northwestern Mutual Life Insurance Co. of Milwaukee.
Live Gamer's yet-to-be-launched platform is designed to capitalize on the huge popularity of massively multiplayer online games. In these virtual worlds there is a black market for buying and selling the rights to use in-game goods, services, and characters. Known as "gold farming" some players gather items of value within a game solely to sell to other players.
"Even in illicit form, the virtual trading economy has proven that vast demand exists," Davis said in a statement.
A recent New York Times story said roughly $1.8 billion was spent last year by gamers on virtual items. This type of buying and selling is also usually against the game publisher's terms of service and is unregulated. Live Gamer aims to become the eBay of this trading by providing a secure marketplace in which players can get protection from unethical traders.
"Our goal is to partner with major publishers," said Schneider, "and deliver a secure easy to use solution for their constituencies to trade virtual items ... an economy this large clearly needs a legitimate trading infrastructure that serves the needs of each of its millions of participants."
While Schneider would not specify when the marketplace would be available, he did say that the company has been developing and testing its product for the last eight to nine months.
The studios that Live Gamer has agreements with include Funcom GmbH; Sony Online Entertainment; 10Tacle Studios; Acclaim Games Inc.; GoPets Ltd.; and Ping0 Interactive Ltd.
Schneider said that future announcements will give insight into when it plans to go live with its marketplace as well as the specific titles for which its platform will allow trading.
Whether the pull of a regulated marketplace will be enough to pull in gamers remains to be seen. Live Gamer said that the "vast majority [of revenues] of every transaction goes to the gamers." Published reports say that Live Gamer takes a 10% cut of the value of each transaction and then shares 10% of that fee with the game publisher.
The company turned to Goodwin Procter LLP for counsel, while Sonnenschein Nath & Rosenthal LLP represented Kodiak and Pequot Ventures; and Lowenstein Sandler PC represented Charles River Ventures.
