How studios are valued

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What is our studio worth?

Kai asks in the studio chat: what is our studio worth? Three people give three answers. Remy guesses $5 million. An investor offers to invest at $900,000. A buyer hints at $600,000.

Nobody is lying. A valuation is an estimate of what a whole company is worth. It is not a fact you can look up, like the cash in the bank. It is a negotiated number: each side uses methods and evidence to argue for a price, and the deal happens where they agree. Like a rare trading card, a studio is worth what someone will actually pay.

Quick check

A studio's valuation is a fact, like its bank balance, that an accountant can look up exactly.

Show the answer

False

The bank balance is a fact. A valuation is an estimate built from methods and guesses about the future, and the final number is agreed in a negotiation between buyer and seller.

Multiples: revenue and profit

The quickest method is a multiple: take one yearly number and multiply it.

Profit multiples are bigger because profit is smaller than revenue. Buyers often use EBITDA, profit before interest, taxes and some accounting costs.

Do the math

offer-notes.txt (made-up example)
Yearly revenue      $200,000Yearly expenses     $150,000Buyer's offer       6x yearly profit

What price is the buyer offering?

  1. $300,000
  2. $1,200,000
  3. $900,000
Show the answer

$300,000

Profit is $200,000 - $150,000 = $50,000, and 6 x $50,000 = $300,000. $1,200,000 multiplies revenue instead of profit, and $900,000 multiplies the expenses.

Comparable companies

Where do the multiples come from? Mostly from comparable companies, or comps: similar businesses whose price is known.

Made-up example: a small mobile studio with $500,000 of yearly revenue sold for $1,500,000, which is 3x revenue. Another raised money at $2,000,000 with $500,000 of revenue, which is 4x. So a buyer might argue that studios like ours are worth 3x to 4x revenue.

Good comps match in size, type of game, platform and money model. Prices of private deals are often secret, which is one reason valuations get argued about.

True story: a price tag of US$10.2 billion

Supercell is a game studio in Helsinki, Finland, the maker of Hay Day, Clash of Clans, Boom Beach and Clash Royale. In June 2016, SoftBank, the Japanese company that owned most of it, announced that a group of investors set up by Tencent, a Chinese internet company, would buy up to 84% of Supercell.

The deal valued the whole studio at about US$10.2 billion. Supercell kept its headquarters in Helsinki and its own team running the games.

A deal like this becomes a comp: the next time a mobile studio is valued, both sides point to prices like this one, then argue about size and risk.

Source: SoftBank press release: sale of Supercell shares to a Tencent-led consortium (21 June 2016), group.softbank

Money later is worth less

A buyer pays today for money the studio will earn in future years. But money later is worth less than money now: money you have today can be saved or invested to earn more, and money promised later might never arrive.

So buyers discount future money, shrinking it to what it is worth today. At a 10% discount rate, $110 expected in a year is worth about $100 today. Adding up every future year's cash, each shrunk like this, is called discounted cash flow (DCF). Riskier studios get a bigger discount rate, so a lower value.

Quick check

A buyer thinks a studio's future earnings are very uncertain. In a discounted cash flow, what does that do?

  1. They use a bigger discount rate, so the studio is worth less today
  2. They use a smaller discount rate, so the studio is worth more today
  3. Nothing, because a DCF only looks at last year
Show the answer

They use a bigger discount rate, so the studio is worth less today

More risk means future money is less likely to arrive, so it gets shrunk more. A bigger discount rate gives a lower value today. A DCF is all about the future, not last year.

What pushes value up or down

Two studios with the same revenue can get very different prices, because buyers pay more for a future they can trust.

Price check

Email from a made-up buyer
We said 3x revenue. After due diligence we can only offer 2x. 90% of your revenue comes from Garden Defense, and there is no signed contract for the Sprig art.

Why did the buyer lower the multiple?

  1. The studio depends on one game and may not own its main character, so its future is riskier
  2. Buyers always cut the price at the end, whatever they find
  3. Garden Defense earns too much money
Show the answer

The studio depends on one game and may not own its main character, so its future is riskier

Depending on one game and unclear ownership of the IP are both risks, and more risk means a lower multiple. Fixing them early, with written contracts and a second strong game, protects the studio's value.

Pre-money and post-money

When an investor buys new shares, the agreed valuation goes into the deal as two numbers. Pre-money is what the studio is worth just before the money arrives. Post-money is pre-money plus the amount invested. The investor's share is amount / post-money.

Made-up example: $100,000 at a $900,000 pre-money gives a $1,000,000 post-money, so the investor owns 10%. With 1,000,000 shares before, that is $0.90 a share, or 111,111 new shares.

A higher valuation means less dilution, but too high can backfire: if the next round is priced lower, that is a painful down round.

Bolt says: Valuation is argued with evidence. Next lesson: business plans and pitch decks, where the studio makes its case.

Fact-checked 11 October 2026