Discover sales that could be worth more than $ 10 billion

Discord is now undergoing a sales process that could lead to a purchase of the communications and cha5t platform for well over $ 10 billion, GamesBeat has learned.

Two sources familiar with the matter said Discord was exploring its options for a sale following interest from several parties wishing to buy the company. According to one source, the company has signed an exclusive acquisition agreement with one party, which means it is in final negotiations over a sale. This news comes after Discord raised $ 140 million in December at a valuation of $ 7 billion (based on data found by Prime Unicorn Index).

Disagreement is seen as a strategic asset, as it connects gaming companies with their biggest fans in audio and text chat communities. Whether it sells or not depends on Jord Citron, CEO of Discord, who will have to decide whether the company can better fulfill its mission as part of another company.

“I know they’re actively in talks with a few select parties,” one source said. “The market is in a state where they can shell out strong double – digit billions of dollars.”

A Discord spokesman said he did not want to comment on rumors or speculation. Many things can happen that can change the plans of the company. According to our sources, however, there is disagreement.

The game market is currently full of plans and calculations. If Roblox is worth $ 42 billion in the public offering, it’s important to think so. Roblox had a successful public offering on March 10 that leaves the window open for other companies trying to maximize their value, either through acquisitions or through the stock market. Disagreement could be a test of whether another company with communications technology could follow in Roblox’s recent footsteps, and rumors are often circulating about a possible IPO.

Although Discord has grown dramatically and has more than 140 million monthly active users, it is still in a growth phase and the finances are not spectacular now. That means it may be too early for the company to try to publish, the source said. The Wall Street Journal reported earlier this month that Discord generated $ 130 million in revenue in 2020, compared to nearly $ 45 million in 2019. In that sense, Discord was similar to many other gaming companies that saw huge profits during the pandemic when everyone in the lock was. .

But Discord acknowledged in the same article that it is not yet profitable. In comparison, Playtika, which was announced in January at a valuation of $ 11.4 billion, was profitable at $ 2.37 billion in 2020 revenue. Playtika earns the money from in-app purchases in free games, and many Discord players can do without the premium subscription.

One source I spoke to said that Discord involved Qatalyst Partners to evaluate potential suitors. Qatalyst, which manufactures Frank Quatrone (CEO) at Silicon Valley Dealer and CEO George Boutros, handled the process when Discord went on sale in 2018. At the time, the company decided not to offer anyone. Qatalyst declined to comment.

Talks in 2018 were constant, with potential acquisition prices ranging from $ 2 billion to $ 6 billion. But buyers often wanted Discord to do something he did not want to do, such as advertise. Disagreement also felt that his values ​​could best be protected at that time by remaining independent. This means that it is possible that the current sales process may not result in Discord being sold.

“It is difficult to distinguish the difference between a serious acquisition effort and a fishing expedition,” said one source who should not be identified. ‘It can fall apart at any time. The reality is that the company is doing really well. I do not see a reason why they would want to sell. They seem to be in complete control of their fate at the moment. ”

Any potential buyer with more than $ 10 billion available to buy Discord would probably be a very big game business, but most likely the freer would be a platform owner like Microsoft, Amazon, Twitter or Google. Some gaming companies are certainly concerned that Discord, which plays critical roles in connecting gaming studios and publishers with their communities, could be acquired by a party that would only be interested in one of the communities. Microsoft did not respond to a request for comment.

The acquisition of Discord would change the company from an independent company that serves all gambling and other communities to a company that serves a specific parent company, just like what happened to Amazon that acquired Twitch, or Microsoft the (now closed) Mixer obtained. Citron’s previous company, OpenFeint, was successful in a sense that it was acquired by Gree in 2011 for $ 104 million. But many users complained about the change in ownership, and Gree eventually shut it down. It is unlikely that Citron will be able to make a similar outcome with Discord satisfactory.

Any transaction is likely to be at a higher valuation than the $ 7 billion in December, as secondary market sales – where employees and other shareholders sell their shares to others to gain liquidity (immediate cash) – cost more than $ 10 billion proposal. If a bidding war occurs for Discord, it’s easy to believe that the price could rise even higher, our source said. A second source familiar with the context of the possible sale said they would not be surprised if the value exceeds $ 20 billion.

Rainmaker Securities noted that secondary market share has increased fivefold over the past 12 months. And Rainmaker said its latest bid is $ 450 a share and has an estimated valuation of $ 11.24 billion. However, some transactions were valued at $ 14 billion. This is a small but important tea leaf about the value of the business.

The latest investors to buy into Discord include Greenoaks Capital and Index Ventures. Earlier investors included Greylock, IVP, Spark Capital, Tencent and Benchmark. If there is pressure on Citron to sell, it will most likely come from the early investors.

To date, Discord has raised $ 480 million. The company earns money from its users by upgrading them to their Nitro subscription service, but many use it for free. Along the way, many people encouraged Discord to accept advertising, but Citron avoided it because he felt it would harm the user experience. It turns out that the gamers’ outreach to other communities has helped the company grow and increase its subscriber revenue.

Discord’s claim to fame is that it has high quality sound, but that it has competition from Clubhouse, which raised $ 100 million at a valuation of $ 1 billion in a round led by Andreessen Horowitz. Possessing disagreement would be a foil for Clubhouse, and it could make it attractive to people like Twitter and Facebook, both of whom are threatened by Clubhouse.

Eros Resmini, Stanislav Vishnevskiy and Citron started Discord in 2015. They started their Hammer & Chisel games studio to make a multiplayer online arena (MOBA) social game. But although the game did not work out, the communication service did. I met Citron and Resmini at a restaurant in San Mateo, California, when they first told me about Discord.

Now it is very popular for purposes like esports communication, game community chat and other features. The company has more than 350 employees.