Meteor Entertainment raises $10M to fund Hawken online mech game (exclusive)

Meteor Entertainment has raised $10 million in a bid to launch a downloadable online game called Hawken. Aimed at hardcore gamers who battle each other online, Hawken is a fast-action shooting game where players can equip themselves with giant armored mech robotic suits and pummel each other in the ruined cities of a toxic planet.

The large amount of funding for a studio that has only one unpublished game in the works is a big bet, but one that the backers are making with a great deal of confidence. The investors include Benchmark Capital and FirstMark Capital, the same investors who backed the highly successful Riot Games, maker of League of Legends, a downloadable web game that was so popular that China’s Tencent bought Riot for more than $400 million last year. At the time, Riot had just a million users, but the company was valuable because of its fast growth — it has more than 35 million downloads now and four million to five million daily active users — and the hardcore gamers were willing to spend real money for virtual goods in the free-to-play title. The investors call the sector the “core free-to-play market.”

“We were tremendously thankful to be associated with Riot, but we viewed the market as much bigger than a single title,” Mitch Lasky, a partner at Benchmark, said in an exclusive interview. “We think that $8 billion to $10 billion will migrate away from packaged goods games and free-to-play will be a lightning rod for those dollars.”

Hawken is being developed by Adhesive Games, a small team in Alhambra, Calif., and it will be published by its parent company, Meteor Entertainment, which is headed by chief executive Mark Long and has staff in Seattle. Long hopes to accomplish something similar to Riot by targeting Hawken at hardcore gamers. On top of high quality, the team hopes it can disrupt traditional hardcore game companies via digital distribution on the web and the free-to-play business model. And Meteor is building a hybrid cloud publishing infrastructure that will be able to host other games too.

“We are seeing the rise of the direct-to-consumer model, where all is downloadable and free-to-play,” Rick Heitzmann, founder and managing director of FirstMark Capital, told VentureBeat. “You can disrupt the business with a free-to-play title. Gamers are willing to pay via virtual goods to do that. League of Legends is a fantastic title, but it is just one game and one genre that has blown up. We think it’s possible to produce very high quality games that have huge audiences that are willing to pay.”

Lasky added, “It’s a phenomenon akin to other incumbent areas like music, TV, film, and newspapers, where the internet is disrupting both
business models and consumption patterns. We have seen it happen again and again. The internet levels the playing field.”

Hawken is scheduled to launch on Dec. 12, or 12/12/12. The title drew a lot of attention last year because the team posted cool game play videos on YouTube that collectively garnered more than 1.9 million views. Khang Le, chief executive of Adhesive Games, told us in an interview that the game is akin to Call of Duty multiplayer combat, but for mechs.

Among the comments on YouTube are:

“Just shut up and take my money.”
“I was thinking badass the whole time!”
“F***ing sick! Open beta immediately!”
“FAWKEN AWESOME!”

The developers are now enlisting gamers for the closed beta test; more than 200,000 have signed up already. The money will support Meteor’s expansion over the next year and make it possible to publish Hawken as a free-to-play game.

The title is Adhesive’s first. The studio was formed in 2010 and has 11 employees in Alhambra and 12 in Seattle. CEO Khang Le co-founded the company with K. Jonathan Kreuzer (technical lead), Dave Nguyen (designer/artist) and Christopher Lalli (animator).

Le previously worked on a game development team called Offset Software that was working on a fantasy action game known as Project Offset. Intel acquired the company because it needed a team of game makers to create software to run on its Larrabee multi-core graphics chip, which was intended to be the heart of a video game console. Intel had a deal in place to make the chip, but the project ran off schedule and Intel ultimately canceled it. After that, Le left and recruited former team members to begin work on Hawken, starting in 2010. They continued the work without funding as a labor of love.

“They were an incredibly passionate and competent team,” Lasky said. “Lots of things suggested to us it would be a big hit.”

Heitzmann added, “They were scrappy. The fact that they did their demo with 10 people is remarkable. ”

The action takes place on a post-apocalyptic human-colonized planet that has been industrialized to the point of collapse. This crumbling world is the setting for a hunt for vital resources and a brutal battle for survival. While many mech-based games, such as the aging Mech Warrior series, have relatively slow action, Le said the action of Hawken is fast-paced and relatively short.

Le said the game is designed to run on a wide variety of computers. Those with good PCs and decent broadband connections will be able to play the game at 60 frames per second. But those with older PCs and slower connections may experience the game at around 30 frames per second.

The content was so good that Lasky was sure the right route was to raise funding so that Adhesive and Meteor could remain independent. Now the company plans to create new assets such as graphic novels, videos, and even a feature film.

The key to monetizing the game is the virtual goods model, where users play it for free and then pay real money for virtual goods such as better weapons, armor, and defenses. The game looks cool in part because Adhesive has licensed the Unreal Engine 3 from Epic Games to power the PC version. Le said the company intends to operate Hawken like a service over a number of years. But it won’t be a massively multiplayer online (MMO) game.

So far there are no direct competitors, although a title called MechWarrior Online project is under development. Piranha Games is creating that title as a free-to-play game for the PC. In digital publishing, rivals include Valve, Electronic Arts (with its Origin service), and Nexon. Meteor has 34 employees, including 11 in Alhambra and 23 in Seattle.

Lasky said he started looking for the Hawken team at the suggestion of his brother, who saw the game play video. But the team didn’t have a web site at the time and Lasky had to track them down via a job posting in Alhambra, where “I camped out on their doorstep.” At the time, Le was looking for publishers and “we talked him out of that,” Lasky said.

Then Lasky and Heitzmann helped recruit Long, who was previously chief executive of Zombie Games in Seattle. Long pulled together a publishing team to host the game, handle the marketing, and undertake merchandising.

As for the state of gaming, Lasky said, “This is the most chaotic period in the game industry I can remember, and chaos is good for investors and startups. This year, I don’t think there will be a galvanizing event like Zynga’s initial public offering. But there will be a series of small events that will look significant in retrospect. Social and mobile games are clearly lower risks. But if you find an extraordinary game like Hawken, you can build a defensible competitive position.”