Skype founder, others catapult $42M to Angry Birds

Accel Partners and Atomico Ventures have co-led a $42 million investment round for Rovio, the creator of the Angry Birds Franchise.

The Angry Birds game is played by 40 million monthly active users and, with sales of over 2 million plush toys, has become one of the most recognized entertainment franchises. The game has had well over 75 million downloads.

Rovio plans to use the money to increase its reach internationally and to expand across mobile and social media markets through merchandising and partnerships. The company has been expanding through 2010 and 2011 and currently has 50 employees in Finland. Earlier this year the company announced that it would introduce an online Angry Birds experience in summer 2011, and would develop an Angry Birds game for all major consoles.

Says Mikael Hed, CEO and co-founder of Rovio, “Angry Birds will continue to grow, and we aim to create more similar success stories. We will strengthen the position of Rovio and continue building our franchises in gaming, merchandising and broadcast media.”

The funding round was co-led by Accel Partners, the venture capital firm known for having invested in Facebook and Groupon, and Atomico Ventures, the venture capital firm created by Skype co-founder Niklas Zennström. Super angel fund Felicis Ventures also participated. Niklas Zennström, who also co-founded Kazaa and Rdio, will be joining the board of Rovio.

Here’s what the Angry Birds folks told VentureBeat’s Dean Takahashi about getting started on the game last year:

Rovio got started in 2003 as Relude. It was started by three students from the Helsinki University of Technology: Niklas Hed (Mikael’s cousin), Jarno Vakevainen, and Kim Dikert. They had participated in a mobile game competition sponsored by Nokia and Hewlett-Packard. Peter Vesterbacka, who worked at HP, was one of the judges, and he suggested the trio start their own mobile games company. They did so. Digital Chocolate published the game, which was called King of the Cabbage World, a multiplayer real-time game on the now vintage GPRS system. They started doing work-for-hire games, creating titles such as Need for Speed Carbon for Electronic Arts.

Angry Birds was the company’s 52nd game. They were so successful that Vesterbacka joined them. Most of those games were designed for others. They made hits such as Real Networks’ Collapse Chaos, but always on a work-for-hire basis.

Mikael Hed joined as CEO in early 2009 and steered the team toward thinking about making internally produced games that it could own. The company took on more work-for-hire projects, but hired its own subcontractors to make them. That freed up the internal team to make its own games.

The team’s leaders started contemplating how to do the perfect iPhone game. They wanted to exploit the iPhone’s hardware, create memorable characters, and do a fun game that people would play over and over again. They conceived the game and targeted it at everyone: men, women, girls and boys.

“We wanted to eliminate luck from the equation,” Hed said. “So we focused on every detail.”

There were other catapult games that had become popular, so they decided to use that familiar mechanic. The game they created has players shoot angry birds with a slingshot to destroy structures. The game used physics, giving people the joy of knocking out items strategically, as if they were bowling. And while many games have the same kind of catapult mechanic, the Angry Birds characters are funny to look at. And it’s fun to shoot at the evil green pigs who have stolen the birds’ eggs. The pigs mock you if you mess up.

Ten of the company’s developers (only a few of them full-time) worked on the game. They chose Chillingo as their publisher because it had numerous other hits on the iPhone and they felt Chillingo could market their game best. It debuted on the iPhone in December, catching on in Finland first through the team’s own social circles. Friends showed it to friends. The title took off like a virus and spread to Sweden. Then it became the No. 1 hit on the App Store in the United Kingdom, selling for 99 cents.

Apple featured the title, making it easy for users to discover and try out. The company started a Facebook fan page, uploaded a video to YouTube, and started its own Twitter account. All of them were successes. On Twitter, celebrities such as skateboarder  Tony Hawk, musician Pete Wentz, and Frankenteen tweeted about their addiction to the game. Hawk said, “Recently finished Angry Birds on iPad and now I’ve lost my sense of purpose.” Jimmy Fallon joked about it on his NBC show. Somebody now tweets about Angry Birds about once every minute.