Runescape News: Control of Jagex Shifts to New York City

by JoHarrington

US firm Insight Venture Partners now owns the majority of shares in the British company Jagex. What will this mean for the future of Runescape?

Despite occasional unpopular decisions, Runescape players have largely trusted the future of their game in the hands of its founder.

Andrew Gower created it as a project, while just a student at University. Its appeal was immediate; its popularity steadily growing. It was his baby and everyone respected that.

But then he sold his majority shares to venture capitalists on Wall Street. As players reel from the shock of that discovery, the next question on our lips is - what does this mean for our game?

Andrew Gower Nets £75m from the Sale of his Jagex Stake

The gaming company's founder has sold his one-third share to American venture capitalists.

Andrew Gower, the man who made Runescape, has severed his ties with the game. The Jagex founder has sold his remaining shares to the New York based equity firm, Insight Venture Partners. For the first time in its history, this places control of Britain's leading game company firmly onto American soil.

According to on-line gaming magazine Develop, the deal was completed 'at some stage' in 2011, but has only just become public knowledge. March 2011 financial records, deposited by Jagex at Companies House, reveal that the company is now valued at up to £240m. This placed Andrew Gower's one-third share at an estimated £75m.

Jagex CEO Mark Gerhard has been quick to respond to the report. He told Games Industry that more capital was needed, in order for Runescape to progress, but UK investors were 'painfully shy and risk adverse'. The company deliberated for a year to find the right equity firm before choosing Insight Venture Partners. The reason, he was quick to reassure players, was that there was no pressure to sell any shares. Jagex could take its time determining the right funders for its ethos.

It is known that Jagex were willing to pay £2.5m in expenses in order for the US firm to take control. Insight Venture Partners are not an unknown quantity. It has owned a 35% stake in Jagex Ltd since 2005. However this latest purchase means that it now holds the majority shares.

Andrew Gower resigned his position on the Jagex Ltd Board of Directors in December 2010. He is currently at the helm of a new business, Fen Research. He reportedly owns 90% of the company. Their website lists it as 'a new Cambridge based start-up, working on creating a ground breaking new product in the field of online games and user created content.'

It is a description which could equally have applied to Runescape ten years ago, implying that Jagex now have a rival on the British market.

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How Andrew Gower Created Runescape

Jagex was born in a student's bedroom. It became one of Britain's most lucrative businesses.

It is the stuff of legend. Andrew Gower was a struggling student, desperate for money, when he was handed an opportunity to make some. The skills he learned would eventually lead to a fortune.

He told fans at the first Runefest that someone had offered him £500 to produce a JavaScript game for a website. He didn't know a thing about JavaScript, but he wasn't about to let so much money slip through his fingers! After a crash course in the coding, he delivered the goods and moved on to making his own platform.

The resulting multi-user domain (M.U.D.) that followed contributed greatly to his dissertation at the University of Cambridge. Friends liked to play it with him. They told other people and the community grew. The game expanded greatly. It would one day become one of the world's most successful Massively Multi-player On-line Role-playing Games (M.M.O.R.P.G.) - Runescape.

Andrew brought in first one brother, then another. Various family members were co-opted into designing characters and scenery. His mother famously cooked bacon, so Andrew could record the sound. It is still played whenever a Runescape player lights a fire. He founded a company to market his game and called it Jagex. It has variously been stated that Jagex stands for Java Gaming Experts or Just about the gaming experience.)

With a friend named Constant Tedder willing to insert some much needed capital, Jagex was free to develop Runescape into a profitable on-line game. It was a gamble that paid off. By 2009, when Andrew was still just 29 years old, he and his brother Paul owned a company that was valued at £110m. The Daily Telegraph placed them as the 11th richest entrepreneurs in Britain.

Yet just one year later, Andrew resigned from Jagex's Board of Directors. By November 2011, he was no longer even listed amongst the Runescape credits. He had already sold his remaining shares to the American equity firm Insight Venture Partners.

The Genesis of Runescape

At Runefest 2010, Andrew and Paul Gower revealed how they created Runescape.

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Who is Insight Venture Partners?

The US company are not gaming developers, but financiers working with some of the internet's largest brands.

Photo: US DollarInsight Venture Partners was founded in 1995 as investors into up-and-coming businesses. Their main focus is upon software, internet or data-based companies. It has only recently branched out into providing capital for the expansion of established projects too.

Based in New York City, the venture capitalists have ploughed money into the likes of Twitter, Tumblr, Zumba and Fuze. A full list of its assets can be found in the company portfolio. Its most recent success story was helping expand the German bargain sales website, Daily Deals, to the point where it was acquired by Google Inc after only two years in business.

As an equity firm, Insight Venture Partners seeks to maintain a substantial, if not majority, share in any company into which it invests. Its primary focus is upon maximizing profits through a variety of strategies. This may involve introducing financial and marketing experts into the boardroom, or else using its own networks and other channels to promote its portfolio businesses.

Typically an equity firm will receive a management fee, as well as a percentage of any profits resulting from its investment.

This appears to have been the pattern in the relationship between Jagex and Insight Venture Partners. In 2005, the investors originally obtained 35% of the Jagex shares from Constant Tedder. As part of the terms, the equity firm's vice-president Alex Crisses and managing director Jeff Horing both joined Jagex's board of directors.

By February 2011, Jagex announced that Insight Venture Partners had invested more capital. This came at a time when two further equity firms, Raine and Spectrum, were also funding growth and taking their own places in the boardroom. Jagex CEO Mark Gerhard stated, 'I fully expect that the collective experience of the shareholder base will be highly advantageous as we embark on our next chapter of growth.'

None of the original three - Andrew Gower, Paul Gower and Constant Tedder - are on the Jagex board of directors now.

Latest news about Insight Venture Partners

Stibbe congratulates Insight Venture Partners  Stibbe
Insight Partners cuts size of $20bn fund amid 'great reset in tech'  Financial Times
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Insight Venture Partners Wins $1.2 Billion SimpleNexus Deal Suit  Bloomberg Law
Insight Partners Has Invested More Than $4B Into AI. What's Next?  Crunchbase News
Insight zeros in on Fund XIII's $15bn cap as tech fundraising takes a dive  Buyouts
Private capital insights for 2024  Farrer & Co
Insight zeros in on Fund XIII's $15bn cap as tech fundraising takes a dive  Venture Capital Journal

What Might New Ownership Mean for the Future of Runescape?

Is it still 'just about the gaming experience' for Jagex as the dollar signs ping?

In the short term, it can be expected that Jagex will seek to assure gamers that it is business as usual.

Andrew Gower was a trusted figure from the outset, with all of the first Runescape players being his personal friends. Even when the player base touched the millions, the general feeling was still that Andrew had the best interests of the game at heart. Profits would always be ploughed back into creating a greater Runescape experience; harsh decisions were solely for making the game better.

The loss of this central figure is going to be a huge blow to Jagex's public relations efforts amongst its customers. With the money men in control, any future decision is going to be viewed in this context. The company has already received criticism for aggressive monetization in recent years. This is likely to escalate in the future.

Jagex have always been proud to offer a free to play portion of the game. Members subscribed merely to access larger areas, more skills and a wider array of in-game possessions. Yet free players have come under increasing pressure to purchase, with many aspects of their area containing the notice that this can only be unlocked by acquiring membership.

Ill-fated blatant marketing attempts, such as the introduction of Gnomecopters to survey member lands, had to be taken from the game due to player protest. Such strategies have now become more subtle by removing established features, such as listing on the hi-scores, which had previously always been part of the free game.

Even loyal members have been targeted by money-making schemes. Recently unique in-game items have been made available only to those purchasing their membership through the most expensive medium of game cards. Individuals who chose to pay monthly via standing order are not eligible to claim the items. Their membership came too cheaply.

However, the longer term benefits have the potential to pacify the players. More capital means greater investment in the game itself. Graphical reworkings have already altered the general look of Runescape, while more development could see a greater game experience. As long as Jagex can keep their players entertained and entranced, then they are more likely to forgive the overt profiteering and just keep on paying and playing.

What will make or break Jagex depends upon how well they balance content versus sales. Without Andrew Gower to inspire confidence, the new owners will have to work twice as hard.

Are you concerned about Runescape without Andrew Gower?

Less than One Month Later...

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Runescape U-turns into aggressive real world trading with Insight Venture Partners' Jeff Horing at the helm.

Other Runescape Articles

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The items were just pixels in an on-line game, but a court in the Netherlands has ruled that stealing them was real world crime.
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Updated: 03/19/2014, JoHarrington
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JoHarrington on 01/06/2013

Travis - You won't find any argument for that point of view here. It's distressing how quickly and how thoroughly Insight Venture Partners destroyed Runescape.

Travis on 01/01/2013

The people running this game now are driving it hard and fast into the ground.

JoHarrington on 08/19/2012

You're not alone in that opinion, Ket Wiki. It's truly heart-breaking to see a brilliant game and community being broken asunder like this. If it wasn't for my clan, I'd have already walked. Even with my clan, I'm barely logging on; and most of them have left too. I just feel that, as clan leader, I should be the last one there. Just to close the doors, stack the chairs and switch off the lights.

Thank you for your comment. I've only been to the grotworms once, so I didn't know about the bot problem. It doesn't surprise me though.

Ket Wiki - a player on 08/19/2012

Runescape is going to hell.
The upcoming combat update is going to be the last straw for most players.
And adding the upset players regarding the SOF and the Solomon shop even more players will quit playing.
Soon only BOTS will play Runescape and if they start to fail selling there gold they will stop too.
I warned Jagex about the bots at the grotworms but sadly Jagex did nothing.
About 40-50 bots play there 24 hours a day making about 150K per hour.
times 40 bots times 24 hours thats a lot of gp.
Now count the number of world where you can kill grotworms.
And you can buy 10 blue phats a day.

JoHarrington on 07/24/2012

I certainly agree that Runescape was much better with Andrew at the helm. But he must have known what would happen, when he sold his shares to Insight Venture Partners. It's hard to know what to think about that.

I'd also check out anything that he does with Fen Research.

Ricky on 07/24/2012

Today, Runescape is just going downhill. Andrew should come back. Without him Runescape... just isn't Runescape, and the stupid ass people who own it now Charge for literally everything, and RWTing is now legal if you buy from Jagex. Horrible, I do hope Andrew releases this game, I will leave Runescape for it.

JoHarrington on 03/19/2012

I know that he's been at Runefest. Is he still in the offices up Cambridge then? Thanks for your comment.

Guest01 on 03/19/2012

I think Andrew Gower still spends time at Jagex. But his main priority is Obv. Fen.

Good info, Thanx

JoHarrington on 02/17/2012

It is a bit strange to know that he's moved on, isn't it? I'll miss him too. He WAS Jagex, as far as I was concerned.

To me, the proof will be in the pudding. Runescape has gone on for a year, with us assuming that Andrew was somewhere in the background. There have been some great updates in that time, though undoubtedly some more incentives to buy things. I hope it doesn't go too far that way.

Hunter on 02/17/2012

i'm gunna miss him...

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