Buzzy British gaming startup Improbable increased its revenue by more than 10,000% in 2017, though higher staffing and development costs meant the firm still posted a loss for the year.
The company's revenue for the 12 months to 31 May 2017 was £7.85 million ($10.9 million), up substantially from just £72,331 over the same period in 2016. The bulk of its revenue came from its US subsidiary.
The firm trimmed its losses to £4.88 million, a 44% year-on-year improvement on the £8.7 million loss in 2016, according to Companies House filings.
Improbable was founded in 2012 by CEO Herman Narula and CTO Rob Whitehead. The company makes its money by selling its virtual world simulation technology, SpatialOS, to third parties such as game developers. It doesn't release its own game titles, but has struck agreements with studios such as Bossa for its "Worlds Adrift" game.
It still costs the company more money to sell that technology than it does to make it, as shown by its negative gross profit margin percentage. But the picture improved substantially over 2017.
Improbable's gross margin percentage was a whopping -73% in 2016, due to its high cost of sales and tiny revenue. By the end of May last year, that had improved to -0.4%.
Another improvement was that the firm trimmed its operating losses, from £8.7 million in 2016 to £8.1 million in 2017.
Still, the negative profit margins will raise questions about how the company was valued as a "unicorn" — the tag given to a startup worth more than $1 billion — last year. Improbable has never confirmed the figure, but TechCrunch placed its valuation last year at more than $1 billion.
Another challenge is that, according to its filings, most of Improbable's revenue came from demonstrating its SpatialOS software and proofs-of-concept. It will need to convert those into long-term partnerships to keep making money.
In its filings, Improbable said the main risk to its business was that it might not make enough money.
The firm increased its total staff count in 2017 to 135, from 78.
Improbable lost its chief legal officer Rob Miller after less than a year. Miller joined in March 2017, but left in January to take up the same position at Deliveroo.
Shortly before Improbable published its 2017 accounts, it also fired its auditors RSM UK Audit because it wanted new advisors. RSM acknowledged but did not immediately respond to a request for comment, and Improbable has not yet announced its new auditors.