Russian gaming company wins with bet on Ireland

KamaGames valuation up threefold since move to Dublin in 2012

KamaGames, a Russian gaming company, has seen its valuation jump threefold to about $500 million (€404 million) since moving to Dublin in 2012, despite financial and regulatory challenges related to EU and US sanctions on Russian companies.

The firm, which focuses on social casino games, moved its headquarters to Dublin is part of the "waves" of Russian start-ups, programmers and developers relocating to Ireland due to concerns about recession and the political and legal environment at home.

"In 2012 the company was growing and developing new products and we decided that our base in Cyprus wasn't that attractive to grow further and to interact with big US companies," says Andrey Kuznetsov, managing director of KamaGames. "There were also some negative aspects about what some Russians were doing on the island."

Kama weighed up several jurisdictions and ultimately chose Dublin so the company could be near its biggest clients, Apple and Google, which generate 60 per cent and 30 per cent of its revenue, respectively.


"We considered Switzerland and some other places, but our American tax lawyer advised us to look towards Ireland because it's a European, English-speaking jurisdiction with common law and a reasonable tax regime, although tax wasn't the number-one item for us," says Kuznetsov. "All of our main partners are here – Apple, Google, Facebook and Microsoft – and we can see them whenever for face-to-face meetings."

Potential buyers So far, the bet seems to be paying off. Based on current earnings multiples, a London-based banking adviser suggested Kama could be worth about $500 million, although he warned that

only a small number of potential buyers, such as Zynga and WSOP [World Series of Poker], are active in this niche.

“Zynga acquired a UK company, NaturalMotion, three years ago [for $527 million] at multiples of about 10 times’ earnings, which is similar to Kama,” he says.

Kuznetsov (33) says the company is not in any rush to sell and is seeking to expand into China after recently signing a partnership deal with India's Yoozoo Games. However, Kama may seek an exit through an initial public offering or a sale within five years.

Without giving too many details, Kuznetsov says profits are in “the tens of millions”, while overall revenue increased by 65 per cent to $58 million in 2017.

Having bought a house, he and his wife have settled in Dublin and plan to apply for citizenship later this year

Kama’s most popular game is Pokerist, which Kuznetsov says US-listed Zynga tried to buy a few years ago. Like many other free-to-play social games, such as Candy Crush and Farmville, it is possible to move through the levels more quickly and access other areas of the game by buying additional chips.

Kama has about 100 million registered users, while daily users have increased to 500,000 from 280,000 a year ago.

There are four or five serious players in social casino games, and it can be very profitable. Zynga, for instance, last year generated well over $100 million from selling chips that have no monetary value – more than some of its peers in raked in from its real money tables during the same period.

The crossover between social and real money is tiny because they are different audiences, according to Kuznetsov. “Our clientele are casual players, who play through social networks and it’s about the game and nothing else – ours is purely fun.”

However, he does admit that social gaming can be a stepping stone to gambling. “We’ve never seen a massive trend, but it is possible.”

The number of players in Ireland is small, and represents thousands. "People here have Paddy Power, where they can bet or play online gambling," says Kuznetsov.

IDA assistance Kama received assistance from the IDA with housing and work permits, but did no

t require any capital. “We are self-funded since day one and profitable since our sixth month, so we didn’t need any grants,” says Kuznetsov.

"The IDA helped with everything else and their manager of the growth markets, Myles Duffy, who has since retired, was amazing. He showed us around, told us the best places to live in Dublin and he still takes me and others hiking in the Wicklow mountains."

The company was founded in 2010 in Vladivostok in Russia's far east by a games developer who remains its main shareholder and prefers to remain in the background. A year later, when the company had grown to 80-strong, they set up a development office in Moscow due to a shortage of talent in Vladivostok.

The Dublin office on Amiens Street, which has about 16 people, is expanding and is focused on business development, marketing, legal and accounting.

The company, which has 220 employees globally, does not have programmers in Dublin because they are too expensive and hard to find, according to Kuznetsov, who says he once spent eight months trying to hire a single software developer. Other offices focused on business development and marketing are located in London and Dubai.

It hasn't all been plain sailing for Kama. Since the European Union and the United States imposed sanctions on Russia in 2014 over the Ukraine conflict, Kuznetsov says the company has faced a much harder ride from banks and regulators.

“They have our audited reports and they see all the revenues are from Apple and Google, but they want to be sure that none of us are associated with Putin’s friends or if we are sending this money to finance certain activities,” he says. “We have always been earning our money cleanly and transparently, but it’s getting harder every year with requirements from the ECB, the Irish Central Bank and local banks.”

Even his wife faced difficulties trying to open a personal bank account because of her nationality. "She wasn't working, she was legal here and she has never been associated with any exposed people," he says. "I had to directly reach out to managers at Bank of Ireland. They solved it but there were many delays."

Start-up fund Kama is

part of what Enterprise Ireland has described as "waves" of Russian start-ups, programmers and developers who have been lured to Ireland. The agency's Competitive Start Fund is open to start-ups from all around the world, but more than a third of its hundreds of applications comes from Russia or Russian-speaking countries.

Companies are provided with support to secure visas and accommodation as well as mentoring after they decide to move to Ireland.

Russia's Kaspersky Lab, the fourth-biggest anti-virus software maker, established its European research and development operation in Dublin in 2016. Employees at Google say that more than 10 per cent of the 3,000-strong workforce are Russian speakers. Several start-ups with Russian DNA, such as internet-of-things play Cesanta and Profitero, a provider of online e-commerce data, have spun out of Google.

Playrix is another Russian gaming company which has been drawn to Ireland. Its global headquarters are in Dún Laoghaire, but the vast majority of its 800 employees are based in Russia and Belarus.

The company, which was founded in 2004, is focused on free-to-play games, such as Township and Fishdom, which are among the top 50 grossing apps for the iPhone and Google Play.

Industry sources suggest Playrix, which has revenue of about $300 million, could be worth much more than Kama. Kabam, a Silicon Valley mobile gaming company, was sold a year ago to South Korea’s Netmarble Games for $800 million. A Playrix spokesman declined to comment.

"There are strong headwinds at the moment, such as a scarcity of independent sizeable studios and strong appetite from Asian buyers for gaming assets," said the banking adviser. "In Europe, several gaming companies have had quite successful IPOs, such as THQ, Nordic, Next Games and Rovio, and are driving positive sentiment."