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Zynga acquires Echtra, maker of Torchlight 3, to double down on RPG games

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Games company Zynga has been on an acquisition tear the last several years to beef up its activity in particular in mobile and casual-puzzle games, spending over $3 billion to pick up a range of startups across Europe (specifically Turkey and Finland) in the process. Today, however, it’s taking a turn towards more immersive, highly graphic cross-platform experiences. The company has announced that it is acquiring San Francisco’s Echtra Games, the role-playing game publisher behind Torchlight III, which is available on Steam, XBox One, PS4 and Nintendo Switch.

The team will be working on releasing a new title in partnership with Zynga’s NaturalMotion studio, the company said. No other details on that were released for now.

Financial terms of the deal were not disclosed. It’s also not clear who backed Echtra, if anyone.

But Echtra is in some ways a classic example of a gaming startup built out of a burning idea, rather than cold, calculated moneymaking — perhaps the best kind of company you can have.

Max Schaefer, the co-founder and CEO, had previously been at Runic Games, the developer of the original Torchlight series, as well as Diablo and others. Runic was shuttered by its owner, Perfect World, and so in 2016, Shaefer went on to form a new company, Echtra, with some of his Runic colleagues and others in the industry because he saw more life left in the franchise.

The plan will be to bring on Echtra’s team and expertise both to continue building the franchise and to more generally help Zynga build out more of a footprint in cross-platform games, and also gaming technology, in particular around tools built on Unreal Engine, the platform of choice at the moment for RPG and other immersive applications.

“Max and his team at Echtra Games are responsible for some of the most legendary game properties ever created, and they are experts in the action RPG genre and cross-platform development.  I’m excited to welcome the Echtra Games team into the Zynga family,” said Frank Gibeau, Chief Executive Officer of Zynga, in a statement. “This acquisition will be instrumental in growing our iconic licenses and brands from mobile to PCs and consoles, while helping to further expand Zynga’s total addressable market.”

“Echtra Games is delighted to be joining the Zynga family,” added Max Schaefer. “We share Zynga’s vision that cross-platform play is an essential part of the future of RPGs and interactive entertainment and are eager to apply our vast experience and talents to this effort.”

Gaming has been one of the bright spots in the last year — no surprise, since people are spending so much more time indoors and at home because of the pandemic. Zynga, as a consequence of that, has also been on a roll in recent times, with its fourth quarter earnings, released last month, beating analyst expectations. Its revenues of $616 million are the highest ever quarterly bookings posted by the company. Acquisitions are major part of its strategy these days, the company said at the time.

Going for more immersive RPG titles outside of mobile is an ambitious and potentially more expensive undertaking and is a very notable swerve away from the company’s acquisitions in recent years, which have included a majority stake in Turkey’s Rollic for $228 million, Peak for $2.1 billion, 80% of Small Giant Games for $718 million; and Gram Games for $299 million.

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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Haitian Activist Brings Awareness To Spate Of Violence Rattling Country

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NPR’s Michel Martin speaks with Jimmy Jean-Louis, a Haitian activist and actor who has been calling attention to the recent surge of violence and kidnappings in his country.

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Consumer agency warns against Peloton Tread+ use, as company pushes back

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Almost exactly a month ago, Peloton CEO John Foley wrote an open letter about the the company’s treadmill. “I’m reaching out to you today because I recently learned about a tragic accident involving a child and the Tread+, resulting in, unthinkably, a death,” it begins. “While we are aware of only a small handful of incidents involving the Tread+ where children have been hurt, each one is devastating to all of us at Peloton, and our hearts go out to the families involved.”

Today, the U.S. Consumer Product Safety Commission issued a warning, telling users to stop using the Tread+. Citing 39 incidents, included the aforementioned death, the CPSC writes, “The Commission has found that the public health and safety requires this notice to warn the public quickly of the hazard.”

Peloton followed up with its own strongly worded statement writing, “The company is troubled by the Consumer Product Safety Commission’s (CPSC) unilateral press release about the Peloton Tread+ because it is inaccurate and misleading. There is no reason to stop using the Tread+, as long as all warnings and safety instructions are followed.”

The commission’s warning includes multiple injuries involving small children and a pet. Specifically, the note calls for users with children at how to cease using the product, a more stern warning than the initial suggestions outlined by Foley back in in March, who at the time told users to keep children and pets away from the system and store the device out of reach after using. Peloton has since added that there have been 23 incidents involving children, 15 with objects and, as the CPSC noted, one with a pet. The company added that it had not revealed the specifics previously out of privacy concern.

“If consumers must continue to use the product, CPSC urges consumers to use the product only in a locked room, to prevent access to children and pets while the treadmill is in use,” the organization notes. “Keep all objects, including exercise balls and other equipment, away from the treadmill.”

For its part, the connected fitness maker adds,

Peloton invited CPSC to make a joint announcement about the danger of not following the warnings and safety instructions provided with the Tread+, and Foley asked to meet directly with CPSC. CPSC has unfairly characterized Peloton’s efforts to collaborate and to correct inaccuracies in CPSC’s press release as an attempt to delay. This could not be farther from the truth. The company already urged Members to follow all warnings and safety instructions. Peloton is disappointed that, despite its offers of collaboration, and despite the fact that the Tread+ complies with all applicable safety standards, CPSC was unwilling to engage in any meaningful discussions with Peloton before issuing its inaccurate and misleading press release.

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Why it’s not surprising to see nine-figure AI rounds 

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Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s broadly based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading. If you want it in your inbox every Saturday morning, sign up here

Ready? Let’s talk money, startups and spicy IPO rumors.

This week, Scale AI raised a $325 million Series E. The company, as TechCrunch has written, works in the data labeling space. And it has been on a fundraising tear over the last few years. In 2019 TechCrunch wrote about how the company’s then-22-year-old CEO had put together a $100 million round. Then in December of 2020, it raised $155 million at a roughly $3.5 billion valuation. Now it’s worth more than $7 billion.

Impressive, yeah? Well, as I learned earlier this week, AI startups in general are having one hell of a year. From the start of 2021 to April 12th, there were 442 AI-startup deals in the U.S. worth $11.65 billion, according to PitchBook data. And the recent Microsoft-Nuance AI deal may accelerate things even more.

Sapphire Ventures’ Jai Das weighed in on the AI venture market for The Exchange. He answered our question regarding how competitive the space was in the first quarter by saying that “investment activity in AI/ML startups has been absolutely insane” during the first quarter.

Per Das: “AI/ML startups are routinely getting 5-6 term sheets from top-tier VC firms and they are able to raise their financings at 150-250X of current ARR.”

Chew on that for a moment. We’ve seen public software multiples reach new heights in the last year, but even for aggressive startup rounds, those are some bonkers numbers. Imagine an AI-focused startup with $1 million in recurring revenue being valued at a quarter of a billion dollars. Damn.

But what about pace among AI investing? We’ve heard that the time from a round opening to its closing among many startups has been compressed and compressed again. Das helped explain the situation, saying in an email that “most firms are completing their due diligence way before the financing actually happens,” which means that there is “no need to do any due diligence during the financing.”

That actually makes some sense? If rounds are largely preemptive — something that Das underscored later on in his comments — you have to do pre-diligence. Otherwise you’ll always be investing blind or missing out on deals due to other firms moving more quickly.

This week The Exchange also dug into the broader domestic venture capital market, with a special focus on seed deals, and the super late-stage investments that dominate headlines. A comment on the earlier-stages of venture investing that just missed our piece on the matter came from Jeff Grabow, EY’s U.S. Venture Capital lead.

In his comments on pre-seed, seed and post-seed deals, something stood out to us — a prediction of sorts. Here’s Grabow:

[Q1 2021] was a strong quarter for pre-seed funding when you compare it to prior years, and we expect the overall environment to remain strong given the abundance of capital available and plethora of investable themes that tap into new markets via technological solutions. It paints a rosy picture for the post-COVID environment.

That tracks with our internal estimates. Q1 2021 was so hot for at least American venture capital activity (expect more international coverage soon) that it seems likely that the year itself will be a record in many respects. Provided that things don’t slow too much, records will be broken. And here Grabow flat-out anticipates a pretty attractive climate for venture after COVID-19 is behind us.

So, records will be broken. The question is by how much.

More notes on Coinbase’s direct listing

Not to whomp the equestrian deceased too much, but I have a few more notes for you on the Coinbase direct listing.

Public.com, the Robinhood consumer trading rival, helped The Exchange better understand just how much retail interest there was in the stock. Per its ever-present spokesperson Mo, on April 14th, Coinbase “was the most popular stock on public,” measured by number of transactions. And perhaps more notably, on the same day “social activity (measured by the number of posts) increased by 70% compared to the day prior.”

I do not know how long the consumer trading boom can last, but that’s a pretty impressive set of metrics.

Similarweb also had a few data points to share, including that visits to coinbase.com reached 86.4 million in January. Hot damn. And during that month new visitors bested returning visitors. That data helps explain how Coinbase wound up with the epic first quarter that it did. Now the question is if it can keep up its bull run or, frankly, if consumer interest in trading in crypto specifically will outlast the equities trading boom or not.

Coinbase Series D lead investor Tom Loverro, who we’ve mentioned a few times this week, including on the podcast, said that we’re still merely in the second inning of crypto. So expect these topics to keep coming up again and again. And again.

Various and sundry

Trying to actually stick to our word count target for once, here are some final notes on the IPO market from the week.

First, the AppLovin IPO did not go according to plan. After modestly pricing at $80 per share, the middle of its range, the mobile-app focused tech company saw its value fall during its first two days’ trading. It’s now worth $61 per share as of the end of Friday.

The Exchange spoke with AppLovin CFO Herald Chen on its IPO day. Chatting with the finance executive, our read from the conversation is that the company could accelerate its acquisition game more now that it is public. Having a liquid stock means that it can be even more acquisitive than before. And AppLovin claims that it can buy companies, run them through its business process, and juice their revenues per its S-1 filing.

If that bears out, the public markets may be giving the company a bit too hard of a time. It was a bit odd to see a software company struggle post-IPO in today’s climate.

Chen also told The Exchange that his firm didn’t see any pushback regarding its multi-class share structure during its roadshow. The multi-class share miasm is something I’ve written about with our own Ron Miller. The CFO did note that no single person has complete control of the company, even with several different classes of equity with disparate voting rights. That matters, frankly.

We’ll keep tabs on AppLovin as it trades. (Our earlier coverage of its numbers is here.)

Finally, autonomous trucking company TuSimple went public this week, and Similarweb filed to go public. We’re also watching the broader IPO market as UiPath either raises its price range or note. We have a guess on that score.

And just as the week was closing, Squarespace dropped its S-1. Notes here with more to come.

Good vibes and nothing other than the best from here,

Alex

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