"Why backgammon?" Gigi Levy-Weiss laughs. "Because backgammon gives me the feeling that I can win. In chess, for example, I'm somebody who gets thrashed because it's a game based purely on skill, and there is something frustrating in that." This combination between skill and luck is what charmed Levy-Weiss and his partner Uri Shahak, two of the prominent figures in Israel's gaming sector, and spurred them into founding Beach Bum in 2015.
"We thought about a game that was suited for two opponents on mobile phones over the Internet. And in backgammon, even if there is an element of luck in throwing the dice, the more skilful player will win over the long term. On the other hand, the less good player can close the gap," Levy-Weiss said.
This was how Beach Bum was conceived as a gaming company, which develops board and card games for mobile phones. On Thursday it was announced that French gaming company Voodoo had acquired Beach Bum for an estimated $300 million in both cash and shares. The merged company plans to become a giant European gaming company developing hyper-casual and fun games and eventually embark on an IPO. Voodoo's investors include Tencent and Goldman Sachs, which will ease the path to a public offering.
Levy-Weiss and Shahak hit the jackpot in gaming prior to founding Beach Bum. In 2010, they were among the founders of Playtika (Nasdaq: PLTK), which held its IPO on Wall Street earlier this year and is traded with a market cap of over $10 billion. Shortly after Playtika was founded it was sold to for nearly $100 million. Following the sale, Shahak left and Levy-Weiss ceased his involvement in Playtika and they came to Beach Bum with money to invest. Shahak, who keeps his distance from the media, refused to be interviewed for this article, and he also left Beach Bum shortly after it was founded. Levy-Weiss stayed on as chairman but is not involved in the day-to-day running of the company.
Levy-Weiss was CEO of gambling company 888 and was the first investor and chairman of mobile game developer Plarium, which was sold for $500 million and has also been involved in the sale of small gaming companies to Zynga and Playtika. Today he is managing partner of the NFX venture capital firm, which founded, and which specializes in early stage investments. Levy-Weiss was interviewed before the announcement that Voodoo is buying Beach Bum.
What makes you keep going?
Levy-Weiss: "When you see something that can succeed, it's very difficult not to do it. What distinguishes entrepreneurs from other people is that you reach a point that you don't need to found companies in order to make a living but you simply can't not do it. You see something, you see a hole in the market and the idea begins to burn in your stomach regardless of other considerations. In the case of Beach Bum, Uri and I knew that there is a need for games of this genre and we processed this for a very long time. We said to ourselves, if we see a company like this that exists, we will invest in it. And when we didn't see it, we founded it ourselves."
As an entrepreneur, you come back to this sector again and again.
"As a kid I was a gamer. I love this entertainment that is called games and I think that this entertainment is as valid as any other, and I'd personally rather play a game than watch a Netflix series. Is watching a series about a murder that glorifies it better or worse than a game in which people get killed? I can't say. Games are never something negative but I cannot pretend that it will save the world. It is what it is and for good or bad, I am glad that I'm involved in gaming companies."
The three games that Beach Bum offers - backgammon, rummy and spades, have so far had 25 million downloads to Apple and Android devices, mostly backgammon. The company refused to cite precise numbers regarding revenue but estimates are than annual revenue is $70 million. Beach Bum has 140 employees and was profitable in 2019 and 2020. Profits doubled in 2020 following the Covid pandemic. Beach Bum has only raised $14 million from North83 and Saban Ventures.
Comparisons between Beach Bum and Playtika are inevitable. Playtika the mainstream Las Vegas casino experience to the mobile phone. Its first product Slotomania is still today considered one of the world's most popular mobile phone games.
Beach Bum, however, has taken traditional 'evergreen' games played by family and friends and passed down the generations from grandparents to grandchildren, and put them on the mobile phone. These are games which have existed for centuries. Backgammon is popular in Eastern Europe and the Middle East while Rummy comes from East Asia and Spades is an American variation of whist, and allows more luck than the best known trick taking card game Bridge. Beach Bum will soon launch a mobile game version of Dominoes, another age-old game first documented in 13th century China.
Beach Bum CEO Shachar Schalka said, "They have already been popular for hundreds of years before us they will probably continue to play them for hundreds of years after us. There is something in their DNA, which combines luck and strategic thinking, memory and the right mathematical problem solving ability, which makes them timeless."
Beach Bum's games are popular in Eastern Europe, the Middle East and Asia and also have a growing following among Asian and Mexican immigrants in the US and Arab and Turkish immigrants in European countries like Germany. The company's backgammon game "Lord of the Board" is most popular in Romania (15% of downloads), followed by Israel, Iraq, Egypt and Greece.
Schalka said, "It was clear to us that these games won't become Coinmaster or Slotomania," referring to Playtika's biggest hits. "But we knew that these evergreen games have a loyal audience outside of digital. We knew that with a successful product we could reach a highly loyal audience and when you see this on your platform, and you know that you are providing the right user experience, you know that you are in the right direction. The rate of players who return to us is 40%, which is very high. People ask me why not for a game that generates a million dollars a day but I prefer to create seven smaller games so you are not dependent on one game with all your eggs in one basket."
To a great extent the traditional board and card games niche, as narrow as it may be, made Beach Bum the gaming start of the Covid pandemic. "The number of users grew enormously and the rate of returning users. We were amazed to see how many people know backgammon and want to play it. It's not a few spins of a slot machine."
This month Beach Bum will launch a new version of backgammon, allowing opponents to play over video.
Beach Bum's Lord of the Board backgammon app leads in the number of downloads from the Apple and Android stores and it is not alone in the field. Israeli company Come2Play has its Backgammon Live version, which has less than half of Beach Bum's downloads but has received positive reviews and is growing fast. Beach Bum's Spades Royale has to compete with rival Zynga's Spades Plus.
Gambling allowed but not for money
Beach Bum's backgammon does not allow any gambling - in other words money for the winner. But like Playtika's poker and slot machine games it does include visual and psychological elements from the casino. There is also the option of gambling for points or turning the wheel of fortune between games, which result in the award of additional points. After a succession of losses and failed bets for points, those interested can continue for a fee from their credit card, if they want to stand out in prestigious tournaments and beat their rivals.
Like other mobile games, players can bank virtual currency. When it runs low they can wait a few hours or perhaps days until they receive more virtual currency for free. Patient players who are interested in only playing once in a while can play for free. Another option is to buy a basket of currencies, for a price that changes from level to level. A beginner, for example, who loses one game receives several offers to buy currency for $1 or spin the wheel of fortune for double or quits.
'Heavy duty' players, about 5%-6% of users, spend tens of dollars a month on virtual goods like a souvenir album of memorable games, participation in tournaments, special coins and designer dice. Users are restricted to a ceiling of $100 for deposits. Over time average income per user is $100. There are many similarities to other casual games like Candy Crush.
Even so research has proven that mobile phone social casino games can lead to positive sentiments towards gambling and even addiction.
What does the gaming industry create more of - money or value?
Levy-Weiss: "That's a tough question. Simply put I don't think that this industry is any different for the world's gaming industry. Whichever way you look at it, gaming companies belong more to the entertainment world and less to the world of impact. Gaming companies are ultimately selling an entertainment product. Does the world need entertainment? It does. Do movie companies and Netflix do anything good for the world? Good question. Do people want entertainment? They do but I don't think that gaming companies pretend to give the world a positive impact but neither a negative impact. Gaming companies are not measured by their level of impact. Are casino games better or less good than children's games for ten year olds in which they kill each other? I have no answers. Ultimately I think that entertainment is something that people need and there is no reason why Israel shouldn't take a piece of the world's most important entertainment industry, $200 billion."
Shahak and Levi-Weiss were the original founders of Beach Bum but from the start it was understood that they would pass on the baton to a new management team. Playtika CEO Robert Antokol introduced Shachar Schalka and Gili Levy to Shahak. They had developed RummyRoyal nine years ago and sold it to Teddy Sagi, meaning that they had proven knowhow and experience in the card games sector. The two joined VP marketing Keren Marom as founders so that the company currently has five official founders. Levy-Weiss remains as chairman.
There is a conflict between being an investor or an entrepreneur. In which position are you more comfortable?
"It's not really a conflict, and I was never an entrepreneur who would be 24/7 at the company. There is a spectrum between being really marginally involved in the company and putting in a bit of money and being very involved to the point of brining the idea and founding the company. I think that I enjoy moving along this spectrum. If there is an idea that nobody is implementing and I have it, so I'll go and found it. In other cases I join up as an investor with another entrepreneur who will found it.
But the other entrepreneur Uri Shahak left relatively quickly. It's not often that the entrepreneur founds a successful company for a second time - and within a short time leaves.
"It's not a common model to found a company and it demands very special people in order for it to work. To set up a new team that will take the company into its hands with the status of founders, and to create an emotional connection with the company and to let go from your side, it doesn't happen a lot but when it does happen it's a win-win for everybody."
Marom says that it did not come out of the blue. "From the first day of the company," she recounted. "Uri Shahak told me that he wants to be the company's grandfather, and he in fact raised us from that position."
The right time to break the silence
Beach Bum, despite its size and prominence in Israel's gaming market, has successfully kept a low profile since it was founded. Levy-Weiss said, "The founders here did not seek exposure, they wanted to build it quietly. But the situation in the employees market is such that many companies that enjoyed staying quiet now want to make a little noise. We sought the right time when we could see that Beach Bum is not another gaming company with one hit but with a stable infrastructure of games, loyal players and a world leader in the genre in which it is operating."
Is there a bubble in valuations when raising money and in salaries?
"We are living in a period when there isn't a company that doesn't need tech and marketing people - and I'm not only talking about tech companies. All insurance companies competing with Lemonade need to hire more tech, marketing, product and design people. The demand for people with broad technological training - not only engineers - is happening in Israel, in London, Eastern Europe and also the US. And we have no choice but to integrate more populations into the sector. Will Israeli tech fail because of a shortage of people? No. It will simply need to pay slightly higher salaries but in the end this will lead to more people entering the field.
"Regarding the valuations of the companies, you need to ask if these are genuine companies and if they are creating real value. I think that in contrast to the tech bubbles of the past, the companies of today have proven that they have technologies that solve problems - if its monday.com which provides innovative tools for managing companies, Lemonade which successfully competes against the American insurance giants, SimilarWeb which sells business information, or Beach Bum, which provides entertainment for people worldwide. We don't see economic models that aren't real. In the end we are operating with public markets and low interest which sees a lot of money flowing from investors. It begins with the public companies and trickles down to the startups. Perhaps there will be a correction in valuation here or there but there won't be a crisis here because the companies are genuine."
Published by Globes, Israel business news - en.globes.co.il - on October 1, 2021
Copyright of Globes Publisher Itonut (1983) Ltd. 2021