Use case - H - D'Ornano + Co

Objective

New Investment

Investment stage

Venture Capital

New Business model

Digital Gaming

Case Study

D’ORNANO + CO. PERFORMED HYBRID GROWTH DILIGENCE ON LEADING EUROPEAN MOBILE GAME DEVELOPER IN THE CONTEXT OF A $100M SERIES B FUNDING ROUND

An investor wanted to complete a Late-stage investment round in a European mobile games developer. The startup offers a full range of publishing, user acquisition, and monetization services for independent third-party game developers. The company has experienced hyper-growth since inception, increasing the founders’ ambitions. They wanted to explore emerging areas such as Web3 and NFTs, while continuing to enhance their core tools to give creators a better chance of succeeding in the hyper-competitive mobile and casual gaming spaces. The company hoped to scale both organically and through strategic acquisitions.

Challenge

The startup had clearly created a product that resonated with developers and players. Yet this also meant that it had a complex revenue model based on splitting advertising and in-game purchases with game creators. In addition, games are a notoriously hit-driven market. It is intensely competitive and many studios and developers have tried to leverage data to drive optimization. Remaining ahead of the pack and maintaining strong developer relations were key to its future success. Even so, the company was intending to pursue new Web3 products that have attracted huge amounts of hype, but remain unproven as long-term drivers of revenue. Traditional due diligence is backward-looking and, for High-growth and Disruptive companies, does not provide comfort on a company’s ability to deliver sustainable growth and create value. Also, because traditional due diligence takes a broader industry approach rather than a more precise business model approach, it can only generate a surface-level view of a company’s financial health with a limited picture of an asset’s strengths and weaknesses to consider in the investment process.

Solution

The investor retained D’Ornano + Co. to apply its Hybrid Growth Diligence for Late-Stage VC product which identifies in a short timeframe any deal-breaking items, secures key aggregates, and challenges the existence of a clear path to profitability. Going beyond classic due diligence, the firm’s HGD methodology layers Financial, Legal and ESG diligence on top of preliminary business model analysis and incorporates operational data mirroring the company’s economics in the assessment performed. The result is an in-depth analysis performed in record time to satisfy the expectations of an investor assessing a high-growth + disruptive asset in the context of a late-stage round.

Mission outcome & key client impact

By using the Hybrid Growth Diligence approach, we helped assess the intrinsic value and confirm the resilience of the target’s business model by testing:

The company’s product market fit, in analyzing sales traction since inception with a highly analytical process of grasping the dynamics of revenue generation per game over time;
Its ability to build game customer loyalty by maintaining usage level after the first few months of games’ release;
The efficiency of its monetization costs incurred to convert new users;
The consistency of revenue growth assumptions by # of new games, average revenue per game and monetization expenses forecasted in the business plan, in light with historical trends.

In validating the target’s execution capabilities and the absence of any deal-breaking items, we helped our client confirm its investment thesis in the company.

New Business Model

+ Vertical

Digital Gaming companies are engaged in the production and distribution of video games that are either partially or primarily played through the internet. D’Ornano + Co. has historically conducted multiple Digital Gaming assignments for global investors.