"We had no idea what we were doing": Herman Narula on Improbable's early years and its future

• Improbable was founded in 2012, marking Herman Narula's entry into the games industry.
• The company's goal is to build the "ingredients" needed to form virtual worlds that go beyond games, into places people want to live in.
• Narula has founded blockchain foundation Somnia, which is working with various mobile-ready games like QRusader and Sparkball.
• The purpose of Somnia is to have "one big, massive f**k-off chain".

It’s been 13 years since UK-based metaverse tech company Improbable founded with the lofty goal to redefine game experiences through innovative virtual worlds.

The company has been through pivots, developer criticism, a Unity spat over SpatialOS and, in its early years, raised $502 million in a funding round led by SoftBank.

More recently, rising revenue and a focus on the metaverse propelled the tech company to its first year of profit in 2023, at £11m, marking a milestone more than a decade in the making.

To discuss how Improbable has evolved alongside the industry, hopes for the metaverse, blockchain, hit games and more, we sit down with Improbable co-founder and CEO Herman Narula. His journey with the company has taken him from Computer Science student to one of the UK’s richest people in the industry.

"I think we've solved the technical problem pretty comprehensively, and I think even our biggest detractors would begrudgingly agree that we probably have far and away the best tech," he answers.

"I think we're at a point where we've got the engine, we've got the cash, we've got the experience, and we've got a model of how to generate new IP and content and incentivise that with crypto.

"So we're hopeful that this is the start of us generating more and more sticky content. But I'm sure we'll have hundreds more failures before we have any big hits.

"My purpose is to build something I'm proud of, that millions of people love, and I'm frustrated every day that we haven't done that. I think a lot of people, when we entered games, thought we were after the money, thought we were only in it for the short haul. Hopefully we've convinced people that we're not."

From the beginning

When Improbable was first founded, there was no Fortnite or PUBG, mobile was in the early stages of the free-to-play wave in the West, while web3, the metaverse and artificial intelligence weren't yet big tech buzzwords. The games industry has changed dramatically since then.

"When we started, the industry was growth, growth, growth. Companies were not really interested in innovating because they didn't need to," Narula reflects.

"Companies moved more towards evergreen IP, people like Activision before the sale to Microsoft essentially stopped all new IP development, and development teams became thousands of people working on more and more content.

"Then everything fell apart. We reached a point of content congestion that led to, I think 40,000 layoffs over three years."

As for Improbable, Narula recalls that the company started out believing more characters on screen and more "stuff" overall would lead to deeper, more engaging worlds.

Today, he recognises that developing gameplay that makes sense in a world, and creating worlds wherein such experiences are possible, is in fact deeply challenging.

Narula suggests that Improbable has "solved that problem now" and claims the company is able to smoothly run 20,000-person live events like they’re "trivial".

We press deeper into those earlier days of Improbable, when its leadership faced some criticism around its operating system SpatialOS, for frequent directional changes, and for causing some uncertainty for developers.

"To be fair, eight, nine years ago, we had no idea what we were doing," Narula explains. "We were kids who were just entering into an industry. We were making it up as we went along - we graduated and then did this.

"We don't really operate anything like that anymore. Those days are far behind us, and I would say that the majority of the people we work with now are actually people that we're investing in, backing, supporting or have known for years.

"I think now, I wouldn't say we're experts, but we've probably been making MMOs and online games longer than most people at this point, especially on the cutting edge. So, I think we've learned to be a bit wiser in the way we operate, and I'm thankful that developers have generally been really positive at this point."

Among the lessons learned over time, Narula notes the expense and time required to make a game. He also acknowledges that Improbable hasn’t yet made a major hit, but says the company has supported many others.

To that end, the company is investing up to $5 million in companies, including in the UK and Europe. He compares that to investors holding back games funding in recent times, and US VCs in particular saying "screw Europe, screw Britain, nobody’s going to make real companies here".

Platforms, players and payments

Narula seems particularly interested in blockchain and crypto, offering to back and support developers with the tech. Improbable is also working on its own projects like the blockchain-powered game Chunked.xyz, a lightweight web app that runs on any device with web browser access. The title is built by MSquared, the firm's "metaverse infrastructure" venture.

Narula notes this was initially built as a test, but the decision to scale it into a full product was reached after 70,000 people played and made 250m transactions over three days.

"It's essentially like, what if the people playing Minecraft were actually mining transactions? And what if the whole world was permanent and on the blockchain?" he explains.

"In the first two days of setting it up, all the trees were completely removed from the world. It was like an ecological disaster - it's kind of wild how excited people got.

"It's basically a permanent living block space where everything that happens is recorded. Even movement is on-chain, so you can't cheat, which actually means that a lot of really interesting speculative mechanics become possible."

Improbable has also started doing rapid-fire releases of smaller experiences with the potential to grow. Narula believes the right ingredients are there to make a major hit "with the right talent and the right team".

He also discusses solving UA dilemmas and the monetisation of early users - a case where "crypto can actually solve a real problem". He claims rewarding early users with crypto payments could be more affordable than expensive UA campaigns with high CPIs.

"UA costs are at about $40 for some genres just to convince someone to play the game," he says. "It’s cheaper to just give people money, right? At a certain point, just give them a stake in your game. That's probably easier and fairer."

This leads us onto the blockchain foundation Somnia. It's a separate entity from Improbable, but is funded by the company and was also founded by Narula.

Somnia has been working with a number of mobile-ready games like QRusader and Sparkball, the former a game built around QR codes and the latter "like League of Legends with football".

"The cool thing about what we're doing in crypto is not so much the blockchain, which I think is exciting technology, but the fact that we're basically building a publisher on top of it," Narula says.

"The point of Somnia is to have one big, massive f**k-off chain that can handle so much scale and so many transactions that it becomes cheap enough to just put everything on-chain."

Words of advice

We close out the interview by asking what advice he would give to games developers looking to make more money themselves.

"Stop trying to make a first game," Narula answers, defining this as the type of large, polished game a player keeps returning to like Call of Duty, Fortnite or Xenoblade Chronicles.

"Trying to displace the time I'm spending on that isn't going to happen, right? Like, five people are not going to build enough of a game to get me to stop doing that.

"But the second game - the thing I play on the weekends with my friends or because I want to socialise with new people - those second games have a lot of potential to still be really, really valuable and to be something that you actually have a shot at getting."

Narula advises against aiming a game at everyone, but instead making something hyper-specific and nailing a niche.

He also suggests accepting AI as necessary in order to compete.

"Putting aside the ethical issues like art being stolen off designers and people who write copy for a living - that's bad for everybody. If you're a developer in this market, don't shoot yourself in the foot," states Narula.

"AI is maybe the one thing that is going to let a one-person or four-person or five-person team compete with a Baldur’s Gate or a GTA."

Narula also highlights crypto as an avenue worth considering.

"If you do crypto the right way, the ethical way, I think it can be really powerful. I know gamers don't like it, but they didn't like free-to-play, they didn't like mobile. I mean, I'm a gamer and I mope about everything. I still play the games though."

All in all, Narula hopes to serve the founders well at the companies Improbable supports, to be a part of a huge hit himself, and to ensure he can take hundreds of shots at this goal.

"It might be that we never hit, but if we do, it's going to be spectacular," he concludes.