With the release of Rock Band 4, Harmonix reveals source of investment

Last Friday, on the eve of the re-launch of the flagship Rock Band franchise, independent developer Harmonix revealed the sources of more than $15 million in venture capital investment. Polygon chatted with CEO Steve Janiak for a revealing look at how the venerable studio is moving into the next console generation and beyond.

"For a 20-plus year old company to get a funding round like this is a little unusual," Janiak told Polygon. "We're kind of running the company now like a start-up, even though we have been around for a while."

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The investment wasn't required to support their latest title, Rock Band 4, Janiak said, nor was it needed for the ongoing operations of the company. Instead the goal of this investment round, led by Spark Capital and Foundry Group, is to allow the Harmonix team to focus on giving birth to the next great franchise. He said it will help give his Boston-based team the financial headroom they need to take risks and be creative.

"We have amazingly talented people with great ideas here," Janiak said, "and honestly having some funding coming into the company allows us to pursue multiple ideas simultaneously. I'm really excited about that. We've got a lot of those great ideas. And this helps us put a bunch of them out there into the world."

Janiak said that investment from Foundry came in part thanks to one of Harmonix's earliest investors, Brad Feld, who now sits on Foundry's board. "He has sort of the inside scoop," Janiak said, "since he's been on our board for a while and has seen our progress towards our product plan that we're launching this year, and through next year." That plan includes Amplitude, crowdfunded through a successful Kickstarter campaign last year to the tune of nearly $855,000, as well as Beat Sports for the Apple TV.

But what caused the most excitement for Foundry, as well as Spark, was the work Harmonix is doing in virtual reality. Spark happens to be heavily invested in Oculus VR.

"It's a unique opportunity for them to be involved in something that could get very large again," Janiak said. "With their background in Oculus, they're very bullish on VR. Harmonix is working with two really well funded, really great VR partners in Oculus and Sony. So we're very well positioned, I think, to be an early, successful studio delivering really great experiences on both the Oculus platform and the PlayStation VR platform.

"Harmonix is working with two really well funded, really great VR partners in Oculus and Sony."

"We're interested in sort of pushing the envelope on some developing platforms."

But these new platforms are a risk for Harmonix, and that's why Janiak says they're particularly interested in keeping one foot firmly in the crowdfunding model. Recently Harmonix entered into a partnership with the equity crowdfunding site Fig, placing chief creative officer Alex Rigopulos on its advisory board.

"Making games is incredibly expensive these days," Janiak said. "There is always a need to understand what the market is looking for when it comes to entertainment. It's hard to really predict that. And one of the things you can do with crowdfunding is sort of gauge whether folks are actually interested. ... If there is, you might take a risk and put more money into the idea. If you don't see an audience materialize that's really useful information as well."

Janiak said that while crowdfunding had its uses, it wasn't a viable way to make the kinds of games his company likes to make.

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"We're spending a lot more money to build Amplitude than we took in from a Kickstarter," Janiak said. "We need to have the capital to produce something like a Rock Band and we certainly can't crowdfund that. I want to make sure that we have some decent stability for the employees at the company. I want to make sure that we're able to continue to make a wide variety of games, and it's okay if some of them aren't instantly large blockbusters."

Fig recently completed a funding round for its first title, an award-winning indie game called Outer Wilds. Their fee to the development team behind it, Mobius Digital, was five percent of the money raised during the campaign, as well as five percent of the game's sales in perpetuity. Janiak wouldn't comment on whether or not Harmonix had a similar deal.

"We can't really get into the details of that," he said. "We are on the advisory board, and we sort of have become a founding studio and we can't really get into the details of what all that entails. But that being said, the five percent fee that Fig charges is lower than what it takes to go through say a Kickstarter.

"With the availability of [equity] investment funds, I think there's a much wider pool to draw in terms of getting your game funded. So, it's a lower upfront cost and you get money that goes towards development of the game, and you have a bigger pool of money that is possible for your game. I think it's a pretty good platform."