The deal is a little different in that it is not an equity investment; instead, Playlab and Cupcake have agreed to a profit-share deal. Cupcake started producing games in 2014, and its current titles include Letters of Gold and Words of Gold. Co-founder and CMO Gabriel Stürmer described its products — which are for iOS, Android and Facebook — as “casual brain games” that require users to “make boards, or do mathematic combinations.”
Stürmer said Cupcake has seen consistent growth — increasing its revenue 45 percent per month on average over the past 18 months, and tripling it since September 2016 — but it has struggled with cash flow when it comes to user acquisition. The eight-person team, he said, has burned through a mountain of credit cards to finance online advertising and marketing campaigns, the tricky part of which being that revenue generated takes a month before it is paid out. The $1 million investment will be used entirely for user acquisition purposes, Stürmer explained, while Playlab will also take a consulting role to help Cupcake and its efforts to scale.
Playlab raised a $5 million Series A round in 2015. Speaking to TechCrunch at the time, CEO and co-founder Jakob Lykkegaard Pedersen said the firm was already profitable. It has planted roots beyond its business by making an acquisition and working with other startups, including fellow Bangkok-based game lab Infinity Levels on a co-marketing and development deal.
Stürmer and Pedersen first met when Cupcake was part of the Game Founders accelerator program in Kuala Lumpur, Malaysia, in 2015, where Pedersen is one of the mentors. According to Stürmer, he was so impressed by the company’s initial pitch that he promised to invest $1 million if it could maintain its promise.
“It’s only taken 18 months,” Stürmer joked.
“We did have many other [financing] options on the table, but these are guys we know and we like them a lot,” he added. “We want to be the number one casual brain puzzle game company in the world and believe this deal with Playlab will help us get there faster.”
Beyond the deal, Stürmer said the companies are exploring how they can work together on future titles and others initiatives.