Improbable: the UK tech start-up valued at $1bn

Herman Narula and Rob Whitehead of Improbable

Valued at more than $1bn after only five years in business, virtual tech company Improbable is on a quest to ‘build the fundamental fabric for a completely new reality’, with applications in sectors ranging from video gaming to medicine. Its co-founders, CEO Herman Narula and CTO Rob Whitehead, meet Director to discuss the leadership challenges posed by their firm’s stratospheric rise

Amid the torrent of recent stories predicting the UK economy’s scuppering on the rocks of Brexit, you could be forgiven for missing a rather startling – and far sunnier – piece of business news. Figures published in early July by London & Partners, the mayor of London’s promotional agency, showed that the capital’s tech sector had attracted more private equity (£4.5bn) and venture capital (£1.1bn) investment in the first half of 2017 than any other European city had managed since the referendum.

Contained within the total was the £389m that Japan’s SoftBank invested in Improbable, a virtual simulation firm based in Farringdon. The telecoms giant’s holding was confirmed as a “non-controlling” share, giving Improbable a minimum valuation of more than $1bn. Not bad for a venture started in a converted barn five years ago by Cambridge computer science graduates Herman Narula and Rob Whitehead. Bonding over a mutual love of video gaming and dissatisfaction with the capabilities of multi-player online games, they developed SpatialOS – a platform harnessing the power of thousands of computers to create significantly more complex and populated virtual worlds.

Although they had set out to revolutionise gaming, they quickly spotted their invention’s possible applications in fields ranging from finance to medicine. “We made a field trip back to Cambridge and met epidemiologists, economists and civil engineers,” Whitehead recalls. “They all had problems involving many things interacting in unpredictable ways. We realised that our technology was very good at simulating such interactions.”

In March 2016 Improbable demonstrated how far it had come by unveiling a simulation of the entire underlying structure of the internet – built with the UK government to model the progress of cyber-attacks in various areas. “You could pull out [virtual] power cords and see the data rerouting,” Whitehead says. “They said: ‘We’ve never seen anything like this before.’”

Herman Narula, CEO of ImprobableInevitably, their work has led them to be described as the men striving to create “The Matrix” – the simulated reality inhabited by humans in the eponymous sci-fi film. It’s a suggestion that they have embraced in media interviews but, for Director, Narula sums up their concept as follows: “It’s a future where you can literally live in other worlds simultaneously, in mass-participatory simulations that involve perhaps hundreds of millions of people.”

This, he predicts, can “have a fundamental social impact. If you involve 100 million people, it’s no longer a game – it’s a country. It has its own economy; it has a GDP. Having that as our North Star is key. Virtual worlds will change how we think about ourselves, empathise with each other and find meaning in our lives. In a world where jobs will continue to be automated, virtual worlds hold the promise of creating new value that’s distinctly about human interaction. That’s something great in a world where artificial intelligence could take our jobs.”

Last December the company announced a partnership with Google to make SpatialOS widely available via the cloud to third parties seeking to develop their own virtual worlds or, indeed, spawn whole new ventures on the platform. Talking about the longer-term implications for business, Narula says: “We want to allow companies to recreate the environments that matter to their enterprise. If you run a logistics firm, for instance, we can build you a simulation of an entire city so that you can test how a particular strategy might work.”

Indeed, in March the firm proved its credentials in this area by showcasing a virtual recreation of Cambridge, complete with transport networks, communication and power lines, utilities and 130,000 inhabitants.

“On the gaming side, studios are being built from the ground up using SpatialOS,” Whitehead says. “On the non-games side, there are companies such as Immense Simulations, which is looking to build routing systems for autonomous vehicles. When you start to have as many vehicles as, say, Uber does, you can actually affect the traffic depending on the roads you send your cars down. How could you simulate the effects of thousands of autonomous vehicles in a location? Those are the kinds of things they’re working on – vastly different areas from what we expected when we started out.”

Herman Narula and Rob Whitehead of ImprobableLeadership realities

The company’s growth has been rapid and the associated learning curve, the founders admit, has been steep. Initially funded by £1.2m raised from Narula’s family and friends, Improbable went on to attract investment from angel investors including Hermann Hauser, founder of Acorn Computers, and Alexander Asseily, co-founder of US gadget maker Jawbone. In early 2015 the company received £13m from Andreessen Horowitz, the Silicon Valley venture capital firm that backed Facebook and Twitter. Chris Dixon, one of its general partners, joined the Improbable board as part of that deal. Further investment came from Hong Kong’s Horizons Ventures before SoftBank’s headline-grabbing cash injection this May.

The latest round of funding has brought a number of high-profile names on board. They include former Disney vice-president Bill Roper as chief creative officer (“he made many of the games that we played growing up,” Whitehead says in fanboy tones); Jason Jhonson, a former director at GitHub, PayPal and Yahoo, as chief marketing officer; Rob Miller from King, the maker of hit mobile game Candy Crush Saga, as chief legal officer; and Michael Bannon from US private investment firm TPG Capital as chief financial officer. With Improbable also having opened its first overseas office in San Francisco in February, and expanded from 50 employees to 180 in little over 18 months, the pace shows little sign of slowing.

One of the biggest challenges they face, the founders tell Director during their photo shoot, is to preserve the company’s culture, so carefully nurtured since its inception in 2012. Improbable’s cavernous 24,000sq ft nerve centre, while now filling steadily with new recruits, still feels uninhabited and – Whitehead is proud to point out – retains the same old stained carpets.

“When we first moved in, there were no partitions in the office. All you had to do to hold a meeting was walk far enough away that you were out of earshot,” he says, adding that he and Narula won’t be cutting a more corporate look any time soon. “I only own one suit and two ties – and both of those are maroon.”

Narula observes that Improbable has “always had a philosophy of bringing in good people, delegating to them and then listening to them. If they are developing trust, we give them more slack and really try to learn something from everyone we work with, absorbing knowledge and changing who we are, accepting the fact that we don’t know anything. That’s important, because it can be hard to admit to yourself that you don’t know how to approach a problem and to be open about that, to be tolerant of failure – humiliation even. But no matter how horrible a mistake is, admitting it quickly, adapting and accelerating will, on aggregate, result in a better position than anyone else is going to be in.”

Rob Whitehead, CTO of ImprobableHe continues: “The objective we’ve chosen is so preposterously hard that it requires an ocean of people – and it’s incredibly difficult to scale the culture within that. So Rob and I individually ‘culture-fit’ every single person we bring through the door. All of our Sundays are booked for culture interviews, in which we really get to grips with individuals and understand them. We can’t hold these during the week, because people are being interviewed on the technical aspects then. We have deep and rich probation processes too, with automatic feedback tools to aid transparency.”

What are the key qualities they’re seeking? “Humility is fundamental,” Narula says. “It’s not a very popular concept in the tech sector, but recognising that other people matter more than we do is the soul of who we are. In fact, being on the cover of this magazine is contrary to our culture in some ways, because we’re really not that important. We have to tell people: ‘This is how the outside world likes to look at companies, but we know the truth: it doesn’t work that way here.’ The way that teams become so closely linked is under-appreciated. I don’t know where my ideas end and Rob’s or someone else’s begin. I don’t even bother trying to attribute things, because it’s so fluid.”

Ensuring that this culture is also nurtured in the San Francisco office has been no easy task, as Narula admits. “It’s involved huge challenges – of culture, communication and process – and we’re still working through these. A lot more has been harder than we’d expected. It’s easy to forget how much happens casually in an office. Now we need to find a way for people to be able to engage across two countries.”

Whitehead points out one of the solutions on a wall in the office: a live two-way TV feed that enables the offices to communicate with each other at all times. “And, of course, you get on a plane – it’s the only way sometimes,” he says.

Although they’re inevitably travelling more now, Narula and Whitehead can still maintain a virtual presence in London while away from the office by using “The Beam” – a remote-controlled communication device that looks suspiciously like a monitor mounted on a sack barrow – enabling them to trundle around the office and chat to colleagues from anywhere in the world.

Retaining control

When asked how much autonomy they have had to give up in return for such large chunks of equity funding, Narula stresses that the ability to maintain control has been central to their choice of investor at every stage.

“The decisions you make with the terms you take from your angel and VC investors can haunt you forever. The littlest thing can become a huge problem in the far future,” he says. “Your relationships with people change with time as well, so it’s really important to have as many contingencies planned as possible when you’re structuring how the company is governed. Many British entrepreneurs accept control terms that wouldn’t be accepted anywhere else – certainly not in Silicon Valley. This is because we’re culturally more likely to say ‘OK, this makes sense’ when it doesn’t. Keeping things as open as possible is arguably the most important thing, especially in the early rounds. Even if it means a lower valuation, it’s way more important to have the right terms and control.”

Whitehead agrees, adding that the process is “about finding an investor you don’t have to dumb down to. You mustn’t compromise on your vision.”

So what do they make of the current investment landscape in the UK? “If you’re going to raise the kind of money that we’ve just raised, there’s no one country that will magically satisfy your needs,” Narula says. “You’re at a level where you have to look globally. You may find there are British investors that can do that kind of thing, but this type of round had to be a very broad international process.”

The path of British tech entrepreneurs to Silicon Valley is well trodden, but would Improbable ever consider a full relocation to California should the founders feel that the trading conditions are no longer sufficiently favourable here? “We want to stay in the UK,” Narula stresses. “We want that so badly that, if the policies here were to become unsupportive to our business, we’d work on changing them. There is such incredible, humble, decent, hard-working engineering talent here in the UK. It needs to be nurtured at all costs. You can put processes in place and have cultural qualities you could never have in Silicon Valley. In building a business here, we can do things in a really special way.”

So what’s next for Improbable? Mooted future uses of its tech include the simulation of biological systems for the testing of medical treatments. “That is far away. We’re not there yet and not touching on that topic too much at the moment,” Narula says. “It’s important not to downplay gaming. The industry is worth $100bn and is growing at eight per cent a year – find me an industry that looks like that. It’s the least monetised entertainment medium in the world and the average age of a gamer is going up: it’s 36 now. Games are about to become even more gigantic than a lot of people have fully comprehended – it’s absolutely the centre of our business.”

He continues: “There’s going to be a period of hard work for us that’s a little bit heads-down. We’re probably one of the few firms that’s reacted to raising a large amount of money like some do when they realise they can’t raise money: we’ve stopped, rather than started, doing some things. We’ve focused on the business because this allows us to double down and go forward. We could never have done this two or three years ago because we needed to keep our options open, owing to the way the business was growing. Focus and the patience required to achieve what we want to do really are the key. We’re still an early-stage company in many ways – and we’re not anywhere close to achieving our mission yet. We have a lot to learn.”

With such pragmatism and humility to the fore, Improbable’s prospects of making yet more sunny business headlines in the not-too-distant future look exceedingly probable.

Improbable vital info

Company Improbable

Founded 2012

Employees 180

HQ Farringdon, London. The firm also opened an office in San Francisco this February

Key people Co-founders Herman Narula (29) and Rob Whitehead (26). One of their first recruits was Peter Lipka, a former Goldman Sachs analyst who helped to start the firm and is now its COO

Key product SpatialOS, a cloud platform that enables developers to harness the power of multiple servers to construct vast virtual worlds

Did you know Narula taught himself to code aged 12

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About author

Chris Maxwell

Chris Maxwell

Director’s editor spent nine years interviewing TV and film stars for Sky before joining the IoD in 2011 and turning the microphone on Britain’s business leaders. Since then he’s grilled everyone from Boris to Branson and, away from work, maintains an unhealthy obsession with lower league football.

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