• Originals
  • 22 December 2020
  • 5 min read
  • Words: Northzone

Dots: How Northzone poached one of its portfolio founders, Paul Murphy, to join its partners group, and the journey that solidified the fund’s core team.

Paul Murphy and Pär-Jörgen Pärson look back at how a common investment led Paul to join Northzone, moving from the portfolio company position to partner. Paul Murphy was the founder and CEO of Dots until joining Northzone in 2018. In August 2020, Dots was acquired by Take-Two. 

Pär-Jörgen Pärson: I think it all started when I moved to New York. As I was walking to  Chelsea Market one day, I bumped into Mattias Swenson, the founder of Bloglovin’. I had met him several times before. He was at a venture-capital studio, Betaworks, at that time, and was fundraising. I had already met John Borthwick, who’s the co-founder of Betaworks, as well; his daughters were in the same class as my oldest daughter at school. Those two connections led me to meeting you during the diligence phase. With Betaworks being a substantial shareholder in Bloglovin’, you instantly came across as extremely structured and very collaborative, but almost like a big company guy. I didn’t initially think of you being an entrepreneur.

Paul Murphy: I don’t know if you know this, but I didn’t have anything to do with the initial investment of Bloglovin’, even though it’s what connected me to Betaworks. I knew Bruce Jaffe, who was one of the other investors in Bloglovin’, from our time at Microsoft. When I moved to New York, he was an investor in Betaworks, and he said, ”You’ve got to meet the Betaworks crew. I just invested in this company, Bloglovin’, and you should get involved somehow.” So, I started going to Betaworks to meet the Bloglovin’ team, and I inherited the role of board member and almost-coach for Mattias. When you and I met, I’d never heard of Northzone; I didn’t really know anything about the group. Mattias just said, “you know Spotify? They did Spotify.” I thought, Oh, okay, it must be good then. We planned a meeting with you, and I remember you were leading the Series A.

There were a couple of hiccups, too. The CEO shift basically happened while we were negotiating. I actually asked myself, several times, if I was naive to invest in a company with a new CEO who was not tested in this situation. So that was probably the reason why I was so tough on the valuation.

I think each of the five co-founders had taken the role of CEO at some moment. That’s when I realised you’ve got to be able to back the team to go all the way with the founders. The founding team has to be the one that you back, because it’s just too much risk trying to bring in these CEOs.

We got Giordano Contestabile to step in, that was pretty much your relationship, right? He came with a good gaming background and product knowledge.

I had this hybrid role where I was a partner at Betaworks, working on a few different things, but then I jumped in with both feet at Dots and ran it as a game studio. The two worlds kept intersecting, so Giordano Contestabile, who has a long career in gaming, gave us a bunch of really helpful advice to guide our approach  at Dots. I tried to recruit him to either run product or be a CEO, but he was tired of gaming, so that never happened. Then, strangely, he started a new business, Finale, which was in the same sphere as Bloglovin’. We convinced him to merge with Bloglovin’, taking it over and running the company. I think there were a lot of reasons it didn’t necessarily take off that were unrelated to him or the team.

Pär-Jörgen Pärson, General Partner, Northzone

At Dots, you're killing stuff all the time. You've spent a year building a game, it doesn't work, you have to kill it and move on.
Paul Murphy
General Parter, Northzone

I think one of the major lessons from Bloglovin’ is that we invested in a company that was catching a dying paradigm. We desperately tried to use that platform to propel something new, which led to the Sverve acquisition, which was meant to give it propulsion. At the end of the day, when you make too many changes to a business, eventually, your execution speed is just not high enough.

One of the things I got really proficient at between Betaworks and Dots is letting go of things. At Dots, you’re killing stuff all the time.You’ve spent a year building a game, it doesn’t work, you have to kill it and move on. I think Bloglovin’ was interesting, because there was always something there–a reason to keep going–but I think we tried to hire our way to growth. We tried to merge our way to growth. We tried to invest our way to growth. Ultimately, like you said, the growth had happened many years prior, so we were actually just riding the decline of that paradigm.

That was when we started speaking specifically about Dots. The immediate success of Dots showed that it was not only a lucky shot, but you also had very good retention; you knew exactly what you wanted Dots to be in the market. You had a far less transactional view of the world than other companies we met with, and I thought that in order to have staying power, you have to have soul in a game. You were always extremely transparent on how you placed your bets, and very level-headed about the prospects of games that you were about to launch. That was something that really impressed me. 

Paul Murphy, General Partner, Northzone

You’re describing the phases we went through when we launched Dots! We deliberately launched it as the anti-Candy Crush. We felt that was not the game that we wanted to play. In New York City, it was funny. You’d see Dots on the F line or the L line, but you wouldn’t see it on the 4, 5, 6. We appealed to a certain demographic. We were building a brand, reaching over 100 million people, and then we hired this amazing CMO, Ondriona Monty, who created an incredible vision. We made Dots & Co, and Wilds, and had all of these new games in the pipeline. We had almost forgotten about Two Dots, which is really what catapulted us onto the scene to begin with. At some point, we decided to put our A-team back on Two Dots, because we felt that could be a 10-year franchise.

And then, during that time period, new logic started to crystallize in the gaming world: We would not see 50 new blockbuster games every year, but rather the same Top 20 games that would stay at the top. 

That became really obvious to us when we launched Dots & Co, which is the sequel to Two Dots. So in the beginning, we launched Dots, and then we launched Two Dots. Within a year in both cases, we spent very little marketing dollars and shot up to number one in the charts. Interestingly, when you got to number one in the charts in 2013-2014, you’d see millions of organic downloads. As it turns out, big companies like King spend millions trying to make that happen and they can’t. There was just something special those first few times for us. When we tried to replicate it again with Dots & Co, I remember we spent half a million dollars for a one-day Instagram campaign and it completely failed. That’s also when we realised we might have just caught the tail end of that rising-tide phenomenon that was happening. By 2015, it was too mature, and you couldn’t stand out in the same way for the same reasons.

I remember we had this great meal on 16th Street, and that’s when we started talking about your next move in life.

Yeah, I remember that. It was such a funny dance that we were playing, because obviously I was a portfolio company founder, still attached to Betaworks, but also clearly had my eye on Europe and becoming a VC. I had been feeding names to the executive recruiter that you hired to find your next partner, and then we had this conversation. Of course, Northzone played super hard to get for six months. Eventually, I had to tell you that I had other options for you to move things forward.

I totally remember. I think the reason it happened this way is because a  partnership is truly a partnership. It wasn’t just me recruiting you, but we needed to make sure you’d gel with the others and vice versa. It’s a completely different thing to join a firm as an associate or investment manager than joining as a partner, because there are a couple of decisions that are implicit to that. Most importantly, it is a long-term relationship. So yes, the process became very protracted– necessary on our side, but I can understand why it drove you absolutely nuts.

I think I did benefit from Northzone deliberately taking their time. It helped me explore the market and get to know some of the other funds, and the relationships I built during that process has proven to be so fruitful as an investor, because all the funds work together. Even more critically, it helped me see that most other groups had a very different structure. I knew that after spending eight years in Microsoft, and then seven years as a founder, I was really going to struggle being anywhere I felt like an employee. It just wasn’t going to work for me. I wanted to be able to help shape the future. The more time I spent with Northzone, it really became clear to me that we are custodians of the franchise for the time that we’re here, and then the next generation picks it up and takes it.

2020 was a year without Slush in Helsinki: never again.

Yes, and that’s hard to communicate because it’s so particular to every fund and it’s one of the great gifts that Bjørn and Tellef gave to the partnership. They actually thought about the franchise and knew it was not a manifestation of themselves; Northzone had ideas and values that were supposed to outlive themselves. At this point, that foundational truth has been put to the test so many times, and it has proven true every time–even when we’ve had the most difficult transition periods, including some horrible fundraising experiences like after the dot-com collapse or the financial crisis. 

One thing I really remember is going to Helsinki for the first time to attend the Slush conference in 2014. The energy was amazing, and it really felt like Northzone was front-and-center there. I spent time with you, Tellef and Bjørn, and instantly felt I wanted to work with the team. This eventually resulted in Northzone’s investment in Dots. But I had the same feeling when I was looking to become a VC. And here I am.