Discord plans to spend $150 million to move into new areas, including selling videogames online

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Discord Inc.

Discord Inc., which makes chat software popular among videogame players, said it is now valued at $2.05 billion after a new funding round, the startup’s second this year as it expands its footprint into sales and subscriptions in the fast-growing game industry.

The San Francisco company filed paperwork Friday to raise $150 million. Greenoaks Capital, which counts the stock-trading app Robinhood Markets Inc. and the construction startup Katerra Inc. among its investments, was the lead investor in the round, the firm and Discord said.

No existing holders are selling shares in the fundraising, Chief Executive Jason Citron said in an interview. Discord previously raised about $50 million in April which nearly doubled its valuation at the time to $1.65 billion.

Discord makes voice- and text-communication software people can download free and use to talk to other gamers while playing on PCs and smartphones. The company faces a number of competitors, including TeamSpeak and Mumble. It hasn’t yet turned a profit, the company said.

Still, Discord counts approximately 200 million users—more than quadruple what it had a year ago. Its rampant growth mirrors the explosion in popularity of free online multiplayer videogames such as “League of Legends” and “Fortnite: Battle Royale,” which have fueled the rise of other gaming services such as Amazon.com Inc.’s streaming-video platform Twitch.

Mr. Citron said Discord isn’t for sale and that it plans to use the new funds to help it build out its fledgling PC-game download store and a new $9.99 monthly game-subscription service. Getting the biggest, best-known games into a store can be expensive, he said. He keeps his eye on current economic conditions, and “it’s always better to raise if you can, because you never know what’s going to happen,” he said.

With the store, Discord is going up against massive, entrenched rivals such as Valve Corp.’s Steam and Electronic Arts Inc., as well as popular retailing newcomers including Epic Games Inc., the company behind the smash hit “Fortnite.” PC game downloads and other digital sales are projected to reach a total of $32 billion this year, up 2.9% from 2017, according to SuperData.

Before launching both the store and gaming service in October, Discord’s only other source of revenue was Nitro, a $4.99 monthly service that gives users access to special emojis and other digital perks to use while chatting.

Discord got a boost earlier this year when the rapper Drake registered an account while broadcasting a gameplay session with the popular streamer Ninja.

In late October, though, the company became ensnared in controversy over people using communications services to push hate speech—a matter that took an added significance following the Pittsburgh synagogue shooting. Discord said at the time its rules prohibited harassment, threats and calls to violence, and that it had closed accounts over those issues.

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A corporate filing disclosing some details of the funding was seen by Lagniappe Labs, publisher of the Prime Unicorn Index.

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