The company was founded in 1993 by Erik Gloersen, Ian Neil, Andre Backen, Gaute Godager and Olav Mørkrid, and is a well known independent game developer and publisher. They develop games mainly for the PC but have also released games on other platforms such as SNES, Sega Saturn, Sega Genesis and Xbox.
In December, 2005, Funcom became the first game developer to be listed on the Oslo Stock Exchange.
In March, 2007, Funcom stopped releasing games on CD and DVD, and started to use digital distribution completely. This was done because of financial losses due to piracy of their games.
On August 21, 2008, Funcom laid off half of its Customer Service department located in Durham, North Carolina. In November of the same year it was reported that Funcom fired an additional 70% of their US staff.
In September of 2008, one of the founders and game director of Age of Conan, Gaute Godager, left Funcom because he was dissatisfied with parts of Age of Conan.
In February of 2009 Funcom reported financial losses of approximately $23 million in Q4 of 2008, and the unsuccessful launch of Age of Conan was largely to blame. An analyst at DnB NOR, estimated that around 100,000 people were playing the game immediately after launch. This was far below what Funcom had expected.
On September 1, 2009, Funcom announced that they were opening a new studio in Montreal, Canada. The new studio is currently working on their latest MMO, The Secret World, and was also the developer of the Age of Conan expansion, Rise of the Godslayer. Shortly after the announcement of the new studio Funcom reduced their staff by 20%.
In August 2010 Funcom's financial situation was starting to improve. Trond Arne Aas said that "Age Of Conan is generating cash for us and these money are supporting the development of new projects. We will continue to invest in Age Of Conan as the game can continue to support other projects under development." Funcom is planning on releasing Age of Conan in Asia, and expects this to generate additional revenue to support the game.
In August of 2012 Funcom announced the layoff of half of its employees due to the lackluster performance of The Secret World. Funcom blames a poor Metacritic score and the launch of Diablo 3 for The Secret World's unsuccessful launch.
Funcom is the publisher of Bloodline Champions, a free-to-play PvP arena game, developed by Swedish developer Stunlock Studios.