How To Raise Money Quickly; The Millionaires of the App World
BY Nitasha Tiku
The $100 million Facebook app. There's been much debate of late about business plans based on micropayments as well as the viability of Facebook application companies. New numbers obtained by BusinessWeek's Sarah Lacey suggest that both businesses can work very well. Zynga, which develops games for Facebook, attracts 40 million users a month, is profitable, and is generating $100 million in annual revenue, according to unnamed sources. Zynga makes money by charging for things like poker chips in its popular Texas Hold Em game. "So in case it wasn't already clear, there looks to be a bright future in the online gaming sphere and specifically around micro-transactions," Techcrunch says. The company is reportedly raising another venture capital round, worth $30 million.
The Microsoft of mobile apps? At the closing panel of the annual National Venture Capitalist Association yesterday, investors wondered whether there was a nascent $100 million mobile app or if developers focused on this niche were merely hobbyists. With the news that Apple just flew past a billion downloads (just as Steve Jobs predicted last August), some VCs are more bullish, reports the New York Times Bits blog. Bernard Gershon, SVP at Disney said, "I don't know if iBeer will be making tons of money. But Pandora has a fantastic app experience. There's potentially something in that space that could be interesting." Other VCs are dubious that mobile app companies can lead to IPOs or the type of return on investment they're looking for. Read our Q&A with Pandora founder Tim Westergren on how he mobilized millions of fans to rescue web radio.
How to raise money quickly. VentureHacks has a new podcast with tips on how to quickly close a term sheet--that is, how to quickly get the money that your investors have promised you into your bank account. Babak Nivi recommends taking care of due dilligence before you sign, pushing your lawyers to move quickly (hint: tell them you're leaving the country or having a baby after a certain date), and making sure you have a backup investor.
Sam's Club offering discounts to small businesses. Hurting in the recession? Sam's Club wants to help you out. Bloomberg says the big box chain is using a promise of $270 million in discounts to draw small-business customers. Sam's Club has contacted 63,000 companies so far, and plans to reach out to 100,000 through May 22nd, to review their supplies expenses and provide price quotes. So far, Sam's Club helped one Tulsa, OK real estate office save $1300 per year on Styrofoam coffee cups, and a Prescott Village, Arizona restaurant almost $2500 on chicken breast fillets, among others.
Why Congress won't investigate Wall Street. Entrepreneurs are sick of the bailout money heading straight to the pockets of the main culprits of the recession. Thomas Frank, author of What's the Matter With Kansas, has an insightful op-ed in the Wall Street Journal explaining why regulators--"the Wall Street policemen who dozed peacefully as the crime of the century went off beneath the window"--are just as culpable, but won't be investigated. For one, it would mean admitting to both the Bush and Clinton admistration's subversion of the regulatory system. Frank looks back at the Pecora Commission of 1933 and 1934, during a strikingly similar economic time, when Congress looked into the massively corrupt investment practices of the 1920s. "Pecora described bond issues that were almost certainly worthless, but which 1920s bankers sold to uncomprehending investors anyway. He told of the bonuses which the bankers thereby won for themselves. He also told of the lucrative gifts banks gave to lawmakers from both political parties. And then he told of the banking industry's indignation at being made to account for itself." Ironically, it was the Pecora investigation that formed the rationale for some of the regulations that Bush and Clinton revoked.
Facebook, not surprisingly, is fodder for marketers Wired has look at the ways in which a few marketers are mining Facebook for data on consumers. Record labels are already working with one company called Colligent, which sifts through Facebook profiles to find users' favorite bands. While promoting the Jonas Brothers, Disney decided to ramp up its Latin American marketing budget based on Facebook profile data. The site may already be the world's richest marketing database: "You're talking about your hobbies, you're talking about your interests, your favorite TV show or your favorite band," said Sree Nagarajan, Colligent's founder and CEO.
Entrepreneurship in the time of influenza. Bizbox points out yet another great reason to be your own boss: Swine flu. In the event of a pandemic, you can leave town, stay home, or spend your days stockpiling canned goods—whatever you feel like doing. You call the shots, so if you want to evacuate, you don't have to fight with your boss about it. As part of their swine flu roundup, they also point to some economic statistics from the 1918 pandemic, including massive labor shortages shortly afterward and skyrocketing sales of mattresses in response to bed rest prescriptions.
Would you be willing to work for free? According to USA Today, a small fraction of the nation's entrepreneurs are trying a new approach: offering their services for free to their best clients. "If your clients weather the storm, they'll remember that you were willing to give them a hand when they needed it most," says Robert Ford, management professor at University of Central Florida. Walt Wacker, head of the consulting firm FirstMatters emailed his best customers to let them know if they had work they needed done, but no money to do it, he'd do it for free. The landscape architectural firm TBG Partners took him up on his offer, then turned around and offered their services to their three best clients for free, asking only that they also assist others who
need help. Awwww.
Reporter NITASHA TIKU covers technology, finance, green business, and social entrepreneurship for Inc. magazine and contributes to the staff’s daily links blog. Her work has appeared in New York magazine, The Villager, Chelsea Now, and on nymag.com. She lives in Brooklyn, New York. @nitashatiku