3 posts tagged “venture capital”

Today is an exciting day for my client, ShoZu, who closed $12 Million in Series C funding in a round led by SEB Venture Capital in London. ShoZu makes uploading/downloading content to/from your favorite social networking sites very easy, and usership is growing rapidly amont those downloading the app from their mobile browsers (m.shozu.com). Plus, ShoZu is being pre-loaded on over 50 million mobile phones in 2008!  Here's a copy of the release:

ShoZu Raises $12 Million in Series C Funding;

Round Led by New Investor SEB Venture Capital, London

Mobile Social Media Company Now Attracting Over 100,000 New Users Monthly  

LONDON – January 28, 2008 – ShoZu Inc., the leading provider of mobile social media services for exchanging content between mobile phones and Web-based social media sites, today announced the closing of a $12 million Series C round of financing led by new investor SEB Venture Capital, London, the UK-based venture capital arm of Swedish financial services firm Skandinaviska Enskilda Banken.  Previous investors Atlas Venture, Crescendo Ventures and TTP Ventures also participated.   

The new cash commitment reflects ShoZu’s growing market traction in the highly competitive mobile social media sector.  The ShoZu application will ship pre-installed on more than 50 million mobile phones in 2008.  In addition, the number of users downloading the ShoZu client to non-preloaded handsets is more than doubling every quarter, with more than 100,000 users currently registering every month.   

“ShoZu is the only mobile social media company that has secured global pre-installation agreements with multiple handset manufacturers.  That fact alone positions the firm for substantial growth,” said Frank Kelcz, an investment manager with SEB Venture Capital’s London office who has joined ShoZu’s board of directors.  “Demand for Mobile-to-Web enabling technology is being driven by a variety of factors, including the need to stay connected with online social media like Flickr and Facebook on the go, and ShoZu has the opportunity as well as the initial market presence to dominate the space.”    

“The industry is still grappling with solving the usability problems of the mobile Web, from navigation to dropped connections,” said ShoZu CEO Mark Bole. “ShoZu is addressing many of these challenges with its approach to simplifying the user experience, exchanging content in the background, and providing an open gateway that offers a shortcut to key destinations.  Strategies like these may be the answer to mobilising social media in the short term and also help define the shape of the mobile Internet moving forward.”   

Over the past year, ShoZu logged a series of successes in establishing its service as the industry standard in mobile social media connectivity.  Achievements in 2007 included securing global pre-installation agreements with Motorola and Samsung, creating the first unlimited-use ShoZu access package through a carrier partnership, expanding its Web 2.0 partner ecosystem to a market-leading 30 sites, and introducing the market’s first two-way multimedia social media capability with a service that will send friends’ latest Flickr photos directly to the handset on request. 

Also in 2007, the company added to its collection of major industry awards with the top 3GSM award for Most Innovative Mobile Application, a 2007 MEFFY Award from the Mobile Entertainment Forum for best handset application, and a 2007 Ultimate Innovator Award from the Interactive Advertising Bureau for its mobile advertising platform. 

These developments coincide with growing consumer demand for mobile connectivity to social networks and other online communities.  A recent Juniper Research report predicted that the number of users accessing social networking sites by mobile will skyrocket from 14 million in 2007 to nearly 600 million by 2012, helping to push mobile operator revenues from user-generated content from $576 million to $5.74 billion.   

ShoZu’s Share-It service enables mobile users to maintain contact with their Web-based social networks, personal blogs, photo/video sharing sites and other social media with a few clicks.  Users can publish photos and video clips up to 10 minutes in length from their phones to favorite Web 2.0 sites without complex navigation, transmit photos at full or blog-quality resolution, exchange comments with friends, and sign up to receive friends’ photos and other multimedia files on their handsets automatically with no manual intervention.  These and other capabilities are unique to ShoZu.  

The ShoZu application is currently available on 317 handset models with users in over 100 countries.  

About ShoZu

ShoZu is the leading provider of mobile social media services that connect mobile consumers with their online social networks, personal blogs, photo storage sites and other Web 2.0 properties from the handset.  The company’s patented technology provides fast, easy, one-click uploads of photos and video clips from the mobile to the Web, full-resolution photo and video delivery without compression, an emerging suite of services that push content to the phone, the ability to work in the background even if a connection is dropped, and other unique features that simplify and enhance the user experience, plus a mobile advertising service that provides non-intrusive and behaviorally targeted ad delivery.  The company was founded in 2000 and has formed partnerships with some of the leading players in the mobile ecosystem, including Motorola and Samsung.  For more information, visit www.ShoZu.com/AboutUs. 

About SEB Venture Capital 
SEB VC is the venture capital arm of SEB, a leading Nordic financial institution. SEB VC has 280 M€ under management in an evergreen fund structure, focusing on early stage and expansion investments in life science, media and technology, and industrial growth. The firm’s 22 seasoned professionals have made more than 70 investments and 34 exits since the fund’s inception in 1995. Offices are located in Stockholm, London, Vilnius, Gothenburg and Malmö. 

Today, Reuters published an interesting article "Social Network Sites Tempt Investors"  talking about the liklihood of a flury of social networking IPOs.  The article is well worth a read for all of you social media fans out there.  According to the article, so called "Wall Street observers" believe that United Online Inc.'s recent registration for an IPO of its Classmates Media Corp. arm (i.e. Classmates.com) will  "test the IPO waters" for other social  networking sites like Facebook and LinkedIn.

While I believe that the remainder of 2007 and early 2008 will bring more social networking IPOs than we've seen so far (not many), I don't believe that Classmates.com will be an accurate indicator of the success of future social networking IPOs.   Even if Classmates.com's IPO bombs, Facebook, LinkedIn IPO, and Bebo IPO have a strong liklihood of being successful IPOs.  To have a solid IPO, a social networking company will have to do more than just link people socially.  It will need to be a platform for relevancy, discovery, sharing, and search. 

When Google IPOed, it was successful, not just because it enabled search, but it provided a platform that wove together search, information, email, and more with relevant and targeted advertising.  Facebook will succeed with an IPO not because it is a social networking site but because it is a social networking platform that allows 3rd party developers to plug-in and users to benefit.  In other words, it is, in effect, a social media operating system.  LinkedIn and Bebo will have successful IPOs if they continue to grow their user base, expand their platform capabilities, and quickly develop a useful API for 3rd party developers.  However, to be clear, it will take a lot of effort, great skills, good timing, (and, perhaps, a miracle) for either Bebo or LinkedIn to have a more successful IPO than Facebook.

By engaging 3rd party developers so early, Facebook gained a clear lead over the competition, which will be hard for competitors to surpass.  By creating a social networking operating system, which allows entreprenurial developers to plug in, contribute to, and profit from a wider economy, Facebook has peaked the interests of investors - not only as a company in which to invest but as an economy in which to invest.  As I mentioned in my last post, VCs are expressing a strong interest in the players within the facebook 3rd party developer economy, and is easy to see why.  Facebook is creating a social media operating system that has the potential to revolutionize the web by changing the way people find and interact with content and applications.

Yesterday, Robert Scoble posted an interesting video trilogy on his blog in which he predicts that if they work together, Facebook,  Mahalo, and Techmeme will trounce Google in 4 years by providing superior SEO-free, reduced-noise, social search that does more than Google.  While I'd be seriously surprised if Google didn't have something up its sleeve to compete with the vision Scoble outlines and I don't think we'll see the end of SEO, I do think Scoble makes some good points in his vlogs.  His musings on the topic of social networking, social media, and search highlight a growing interest in social networking as a space and its potential to change the way we surf the net.
 

There is nothing more attractive to investors than strong possibilities and good ideas, and it's clear in the quickly growing and evolving space of social networking, there is a high concentration of both.  Which social networking companies will choose to ride the wave with an IPO remains to be seen, but I'm betting with Reuters in thinking the numbers will increase very soon.

Note: I'm not an investment advisor, and my blog posts do not constitute financial advice.

Tonight is the first chance I've had to write about the Facebook Developer/ Influencer conference that I went to last week.  The event was an invite-only afternoon of panel discussions hosted by Seth Goldstein of SocialMedia.  Attendees included about 50 developers, entrepreneurs, investors, and a couple of bloggers, and the discussions ranged from "When, if ever, will Facebook start 'taking back' core chunks of its platform?" to "What metrics really matter for gauging success on the Facebook platform?"

The conference began at Noon with lunch and networking followed by the first panel discussion at 12:30: "What is Engagement and why is it so important?"  In the first session, Dave McClure from 500 Hats and Seth Goldstein  set the stage for the rest of the event.  Dave emphasized the importance of establishing more meaningful metrics for measuring the success of Facebook apps - beyond counting user installs.  His point was well taken... Clearly we need a way of measuring user engagement in apps, especially given that people are often compelled to download apps that their friends send to them and never use them again.  Just because an app has great word of mouth success initially, doesn't mean that it will latch on for the long haul.  Similarly, time spent on the app isn't the right measure for success either.  As Seth asked (and I'm paraphrasing), 'What's a more important to Facebook's success- a graffiti app that allows Facebook users to draw for 3 hours, or an application that encourages shorter but more frequent interactions?'

Rumor has it that Facebook will be unearthing at least a few 3rd party app success metrics internally in the next couple of month, but it remains to be seen whether they'll share this information with the world.  So far, Facebook hasn't released any helpful metrics for measuring user engagement on apps.  Perhaps this is because they don't have them, or perhaps they're holding their cards close to the vest in the hopes of determining the best way to move forward (i.e. by taking back parts of the API they already opened and/or extending new Facebook features that leverage lessons learned by observing user engagement stats on leading apps).  Either way, in order for the 3rd party developer community to flourish on Facebook,  developers will need a better understanding of what makes a winning app and which apps are the most successful based on those metrics.

The next session of the day was about "Creating, Spreading and Scaling Multi Million User Facebook Apps."  The all-developer panel included:

• R. Tyler Ballance from Slide,
  
• Blake Commagere of Vampires / Zombies / Causes,
  
• Dave Genztel from SocialMedia,
  
• Jia Shen from RockYou,
  
• Joe Winterhalter and his colleague, Eric (didn't catch his last name), of Quizzes and
  
• James Hong from Hot or Not. 
  

Slide had over 10 million Facebook users at the time of the conference, and Tyler initiated the conversation by talking about what he thinks users want to do with their friends.  In cases where users have a large number of Facebook 'friends' (Tyler had a whopping 630 at the time), Tyler felt it was important to be able to quickly engage with lots of people, while having the option to more intimately engage with closer 'friends'.   He attributed the success of applications like Happy Hour, which allows users to send virtual drinks to their 'friends', to this very phenomenon.  Dave Gentzel from SocialMedia, who developed apps like Happy Hour and Food Fight, agreed that user engagement is key.  In addition, he felt that speed in development was a key component of success.  Anything that's taken him longer than 2 days to develop hasn't paid off.

Tyler also brought up the issue of Facebook's need to communicate more proactively and effectively with Developers.  He and others expressed concerns that Facebook had made some code changes without talking to developers in recent weeks, which resulted in killing thousands of profiles within Slide's database alone.  Generally, the developer panelists felt that Facebook's attempts to help a large number of small developers may unintentionally hurt larger developers.  As I've mentioned in previous blogs, I'm a huge proponent of investing in developer relations.  When you allow ISVs/ developers (at least large ones) to plug into your API, you should be treat them as strategic alliance partners and give them insight into what you're planning in exchange for quality assurances.  If you don't, you run the risk of alienating thousands of your users if/when something goes wrong with the apps that plug into your platform.

Blake Commagere, who helped develop popular facebook apps like Causes went on to talk more about developing Facebook apps.  It took 4 engineers to develop the Causes app (which was written in Ruby on Rails).  Blake pointed out that to develop a successful Facebook app, you don't need 100 app servers, you just need to make sure the app and database are solid.  By way of example, Causes runs using 11 app servers, which serve 2.5 million users, and it is working well.  Joe and Eric who developed Quizzes, only use 4 servers for their app.  They emphasize the importance of focusing on app quality and investing time in apps that will grow spread quickly virally.

All of the developers mentioned that that Facebook platform is a little sluggish at times.  James Hong from Hot or Not said that to combat delays, his team opted for using Ajax.  The challenge here is that most ad networks don't currently consider user action as the way by which advertisers pay for ads. Instead, it's still page changes.  In principle, the ad networks James knows say they're happy to move towards a user action model, but in the meantime, there are monetary disadvantages to using Ajax on Facebook.  But, most of the panelists seemed okay with the tradeoffs in the short-term because they increase user engagement long-term.  At the time, Hot or Not is apparently making $1000/day off of AdSense, and rumor has it (according to a member of the audience) that Graffiti is making $100,000 month!

Ads were a hot topic on all panels - including the developer panel - with the need for relevant content delivery emerging as a key theme.  Most of the developers on the panel said they'd been approached to do demographic based behavioral targeting of users.  What I found interesting is that the only data anyone would cop to hearing advertisers request is: sex and geography.  If this panel was any indication, for all of those personalization fans out there (of which I'm one), it looks like we're a ways off from seeing any meaningful movement in this space.

The 2pm panel was on "Facebook Advertising Models."  Panelists were:

• Aryeh Goldsmith (Acebucks)
• Sourabh Niyogi (Appsaholic)
• Scott Rafer (Lookery)
• Narendra Rocherolle (fbExchange)
• Matt Sanchez (VideoEgg)
• Sundeep Ahuja (Appfuel)

Perhaps the most interesting part of this panel was how so many people are attempting to create ad networks on Facebook.   Matt Sanchez from VideoEgg says he has 20 sales people selling in 4 countries.  Aryeh Goldsmith is creating a new Facebook economy and customer loyalty company by introducing a fake currency to Facebook called Acebucks.  At best, the currency takes off and does just what Linden Dollars are doing for SecondLife.  Appsaholic is hoping to become a fully independent monitor of Facebook Stats (think the AC Nielsen of Facebook).  While, Slide wants to be the "single largest content delivery platform to unique users" across all social media OSes.

How useful are Facebook users to developers and advertisers?  The final session addressed "How to Value Facebook Apps."  The panelists were:

• Eve Phillips, (Greylock)
• Keith Rabois, (Slide)
• Naval Ravikant, (Hitforge)
• Angela Strange, (Bay Partners' AppFactory)
• Susan Wu, (Charles River Ventures)

One VC in the audience reckoned that each Facebook user is worth about $500 each.  While, Angela Strange from Bay Partners, whose AppFactory is actively seeking investments in start-ups that make Facebook applications, used a guideline of 25-30 cents per user per app.  In watching this last panel and listening to the excitement relayed through the questions from the crowd and VC responses, it's clear that there are a lot of people pinning their hopes on Facebook (and other Social Media Platforms) continuing to open their APIs and thus encouraging the growth of a new developer economy that pushes apps for so-called social media operating systems.  There is a frenzy of enthusiasm about the potential, but it remains to be seen whether potential becomes reality.  The VCs aren't taking any chances.  Each of the panelists said that when they're looking to invest in a company that develops Facebook apps, they need to see the potential of those applications beyond the confines of Facebook.

For those of you interested in future developments in the Facebook space, Dave McClure mentioned that he's planning a Facebook conference of his own on October 7-9. Stay tuned to his blog for details.