How much investment in social networking companies is enough? If you ask Facebook or new startup weplay.com, the answer may be there’s no such thing. Both have added to their coffers. $4.5m for Weplay, $60m for Facebook.
In the case of Weplay, talent agency Creative Artists had hinted they were serious about venture investment when they moved to set up their own funding structure. In contributing part of the $4.5m raised for the kid’s sports site, they officially stepped up to the plate. Major League Baseball’s Investment arm and Pequot Capital also contributed.
The site, which will launch in April, aims to be a congregation point where young athletes, parents and coaches can network, post videos and reports on their accomplishments or otherwise engage in all things sport.
One advantage the CAA investment brings is the prospect of celebrity participation. The CAA sports group counts star athletes like the San Antonio Spurs Tony Parker among its 350 sports clients.
Bringing the stars to the kids raises the potential for the site to have a significant fan-interactive component. That, and the potential sports advertising tie-ins, is likely what drew MLB to the table too. Brandi Chastain, Shaun Alexander and Peyton Manning are among others lending their names to the site’s beta launch.
The idea for Weplay reportedly came out of CAA as part of brain storming sessions intended to consider non-traditional endorsement vehicles for clients. It’s not surprising then that the site seems to borrow some similar ideas to CAA’s other internet venture Funny or Die (though that site is video centric). That comedy centric site was built in collaboration with actor/comedian Will Ferrell, CAA and Sequoia Capital.
I vaguely recall the bust of 1999’s Internet sports vehicle MVP.com and generally remain skeptical about the chances of success for yet another social network. Weplay carries both caution cards.
As evidenced by the past few years’ voluminous rounds of funding in the space, it can be a complex and expensive process to build a scalable site and audience. $4.5m may amount to little more than a drop of what’s needed for an expansive, national site to operate once (and if) it starts to draw audience.
Weplay will compete against other similar ventures like Takkle.com (which raised more than $7m in September). There remains a lot of work in front of them to gain traction. It’s a safe bet they could end up becoming a part of broader social network services like Facebook or MySpace. Then again, not yet launched, it’s premature to predict their future.
In the case of Facebook, no amount of money seems too much. Thursday, it was widely reported that Honk Kong billionaire, and prior investor, Li Ka-shing was doubling his stake from $60m to $120m. The investment was made from his personal foundation (not other corporate entities). If reports are accurate, it was made at the same $15b valuation and terms underlying Microsoft’s purchase of $240m (or 1.6%) of the company in October. In total, the new investment means Li Ka-shing will own .8%.
Facebook hasn’t offered any official word, but it would appear they are trying to stockpile their cash reserves to continue to fuel growth; and their growth remains expensive.
On January 31st, news leaked after a company presentation that the company’s (which is still private and does not publicly disclose its financials) 2008 revenue is expected to be in the $300m range. But with a plan to more than double staffing from 450 to 1000, and the heavy costs of serving the more than 37 million people that use the site, their earnings before interest, tax, depreciation and amortization (EBIDTA) will be only about $50m. That leads to a negative cash flow of about $150 (as reported on All Things Digital)
On the subject of social network fundings, Sausalito based social network Glassdoor has apparently raised a $3 million second round led by Benchmark Capital. (via peHUB). The company is led by former Hotwire president Robert Hohman and Benchmark partner Richard Barton who is also CEO of Zillow.
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