Capital Chaos

Redpoint Ventures has made two significant investments this week (we just profiled their investment into Seesmic) and the latest is in Sparkplay Media (Mill Valley, CA).  Sparkplay raised $4.25M in this Series A round which also included Prism Ventureworks.  The company which develops its “browser-based massively multiplayer 3D games platform and of its first MMO, Earth Eternal” is poised to take on some pretty big competition in the space.

Earth Eternal is a “3d MMO, players will encounter an approachable and immersive world of cartoonish characters, high adventure, and social fun.”  These guys are all about the whole virtual world life and will attempt to go head-to-head with the likes of Second Life and others.

I will say this, the guys who have been bootstrapping for the past year and a half running the co. definitely have some pretty good credentials in the space.  Sparkplay is actually a spin-off of Iron Realms Entertainment - one of the most successful in the (MUD) niche.  Matt Mihaly (CEO) was the founder, Chris Kohnert (CTO was CTO there and David Kaye (VP of Biz Dev) was also a co-founder of Iron Realms.   I’m not quite sure what is left of Iron Realms after this spin off but could provide valuable if the guys at Sparkplay can utilize some of the resources there.  I’m a bit curious as to why Iron Realms didn’t just raise the money themselves and keep Sparkplay under its umbrella…

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Redpoint Ventures (Menlo Park, CA) is an early stage VC that truly loves the entrepreneurial spirit. With over $2B under management, 34IPO’s and 54 upside acquisitions, these guys have a pretty good track record. Even being as big as they are, they do like to invest in younger companies who are early in their lifecycle. For Redpoint, companies fall into one of three categories:

• Seeking to create new markets or redefine existing ones
• Looking for seed stage or first round institutional financing—or are generating revenue and seeking growth capital
• Want a lead or co-lead investor that will play an active role

These guys have made a lot of investments since they began in 1999. Their primary areas of interest include:

• Broadband Infrastructure
• Enterprise Systems & Software
• Interactive Media, Content & Advertising
• Consumer Internet Services & Applications
• Mobile Platforms and Applications
• Semiconductor Materials and Devices
• Energy and the Environment

Having made the number of investments that they have, there still seems to be both an appreciation and respect for the entrepreneur and being a part of the process (more so post-funding).

There seems to be two versions of pitching to Redpoint as a VC. Some say that the firm is very helpful in the pitch process and offer great insight but there is also a group that will say after the pitch is over, they tend to go silent with little feedback post pitch. I am not sure if the strategy is that if you dont hear anything, it means they aren’t interested but my sense is that even a “no” is better than not hearing anything at all. This is often a very frustrating sentiment echoed by many people out there trying to raise money and that is they just want to hear something and many times, “no” is better than nothing at all. While Redpoint does get high remarks once they have invested, I think more people would like the process better if there was some closure either way.

Fouad ElNaggar (consumer Internet, online marketing, digital media, software and cleantech specifically biofuels, carbon sequestration and water-related technologies) and Tim Haley (software, consumer Internet and digital media) are the two guys that seem to get the most accolades to pitch to. But again, manage expectations if you are going to pitch them and understand that even though they may be very engaging during the pitch, a lack of communication afterwards probably means they arent interested. Don’t be afraid to keep reaching out to get an answer either. What’s the worst they can say, “No”? Better than nothing!

Contact:
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Telephone: (650) 926-5600