Capital Chaos

Zivity (San Francisco, CA) seems to have broken the barrier between mainstream and adult by securing $7M in VC money from some very reputable sources for an online adult content social network.  The Series A Round led by BlueRun Ventures and FoundersFund (Peter Theil of PayPal fame and co.) comes on the heals of a $1M angel round just last year. 

While the news of a another social networking site getting funded isn’t really news today, the area in which Zivity plays is.  Adult content has always made money online and many believe it is one of the few sectors of the web that generates “real money” - something significant.  Since the online adult model is based on affiliate marketing (and since the demand just keeps growing), the viral effect of online adult content is significant.  You rarely see ads for adult sites on anything other than other affiliate sites (with the exception of Adult FriendFinder which was allegedly sold for $400M). 

There have been other sites that have penetrated the social networking world as it relates to adult content but few have gotten the type of press, and money, that Zivity has achieved.

The site allows professional and amateur models, photographers and videographers the ability to showcase their works.  Registered users vote on what they like and then the talent can get real money for it.  The more votes, the more money.  While the site is free (still in beta under “invite-only” mode) if you want to vote, you will have to pay.  From what we have read, the spilt will be roughly 60/40 with 40% going to the talent.

I’ve played around with the site for sometime now and notice that the community is growing more and more active - in terms of adding more friends to check out Zivity as well as the voting overall.  There also seems to be a growing number of women on the site which I also found interesting since there is no question that will stimulate grwoth to the site and keep men on there longer.

The site is run by Jeffrey Wescott who was formerly with IronPort (sold to Cisco for $830M in 2007) where he led security software architecture.  He started the company with Scott Banister who was also at IronPort and was one of the initial investors in PayPal and also served as a Director.  These guys are not newbies and while the online adult industry is a very tight group which is weary of others treading on their ground, these guys have money, a great idea and a growing universe of users - all of which are attractive to any industry.

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On the heels of closing FoundersFund II for $220M as we reported back in December, ‘07, the guys are at it again.   Having already made investments into Slide and Quantcast, their latest projects seems to come in Zivity. These guys are the real deal in terms of truly understanding and appreciating what it means to start something from scratch. The FoundersFund is exactly what it sounds like, founders who have money they want to put to good use in the form of a fund. They are familiar with every stage in a company’s lifecycle from seeding, to building defensible products to increasing shareholder value through a public offering - you name it, they have seen it, done it and most importantly - been successful at it.

If you get a chance to pitch these guys, make sure you are air tight and not only have a passion about what you are doing but can articulate it in a fashion that makes sense and more importantly makes sense to others. Your team has to be a cohesive engine that has little margin for error in terms of your dynamics - the business may need to be polished but your team should be a unit from day one.

Typical investment size ranges from $500,000-$5,000,000 and they dont just provide cash but the experience and know how to help you make your vision a reality. If you are serious about reaching out to these guys, submit a 10 - 20 page PowerPoint presentation containing an overview of your business, including your company idea, your team, the market, the competition, and your distribution model.

submissions@foundersfund.com

These guys are up there as one of the top early stage VC’s. If given the chance, really try and pitch Peter Thiel (co-founder of PayPal).

Contact:
1 Letterman Drive
Building C Suite 400
San Francisco, CA 94129