Four Reasons Index Ventures Invested In Grey Area

Earlier this week Grey Area announced a whopping 1.9 million euro series A round from Index Ventures, London Venture Partners and Initial Capital. This is one of the largest single rounds into the Finnish gaming companies in the recent years for sure. What makes this all the better for the whole country and Northern Europe for that matter, is that the financing came from overseas from globally respected investors. Ben Holmes from Index Ventures outlined four reasons why they invested in Grey Area. I think this is a good read for all entrepreneurs to keep in mind if they are looking for venture capital.

The four reasons Ben outlined in the Index Ventures blog post are also shown below:

* Exploding market – The iPhone and Android ecosystems have transformed and democratised mobile gaming. I have written in the past about how fragmentation and the operator channel made the whole mobile app business a nightmare. This is no longer the case, entrepreneurs can access vast audiences by being creative around marketing rather than using the traditional brute force approaches.

* The right monetization model – We have seen with existing investments in Stardoll, Moshi Monsters and Playfish as well as other companies such as Gameforge and Zygna that free-to-play with in-game purchase is probably the most lucrative business model in gaming currently. In-game purchases were rolled out by Apple last year and now a few of the “Top Grossing” titles in the iPhone appstore charts are free-to-play games. I would predict that over the next year that the majority of mobile gaming revenues will shift to free-to-play games.

* Positive early traction. One of the challenges with finding investments in this sector is that there are literally hundreds / thousands of developers writing for iPhone and Android. Those with substantial traction and monetisation tend to be valued stratospherically. Finding something which was early but was already showing its potential was what we were looking for. Shadow Cities fitted this criteria precisely. The early beta data from Finland showed very promising metrics around both engagement and monetisation. The app fairly quickly became the Top Grossing game in Finland soon after launch. Now just the rest of the world to conquer …

* Great team – Just four people when we first met, but already achieved a lot in a short timeframe and on a shoestring budget. If you want to see how effective entrepreneurs will be once they have money, see how much they can achieve without financing – that is always the best pointer.

From: http://www.arcticstartup.com/2011/02/25/four-reasons-index-ventures-invested-in-grey-area

Does there need to be a pain point for an investor to invest?

I recently met with Nic Brisbourne at DFJ Esprit and pitched him for investment into a company that I am involved with; so was interested to see his view on whether something can be fun, meet no ‘pain point’ and raise investment. After all life should be fun…

The pleasure principle – companies shouldn’t only focus on pain points

Perna Gupta is the CEO of Khush, the developer behind the music creation iPhone app LaDiDa – an app which has been downloaded 270,000 times and is unashamedly about having fun.  She wrote a guest post on Techcrunch on Sunday complaining about how her company had got to the final stages of two prestigious start-up competitions, been the audience favourite, but been dismissed by judges because she isn’t solving an obvious pain point.  In her words:

Earlier this year, my company advanced to the final stages of two prestigious start-up competitions. Both times, I got up on stage and belted out my prezo in C Major (our product is LaDiDa, an iPhone app that helps bad singers make music), and then backed up the singing with solid growth metrics on our business. The audience loved it, and LaDiDa was a crowd favorite to win in both contests. But when it came time for the judges’ feedback, I was frustrated to hear a familiar refrain: “Your demo is great, really cool app,” they said, “but we can’t give you this award because your product doesn’t solve any obvious pain point.”

In the rest of the post she goes on to argue that investors’ focus on pain points is resulting in a lot of worthwhile companies not getting funded.  As she points out, Twitter and Facebook weren’t about solving pain points when they started.  Nor are the pornography, sports and coffee industries.

As an investor I love a business that solves a clear pain point as much as anyone.  When pain is being removed it is much easier to be sure that a market is there, but I think our major pain points have largely been solved, and targeting pleasure, or happiness is increasingly going to be where the action is.

For most consumers the burning question is ‘how can I be happier’ rather than ‘I wish I could get rid of XYZ irritant’.  And LaDiDa makes people happier, it is fun, it promotes togetherness and sharing, and it makes you a better singer.  What’s not to like?

Check out this promo video from their iPad app to get a flavour (and this is a fun experience too…)