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My Twitter Debate With Mike McCue: Why Does Flipboard Need $50 Million?

April 15th, 2011 04:09 admin Leave a comment Go to comments

There is no question that Flipboard has an early lead in iPad news consumption. The company just raised a massive $50 million B round to cement that lead. This comes in between iPhone photo app Color raising a $41 million A round, and LivingSocial raising $400 million so that its founders and early investors could take half of that off the table. There is obviously a lot of venture money sloshing around, especially for high-quality companies and teams.

When investors offer startups a huge pile of cash at favorable terms, it is usually a good idea to take the money. And that’s exactly what Flipboard did. But does an iPad app company really need $50 million? And does taking too much money ever backfire? Flipboard is no lean startup.

Even if Flipboard wants to expand to other devices such as the iPhone, Android and so on, that doesn’t require that much cash. Maybe he needs all that money to build out an ad sales force (those are expensive). All of which begs a question which I asked Flipboard CEO Mike McCue last night on Twitter:

Erick Schonfeld

@ @ what do you need $50M for that you couldn’t do with $20M?

That sparked a debate between us. McCue fired back a series of answers:

Mike McCue

@ @ considered that scenario seriously. I want to have plenty of runway left before we get to cf+ or new financing

Mike McCue

@ @ also, this raise reduces risk of any unnatural forcing functions to generate cash which cld throw us off vision

Mike McCue

@ @ finally, we will be insanely careful abt how we spend so we’ll preserve options like doing small acquisitions,etc

McCue’s desire to avoid “unnatural functions to generate cash” strikes me as strange. That’s certainly a popular way to build startups: get consumers to fall in love with your product, then figure out how to charge for it later. But generating cash is one of the defining characteristics of every business. There is nothing unnatural about it.

Erick Schonfeld

@ @ there’s nothing “unnatural” about companies that generate revenue.

McCue realizes this, and he had a good response. The $50 million gives him time to find teh best revenue model.

Mike McCue

@ @ of course not. The key is to try to give company enough runway to pull off big vision vs. retreat to survive.

Mike McCue

@ @ in other words: not all revenue is created equal. Best to go after most valuable revenue vs easiest. Takes time.

And then Shervin Pishevar, who somehow got pulled into the debate, ended it by Erickrolling me:

Source: My Twitter Debate With Mike McCue: Why Does Flipboard Need $50 Million?

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