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Say what you want, but VC is still about finding the best companies first

There’s a lot of talk about crowdfunding and the disruption of venture capital in tech and VC circles. But while people are busy talking, VCs are hard at work at finding the next huge successes.

Techcrunch posted a very interesting story of  Plain Vanilla, the makers of QuizUp. For those of you who don’t know it (where do you live?) QuizUp is a marvelous social trivia app which scored 1 million downloads in 8 days and is the top free app in the iOS App Store. It’s incredibly well executed and addictive.

The most interesting part of the story for me is the additional funding round, which in my opinion has the potential to go down as one of the best investments of the year.

Sequoia and e.ventures found about QuizUp while it was in beta and rushed like crazy to close a round and wire the money before the app launched in the store. If they had waited just one more week the round could have been extremely more expensive and crowded.

Plain Vanilla was basically faced with the following question: accept $2M from two leading investors pre-launch or wait for the launch and either  raise at better terms thanks to the traction or potentially die if it does’t go that well. I think they made the right choice.

This demonstrates what sets great VCs apart. Massive congratulations to Sequoia and e.ventures for getting into it before everyone else even noticed.

  • Ashish Aggarwal

    I like the core point that you are highlighting here.

  • FNiutta

    Ciao Stefano,
    I beg to differ on your post, sure Sequoia made an excellent job at closing a deal (i.e. making a quick decision) in time to get the upside of an app store major hit, but I think it has much more to do with deal execution rather than finding the best companies first – matter of fact Plain Vanilla had already raised quite a bit of money as Sequoia’s check went into an extension of their Round A….

    • http://bernardi.me/ Stefano Bernardi

      Not really sure I get your point, and actually if Sequoia and e.ventures got the same terms as the other Series A investors it might be an even more awesome deal.
      But the point is that they were able to invest at the perfect time – while previous Series A investors took a much bigger risk when there was no app to look at.

      This doesn’t mean that those investors are not great, quite the opposite.

      • FNiutta

        My point was that it’s rather a matter of execution than scouting (which is more due to the previous investors, mainly angels) – 100% agree this qualifies everyone who invested in Plain Vanilla at pretty awesome level :)

  • Stefano Tresca

    And there is a lesson for Europe. I spent almost 2 months to close a simple seed investment for one of the startup in my portfolio Cybranding. And we had to show a contract with a big corporate client to get our evaluation. Europe often invests on current numbers, US usually invests on a vision. You can’t have Google or Amazon if you focus to early revenue. Luckily I see things improving, at least here in London.

  • Pierluigi Avvanzo

    Stefano, I’m still struggling with the way plain vanilla could monetize the huge interest it has urged in its users, different from upgrading levels or XP points purchase. I have been playing at quizup since a couple of weeks and even though I’m still finding it stimulating I am getting really and quickly bored than addicted to this trivia game. The problem I mean is that other than a challenge to other persons or each self, it doesn’t raise any concrete advantage to users. Here is a question for you ( I will be honest it’s almost 2 years I am thinking of a game like that which might bring money to inventors and to users) which is the best way a quiz game or app can ride to get money being still free and always addicting for users? I have an idea but still have some confusion as to how to realize it quickly and efficiently.

    • http://bernardi.me/ Stefano Bernardi

      There’s some great opportunities for sponsored content, as well as applications in the education space.

      But it’s definitely a very tricky game to monetize. These guys have been at it and know more than anyone else on the trivia space, so I’m confident they’ll figure it out.

  • John

    Best investment of the year for an app that for now just stayed on top of Apple charts for a week – great job btw – and who knows where it will be next week (already lost #1 position)? Best investment of the year for an app that despite being in the top charts for a week is only ranking #277 in top grossing (you know, making money)?

    • http://bernardi.me/ Stefano Bernardi

      John, I’ve learned to not dismiss anything because there’s no clear monetization path and anyone following the internet and mobile space should try to do that as well – most apps and companies don’t die because they don’t make money, but because they don’t get enough users. But that’s a much larger conversation which I suspect you wouldn’t agree with.

      Anyways, as I’ve replied above there are a number of ways to do it and I’m confident the team will figure out the best way. Not sure it’s an immediate focus.

      But it’s an amazing product which gets people engaged in a huge market – so yeah, I still believe it has the potential to be a very very good investment.

      • Get a life

        Ok, if you just delete any comment you don’t have an answer for, just stop blogging and start growing up.

        • http://bernardi.me/ Stefano Bernardi

          I haven’t deleted a single comment ever. Which one are you referring to?

          Also, it’s good form to comment with your real name.

          • John

            I used my real name, John, then you deleted my 3 paragraph, polite, response. Already wasted too much time here and I don’t understand the purpose of blogging this way. Good luck!

          • http://bernardi.me/ Stefano Bernardi

            Never received a response to my reply. Good luck to you!