Tuesday, May 08, 2007
Deal Note: Scribd
So Scribd is hot - really hot. If we accept the rumour, at the A-round, Scribd achieved a valuation of >20m.
Not bad, given the fact that it hasn't exactly seen exponential growth in terms of attention share.
The hypothesis behind investing in Scribd is easy - a global repository of documents will garner an incredible attention share at any reasonable scale. Even at a measly Digg-scale, the revenue potential of a Scribd begins to be significant. And then there's the fact that Scribd ads can be hypertargeted...
Now, that's all well and good.
In fact, what's really interesting about Scribd isn't the yawner of an investment thesis - but the fact that it's one of the few startups around that really pushes the definition of what media is. Can other people's documents really be a medium? What are the economic of that medium?
Very interesting and thought-provoking questions.
But back to the IRR.
I'm just not so sure of the key assumption behind the investment: that Scribd solves a problem that actually exists. Is there a supply of prosumers with "documents" leaping at the chance to share them? Initial attention share tells us very clearly - not yet.
And even if there are, why wouldn't they just start a blog? YouTube had a clear monopoly on online video (at least usable online video). Scribd doesn't have the same clarity of market power.
Would I have taken a bet on Scribd anyways? Probably. Good ideas are (very) few and far between these days. And the potential upside of a Scribd is well worth the risk.
Let's discuss the sideline of a Scribd as host (essentially) for ripped-off books, magazines, etc. YouTube was in a legal grey area (ie, microchunks). Scribd isn't (which it acknowledges). Can Scribd exert pressure on publishers? Not unless it's in the grey area.
But the larger point ist that there are lots of other positionings to be explored - Scribd as Office meets community (which is what a lot of the buzz is about), Scribd as Digg-feeder, etc - which is what offsets the risk of the key and somewhat shaky assumption, and makes Scribd a fairly cool play which will be a lot of fun, if not an obvious game-changer.