BUSINESS BLOGS
BUSINESS BLOGS
category: business
31 Oct 2009

Since being pushed out of MySpace, Chris DeWolfe has tried to raise money to roll-up social games and compete against Zynga:

DeWolfe is likely looking at very small gaming companies run by a handful of stellar developers but that lack the legal, business development, and dealmaking resources to make any kind of a dent in the current social-gaming market.  

Social games are a red hot space, with Zynga allegedly generating $100-250M in annual revenues.

If this all sounds familiar, it’s because DeWolfe’s former boss Ross Levinsohn was also planning on raising money and rolling up assets when he left Fox Interactive Media.  Levinsohn, of course, joined forces with former AOL boss Jon Miller and instead merged their venture capital operations with ComVentures to become Velocity.  Today Miller has left for News Corp’s Digital Chief and Levinsohn has renamed Velocity Fuse.  One thing he learned wasn’t obvious was the whole roll-up strategy.

Roll-ups sound great in theory and every time I mention rolling up video assets (the industry I operate in via WatchMojo) investors get hot and heavy, but the truth is, just because sometimes creative/technical types lack the “legal, business development, and dealmaking resources to make a dent in their market” doesn’t mean roll-ups make sense from a strategic, operational, financial or tactical perspective.

You have to be able to manage a lot of personalities and egos, above all, and then once that is done (if that can be done), then you have to make the numbers add up.

Then again, don’t be surprised if Levinsohn invests in DeWolfe’s venture, who knows.

DeWolfe still has a better valuation landscape today than the one facing Levinsohn when he left FIM, but either way, DeWolfe should avoid suffering from hubris and biting off something that is easier to chew if he plans to catch lightning in a bottle twice.