Guy Kawasaki interviews the guys who don’t need no stinkin’ venture capital

By Dean TakahashiFriday, December 7th, 2007 at 2:32 am in General, entrepreneurs, social networking, tech culture, venture capital.
The highlight of the AlwaysOn Venture Capital Summit was Guy Kawasaki’s panel, “Why Take Venture Capital At All.” It was hilarious from the get go as venture capitalists watched the young entrepreneurs on the panel inside the swanky Ritz-Carlton Half Moon Bay resort. Kawasaki rounded up four people who were at the right place with the right idea at the right time. By making money with virtually solo operations, they are the lucky ones who make it look so easy. So much so that they didn’t really need much funding at all. In other words, it’s the people everybody loves to hate because they make the rest of us look so bad and unlucky.
Kawasaki asked everyone at the outset how much traffic each of the young entreprenuers were getting. Drew Curtis, the founder of Fark.com, said he has managed to get 52 million page views a month from four million unique visitors. I enjoy Fark myself. It’s basically news of the weird that makes you laugh. People submit ideas for funny stories to him and he and his crew put the best ones on the site. Curtis lives in Kentucky, drinks beer, and plays a lot of soccer so that he counteracts the effects of the beer.
He got the idea for Fark.com as a “complete accident” back in 1999. “I did it because I was annoying the people I was sending the stories to,” he said. Curtis said the site is just a single page that you click on to go to the stories. Once it gathered momentum, the bottom had fallen out of the dot-com market so Curtis didn’t raise any money.
“Still, it was basically my own personal web site,” he said. “It’s almost on auto pilot.”
They get about 2,000 stories a day and then sort through them. He notes that every single late-night talk show and comedy show uses stuff from Fark.com but they don’t credit it. He reads through them from 7 am until 5 pm, when his soccer game starts. He says he is usually so drunk at night that he signs off early, he said.
“I’m having trouble feeling sorry for you, hanging out in Kentucky,” Kawasaki said.
Curtis said that four friends help him do the sorting because they have the same kind of sense of humor that he has. Sometimes he disappears and no one notices. Acting the social critic, Kawasaki asked, “What does it mean that a lot of people get their news through Fark? It’s not exactly NPR.”
“It comes down to the way the younger generation reads the news,” he said. “Most males 18 to 35 get their TV news from the Daily Show. It’s a different filter.” He is worried that Fark has been around nine years and it will be “screwed” if the younger readers don’t adopt it. But he said the younger readers are still coming.
Markus Frind runs a free online dating site Plenty of Fish out of his apartment. He gets 1.2 billion page views a month from 50 million unique visitors. Frind said he started the company because he needed to learn a new software program dubbed ASP.net. “I needed to learn so that I could get another job,” he said. “I built it in two weeks and it started to get traffic. It never occurred to me to raise money.”
He and his girlfriend worked on it and he said, “My girlfriend didn’t really want to do anything so I hired an actual employee.” Kawasaki asked him, “What is the biggest single check you’ve ever gotten from Google AdSense?” Frind answered, “$900,000. That was for two months.” Frind said he beats out eHarmony and others thanks to “lots of automation.” He said one person goes through the site and “forwards me the police requests.” Kawasaki asked how many police requests come in. Frind said two a week.
The traffic is taking more and more servers. He now has 12 servers in a vault, storing 50 terabytes a month. About 300 million files a day are sent out. Frind said that about 30 percent of the members turn over a month, since it’s a dating service and some folks drop out of dating when they find someone.
“Catch and release,” wisecracked a member of the audience.
Frind said that he believes he gets more hours from his visitors than Facebook.
“I guess sex is sticky, is what you’re saying?” Kawasaki said.
Ramu Yalamanchi is the CEO of Hi5, a social network that is largely international. He raced ahead of Kawasaki’s questions and talked about how he raised $250,000 early on and launched his service in late 2003. Now the site is No. 1 in seven countries and has 35 million unique visitors and 12 billion pages. He said it was really hard to raise money during the “nuclear winter” of the tech bust. They used the capital to get the business going, focused on monetization because they didn’t have a choice. They they raised venture capital in July 2007. At that point, they were profitable. They raised it to expand the business, hire new people, and make bigger bets.
“The hardest thing is to get momentum,” he said. “If you have it, you should take advantage of it. That’s why we went out and raised money.”
Kawasaki said that many companies raise money because the first version of their products suck. But Yalamanchi said that wasn’t the case. Kawasaki said that Yalamanchi’s company must be worth $7.5 billion if Facebook is worth $15 billion. Yalamanchi said his site is big in places such as Mexico and is particularly big with the Hispanic market. After taking the venture capital and hiring more, the company has 60 people.
Blake Commagere, co-founder of Mogad, said he had a “string of unsuccessful companies, none of which you’ve heard of.” But in his last project he created something that is spreading like wildfire on the Facebook social networking site: the Zombies and Vampires social game. In five month, there have been 20 million users. But there are about five million unique visitors who are active and the monthly page views are just shy of 500 million.
“How much?” Kawasaki asked in disbelief. “Half a billion,” Commagere replied. That means that the players of the game are addicted and they’re generating hundreds of pages views each.
All Commagere was trying to do was annoy and amuse his friends. They were annoyed with him when they found out he disappeared for two weeks to create a dumb game. “It was created as a joke, just to make me laugh,” he said. “As it took off, I said oh god I have to get resources into this.”
Commagere said it’s a very simple game that is designed to spread from person to person. The reward system gets users addicted so they can get to the next level and see new pictures of zombies. He figured he shouldn’t even try to ask for venture capital because he would get laughed out of the room.
“People would probably be terrified if I told them about how off-the-cuff everything was,” he said.
He did have a background in spreading products in a viral manner such as Plaxo’s contact service. When he realized it was a good business, he was already cash-flow positive. In other words, he didn’t need to raise money. His roommate helped out. He warned that “Facebook users don’t monetize as you would think,” he said.