MediaFile

Cisco flipped for Pure Digital, but did VCs flip out?

Cisco’s $590 million all-stock purchase of Flip video camera maker Pure Digital last week may sound like a nice price for the venture capital-backed company, especially given the non-existent exit market right now.

But Venture Capital Journal editor Larry Aragon writes in a PEHub blog post that the $590 million number doesn’t sound that meaty when you calculate the return on investment for Pure Digital’s venture capital backers. And that’s especially true because some top-notch VC firms like Benchmark Capital and Sequoia Capital have invested in Pure Digital. (Venture Capital Journal and PEHub are part of Thomson Reuters.)

Aragon calculates that if Pure Digital’s VC investors put in about $95 million, and assuming that they own about half the company (since it’s a stock deal), “that’s a return of just over 3x their money.”

Now, Silicon Valley’s brand-name venture capital firms have long been used to returns on investment that are several multiples higher than that, usually around 10 times the investment. We know the dotcom boom days are never coming back, but a selling price that brings back only three times the money invested — that too, over a five-year period, according to Aragon — is cause for concern about how profitable the VC model really is.

Surely, the VCs might have been tempted to hold out for a better return on their investment if the public markets showed any signs of life. But with IPOs of venture capital-backed companies remaining a dream in the current environment, guess the venture capitalists decided that Cisco’s offer was one they couldn’t refuse.

iPhone Apps mean money for game publisher ngmoco

Given the popularity of downloadable apps for Apple’s iPhone and iPod Touch, many folks — namely some prominent Silicon Valley venture capitalists — are confident there’s plenty of money to be made from app developers as well.******Ngmoco, which makes games exclusively for the iPhone and the iPod Touch, said Monday it has closed $10 million in Series B financing led by Norwest Venture Partners. The company’s previous investors –- Kleiner Perkins Caufield & Byers and Maples Investments — also participated in the funding. Ngmoco received $5.6 million in its first round of financing.******Ngmoco — which stands for “next generation mobile company” — was born last year along with Apple’s App Store, and the company’s profile has risen in tandem with the store’s popularity. Users have downloaded more than 800 million apps in total and the store now features more than 25,000 offerings.******Ngmoco’s games have been installed more than 7 million times. The company currently has seven titles –- its most popular is the $9.95 “Rolando Orlando” -– and 12 in development.******Neil Young, ngmoco’s chief executive and one of its co-founders, said in an interview that he was surprised by the “voracious” appetite for games on the iPhone and iPod Touch. Although he wouldn’t rule out making games for other platforms, he said the devices provide a unique opportunity for game makers.***

It’s just a blend of amazing capability with this awesome usability. And its clearly those two things that are enabling this new type of usage patterns both in terms of how people are consuming games and how much they’re consuming. And also the ease at which they’re able to get them. Until there are any other platforms that come close to that I think we’ll certainly remain focused on these devices.

******Young, who left game publishing giant Electronics Arts to launch ngmoco, declined to disclose a revenue figure for the company, which has 26 employees.******The App Store is estimated to offer some 6,000 games. Many see the iPhone and iPod Touch as legitimate competitors to Nintendo’s DS and Sony’s PSP handheld gaming consoles, and that battle should play out over the coming months and years. IPhone games are expected to be much on display at this week’s Game Developers Conference in San Francisco.******Keep an eye on:***

    *** EBay’s Skype plans to announce on Monday a version of its Internet calling software for small and medium-sized businesses (WSJ)

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    *** Former Yahoo Chief Operating Officer Dan Rosensweig will take over Activision Blizzard’s Guitar Hero franchise (All Things Digital)

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Android co-founder in Google Ventures?

Is Android co-founder Rich Miner Google’s new in-house venture capitalist?

To judge by one intriguing clue, it appears so.

Miner’s name was recently spotted on a nametag at a Silicon Valley event for start-up firms to present their ideas and pitch VCs for funding. The tag identified Miner as belonging to Google Ventures.

Of course, there is no such thing as Google Ventures, at least not yet. A company spokesperson told Reuters on Thursday that Google Ventures is “a project we’re working on. But we’re not able to discuss details right now.”

Miner would be an interesting choice for a Google in-house venture fund, which has been rumoured for months.

VCs give Twitter a Valentine’s Day gift

Venture capitalists are stingy with their money right now, but that doesn’t mean they won’t shell out a few dollars for a hot Internet startup like Twitter.

The micro-blogging website announced on its blog it had received new funding from venture capital firms Benchmark Capital and Institutional Venture Partners, although they didn’t say how much. Some folks are reporting it’s in the neighborhood of $35 million.

Twitter co-founder Biz Stone said in a post Friday morning they weren’t looking for more funding. “Nevertheless, our strong growth attracted interest and we decided to accept a unique opportunity to make Twitter even stronger with a very attractive offer,” Stone wrote.