5 Questions for David Cowan on the Playdom Sale

Walt Disney Co. today announced that it will buy social gaming company Playdom for up to $763 million. It’s the largest exit of a VC-backed gaming company since Playfish was acquired last fall by EA, and is significantly larger.

So we’ve got five questions for David Cowan of Bessemer Venture Partners, which became a Playdom investor just last month:

1. Playdom reports fewer monthly numbers than did Playfish at the time of its acquisition, but is being acquired at a price that’s around 90% higher. Why?

Cowan: I think there are three answers here. First, you always have to look at the specific acquiror and the strategic fit and value of the company being acquired. I don’t know the specifics of the valuation that went into Playfish, but do know that Disney expects a lot of synergies as it brings the Playdom team into other Disney properties.

Second, number of users is only one metric. I think that Playdom’s revenues were significantly more at the time of acquisition. Third, Wild Ones is totally, totally awesome.

2. Bessemer first invested in Playdom just last month, and the company raised its first VC round around seven months ago. How much value could VCs have brought in so little time?

I think this is a company that was built by the founders with very limited help from venture capitalists only at the very end. But, that said, I think it would be unfair to discount the value of the work the [New Enterprise Associates] team put in. They weren’t there very long but, in this business, a lot of things can happen in seven months.

3. Playdom bought at least eight other companies over the past year. Is this hyper-acquisitive platform model something that successful social gaming companies should replicate?

I think what we’re seeing in this industry is the consolidation we see in other industries, but happening much faster because of social gaming’s growth rate.

In general, there are consolidators and consolidatees. If you’re a consolidator, you’ll be hunting for those creative teams that have a knack for amusing users. But to create a successful social gaming business you don’t necessarily have to be a consolidator. You have to look at the ecosystem and know what you are, because the rules of the game have changed so much in the last six months.

4. How so?

In 2009, Facebook was the wild west and app vendors could do all sorts of clever things to drive virality. But the Facebook platform is maturing and not all those techniques are available to scale so rapidly.

I guess what I’m suggesting is that the early entrants got very big very quick. It’s not clear to me that there will be other Playdoms following with the same models. I think we already know who the consolidators are.

5. This deal includes a $200 million earn-out. Do you view earn-outs like biotech investors, in that you’ll only get 20 percent? Or do you expect more?

I think Playdom is going to blow the cover off the ball with Disney.