

After A Hot Start, Justin.tv Spins Off Socialcam, Its ‘Instagram for Video’ - Mazy
http://techcrunch.com/2011/08/29/after-a-hot-start-justin-tv-spins-off-socialcam-its-instagram-for-video/

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andrewcross
How would this work for the investors of Justin.tv? I know that Justin.tv has
a stake in Socialcam, but to go from owning 100% of the value to something
less seems like a lousy deal for the investors.

I suppose you could make the argument that this will enable Socialcam to grow
more quickly and thus drive higher value for everyone, but it seems like quite
a high risk.

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byrneseyeview
Justin.tv owns some of it. What they're probably doing is having Socialcam
issue some stock to investors, and to grant lots options to the founding team.
Imagine that SocialCam has 100 shares now. They might have the company sell 50
shares to outside investors for funding (so Justin.tv owns ~67%, _but_ that is
67% post-money, and the total value of the stake will be the same). Then the
company could allocate 50 shares to an option pool for their founders. That
dilutes Justin.tv's stake down to 50%. Nobody has to give anything up--the
investors are putting in money, and the options are a form of employee
compensation.

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callmeed
I don't quite follow.

The investors _in Justin.tv_ now own a smaller share (or none) of SocialCam,
right? How is this allowed (without approval)? And who would approve it if
growth is good?

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drusenko
That's certainly one way to paint the picture. Most of investing, though, is
trying to grow the pie, not necessarily focusing on your specific piece.

I've been on the founder side (trying to convince investors to spin off a new
company) and the pitch goes like this: Before, you had an ownership stake in 1
company with two products. After, you have an ownership stake in 2 companies.
Both of these companies are out to grow, raise money and exit in their own
right, and have teams solely devoted to hitting a home run. From that
perspective, you could argue that you now own more than you did before,
essentially by growing the pie.

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tmcneal
Justin.tv's strategy of using their video-hosting infrastructure to
aggressively pursue verticals within the video watching/sharing/hosting space
is working out really well. They seem to have a knack for identifying how
people use video and streaming on the web, and are creating products that
serve the specific needs of each group.

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johnrob
Justin.tv seems like it's doing really well (at least from the outside), which
makes it difficult to understand why they keep launching new products.

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JonLim
Why not? They're continuing to create really great products that scratch their
own itches and are allowing the company to grow.

Seems like they have the resources for it and the drive and ambition.

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terhechte
Interesting. I suspect that Instagram are also contemplating adding video
sooner or later, given that in their API images are to be found in the "media"
branch, and for each entry there the data-type is labelled as "image".

