Momentum Ventures: Helping start-ups start up

Momentum Ventures is a Venture fund in Los Angeles, CA, that funds early stage start ups, to get them ready for traditional VC investment. Rabinder Sekhon of Sekhon Advisers, writes about the fund, its investment strategy, and the work it does in getting start ups to the next level.

momentum ventures logo

As some first time entrepreneurs may already have experienced, attempting to get through to a VC with the hopes of securing a Series A round is really tough to do right now. There is a funding void left by VC firms shifting their investments downstream. This has left many unseasoned entrepreneurs to fend for themselves to bring great ideas to fruition.

Filling this void is Los Angeles based Momentum Venture Partners, founded in 2004 by a pair of veteran start-up executives - Matt Ridenour and Andy Wilson. Momentum works closely with a company’s founders to shape their business plan, find experienced management, finalize a product and gain customers - a process that typically takes about nine months to complete. At that point, they pitch the company to VCs with hopes of securing a $4 million to $5 million Series A round.

Picture courtesy Momentum Ventures

Momentum’s distinctive model dedicates far more time than a typical angel or seed-stage investor while also assuming considerable risk. A typical assignment begins with a six weeks first phase - usually for a fee of less than $20,000 - validating a business plan, building chemistry with the founder and carrying out due diligence before committing to the start-up. Upon approval, one of four Momentum partners then takes on an interim CEO role, moving the founder to the chief technology officer role. During the process, Momentum provides a bridge loan - typically $250,000 to $500,000 from a bridge fund pooled from high net worth individuals - to keep the company operating, all for a ‘nominal’ monthly stipend.

momentum ventures Andy Wilson, Stuart MacFarlane, Katic Cameron, Matt Riedenour, Dan Tamkin, Scott Shapiro of Momentum
Andy Wilson, Stuart MacFarlane, Katie Cameron, Matt Ridenour, Dan Tamkin, Scott Shapiro of Momentum Ventures

Unlike a traditional VC who might split his/her time with many companies, Momentum partners typically work with, at the most, two companies at a time spending half of their time on each, with an operating associate subbing in the other half as a project manager and director of operations. Momentum’s ultimate goal is to deliver the company to venture capitalists and secure that first round of capital, when the firm’s bridge investment converts, often at a discount, into Series A preferred stock. It’s at this point the firm gets paid for its work after having deferred the majority of its management fees during the previous nine months.

So far all seven of its start-ups have made it to the Series A level, focusing on Los Angeles-area technology companies that require less than $10 million in funding to break even on a cash-flow basis. The seven have raised a total of $30 million in Series A funding. The firm had its first exit in 2006 when Discovery Communications Inc. acquired Academy123 Inc., which had raised a $5 million Series A round the year after Momentum brought the company to venture firms Arcturus Capital and Hanseatic Group.

Momentum is especially beneficial to VCs because it’s bringing only companies with proven business models and customers. From the point of view of the entrepreneur, Momentum understands what VCs want and helps clear up legal and other issues that prove invaluable to companies who make the grade to be part of the Momentum portfolio.

WSJ also covered Momentum Ventures this morning.

Interview: Sean Malatesta of India Games

Interview with Sean Malatesta, VP Americas, India Games Ltd.
Contributed by Barbara Bickham, CEO, Techgenii

indiagames logoBarbara Bickham spoke with Sean Malatesta of India Games, regading the company, its global plans, the games they are developing and the challenges of the mobile gaming market. The company has offices in India and Los Angeles.

1. What is your role at India Games?

indiagames chessSean Malatesta is the Vice President for the Americas of India Games. He is in charge of the entire business for the Americas. This includes Licensing, Carrier Relations, Game Creation, Marketing and Sales, and Production. He is also now CEO of IG FUN LLC, the new publishing unit of Indiagames in Europe and The Americas.

2. What are some of the barriers to entry or challenges for your company?

For mobile gaming there is not always a clear marketing path. It is clear, however, that “The Carriers are our retailers.” says Malatesta. The company feels that they need to work with carriers on consumer education. We’re still dealing with discovery issues: Consumers need to know that such product exists and how to get the product from the carrier. This education should be all encompassing; explaining to consumers how to do it every step of the way.

3. Was NBC’s The Office Games widely adopted by consumers?

“Yes. We did Co-marketing with Circuit City, NBC Home Video and In Cinema Advertisements. In the future sales may come easier as customers will understand how to get product.” says Malatesta.

4. Could you tell me more about India Games? Is it a Global Company?

India Games has just gone through a change of ownership; now with UTV an Indian media company. American companies, Adobe and Cisco own roughly 10% each of the company. There are Offices in India, Los Angeles, Beijing and London.

5. What types of Games does the company develop?

indiagames spiderman gameIndia Games has creates many branded and unbranded titles; Hollywood, Action and Casual. Some examples are: Bruce Lee - Iron Fist, NBC’s The Office Games, Predator, Godzilla and the upcoming Rush Hour 3.

6. What about Mobile Video Game Rating?

According to Malatesta, “Not a major concern now. The carriers are our big box retailers and they are doing a good job; carriers are selective about the games that go onto their decks.” The industry is already “self policing”.

7. Any challenges with the handsets and porting games to the different handsets?

India Games believes that it is a part of doing business. As an analogy “It’s like making shoes. One size does not fit all. There are many different shoe types and many different shoe sizes.” states Malatesta.

8. What is the future of Mobile Gaming?

Recognize the medium we are in. This isn’t console gaming; this is mobile phone gaming; it’s got to be simple to understand. Multi-Player games will work well if they play easily, fast and are designed elegantly. 3D games may work best if they are simple and fun. The user needs to be able to easily understand the game, navigate within the game and for have fun playing the game.” says Malatesta.

9. What are the plans for India Games?

India games will continue to market and promote games to enlarge exposure and revenues. Most people think that once the game is placed on deck, that’s the end; It’s just the beginning for marketing and proper retail merchandising. They are working with their retail partners to help consumers understand how to buy the titles that they want.

India Games is working to import and export titles to and from the United States. They have global, regional and local titles. Some of the titles will not import or export well. They work with their partners to co-market or do cutting-edge marketing to get the message out about the new title. “This is not easy and can be expensive; Hollywood does it every week for its movies; it can be an expensive line item.” says Malatesta.

“Again, Carriers are our retailers. Carriers are willing to work more with their partners to promote games content. Innovative creatives, titles and marketing will succeed. The feeling that I get from carriers is that they are very helpful and want to help companies with content on their decks succeed.�? states Malatesta.

With their wealth of titles and success of The Office, India Games is positioned to make mobile games easier for consumers to buy and enjoy.

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