Before Facebook went public, Jim Judson was offered shares of the social networking giant in the mid-$20 range. The active private investor and telecom pioneer thought about it, but ultimately turned down the opportunity. Based on the company’s stock price of $19.75, that was the right call.
What we don’t know yet is whether his decision to invest in a year-old social network called CyPOP was a smart move as well. Judson and an unidentified investor led the Seattle company’s first fundraising round of $150,000, which closed in March. Along with the law firm Wilson Sonsini Goodrich & Rosati, which also put money into the startup, they all plan to invest more in an upcoming round targeted at $1.5 million, said Glenn Walker, CyPOP’s chief executive officer.
While users of Facebook typically connect with people they already know in real life, CyPOP’s website encourages users to find others with common interests, through message boards for food, fashion, TV shows and other topics. The format is based on a genre of popular sites in South Korea where visitors hang out at virtual cafes. Of the 300,000 users that came in the first month after CyPOP opened, about half of them are based in Asia. Korean pop music, known as K-pop, is among the most active boards on CyPOP. Electronic Arts, the second-largest U.S. video-game publisher, began today hosting pages on the site for many of its sports games.
So why did Judson put his money into CyPOP and not Facebook?
How Facebook is optimized for wireless networks is clunky and inefficient, said Judson, a longtime executive in the wireless industry who has served on the boards of Nextel International and China Unicom. Since retiring, Judson and his family have been making four or five investments a year in closely held companies, typically telecoms. (A notable exception, besides CyPOP, was Cheezburger Network. Judson said he still holds a small stake in the purveyor of funny cat pictures.)
“He’s not a social-media person or really an online-community person,” said Walker, the CyPOP CEO. “He’s obviously a mobile guy. So he really grilled us on our longer-term plans for mobile, and also from a revenue perspective, for mobile.”
That’s an area where Facebook has certainly struggled. Top executives have said that the company’s biggest mistake was investing development resources into a less effective mobile technology, and that usage on phones is yielding less revenue than on Facebook’s website. In August, Facebook issued a significant technical update to its iPhone app making it more efficient. In an interview last week with Bloomberg Businessweek, CEO Mark Zuckerberg said 600 million people use the service on phones.
“The monetization and value projected for Facebook were not obvious to me,” Judson said when asked about turning down a pre-IPO investment in the company. “If I thought we would get crushed by Facebook, then obviously I wouldn’t have invested in CyPOP.”