Microcap: Shvoong

Google acquires Jotspot, Wired (CondeNast) acquires Reddit. These are companies that have achieved exit with little investment. [Jotspot raised one round of funding in 2004 for $5.2 million from Redpoint Ventures and Mayfield Funds. Joe Krause frequently points out that it cost only $100,000 to get Jotspot to market.]

Reddit, it appears, did it for a lot less. [From Techcrunch: Steve and Alexis wouldn’t disclose the acquisition price (even under pressure), but they did talk about current traffic (70k uniques & 700k page views per day), and previous funding ($100k total in seed funding, all in the summer of 2005).] The acquisition price is $65 Million, according to GMSV – wow, what a multiple!!

Here’s an interview with Eyal Rivlin, the CEO of Shvoong, a little Israeli startup that has suddenly been receiving substantial traction. Another example of what can be achieved these days with little money.

SM: Please describe your business value proposition.
ER: The main objective of Shvoong is to make the long story short, by gathering the essence of human knowledge under one site.

Shvoong is an extensive multilingual online resource (currently active in 34 languages) that enables mainly individuals, but also owners of abstracts’ databases, to maximize the informational and monetary value of scientific and literary abstracts.

The content at Shvoong is presented for free for all readers, while abstracts writers earn royalties for their work.

I believe that very soon Shvoong will become one of the biggest open content source sites, with our major added values, i.e. that writers get paid.

SM: What is your target customer?
ER: I would split it into three kinds of potential “customers”:

– Writers: Anyone who likes writing, or who has existing content he or she wishes to share, get recognition, and get paid. It could be book-club members, students or any random internet surfer who likes reading and writing. We have special interest in the academic community, and I envisage students from all over the world turning to Shvoong to post abstracts of their academic work.

– Readers: Surfers who are looking for the essence; researchers who have to digest a lot of information. Abstracts can be an independent reading, or act as an interlude to the actual texts.

– People who have writing abilities, and want to earn some extra money by working from home.

SM: What is your personal background?
ER: I hold a bachelor degree in law (LLB). During the last four years I ran a few Internet operations as a COO.

SM: Under what circumstances did the company get started?
ER: Shvoong was created as a result of a reunion of two high-school buddies from Natania, a small Israeli town. Avner Avrahami (53), a journalist in Ha’aretz daily, was thinking about summarizing the whole of human knowledge; Avi Shaked (the same age), businessman, owner of 888.com, suggested making it a world-wide project of knowledge-sharing, while rewarding writers with royalties. This became the model of Shvoong, and the beginning of a revolution.

SM: Who financed the company at the very beginning?
ER: As I had said, our main shareholder is also the main shareholder of 888.com (an online casino and poker company). He has been financing Shvoong from day one.

SM: What is the traffic, revenue & profitability status of the company?
ER: Shvoong is already visited by 50,000 unique users a day. The company (website) was launched about a year ago, and is rapidly growing. We are on track to achieve profitability towards Q4 2007.

SM: What were/are your top challenges in building the business?
ER: Having Search engines cope with our daily mass of incoming content.

SM: Are you looking to raise another round of funding? What are your plans for the company?
ER: No. At the moment we are focusing solely on achieving our business model goals.

What few can say, Eyal has the luxury of saying : Thanks, but no thanks, to new money!