Sequoia Leads $4.7 Million Investment in Humble Bundle (YC W11) | Hacker News Reader

Sequoia Leads $4.7 Million Investment in Humble Bundle (YC W11)

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85 pointsmatthew-wegner38 comments

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This was the one YC W11 company that didn't present at Demo Day because of a no-shop clause.

Can you explain more?

What do you want me to explain?

What is a no-shop clause?

I didn't even realize that the Humble Bundle was a YC company.

No-shop means you accept a term sheet that includes a clause that stops you from talking to other potential investors.

I realize this is straying off topic, but why would an entrepreneur hamstring him/herself by agreeing to such a clause? It appears to me that such a clause benefits the VC in a big way, but puts a significant amount of undue pressure on the entrepreneur. How am I supposed to know if I am getting the best deal if I am barred from taking the offer into the marketplace?

Yes, it is a pro-investor clause. You would agree to it in the situation where you feel you are satisfied with the term sheet (and who its from) and are ready to commit.

Worth mentioning there's no official confirmation yet, but this is the filing in question: http://www.sec.gov/Archives/edgar/data/1518293/0001518293110...

I'm puzzled. What are they going to use all that capital for? The business already seems quite successful and profitable.

Even rounding up to $5M in sales with the 3 humble bundles, a 5% commission comes out to $250,000. Factor in hosting costs and salaries, and that's not really enough money to build out a business.

They plan to grow the company (and revenues), of course. Valve runs a somewhat similar business with their Steam content delivery and promotion system. A lot of indie games are on Steam and "Steam sales" are somewhat similar to the humble bundle mechanism. There's certainly a lot more money in the indie games market than the humble bundle has brought in.

I've actually received an email from Humble Bundle telling me I could add the games I bought to my Steam account.

Steam is an actual platform that does stuff. Humble Bundle is pretty much a website with some download links. I do like what Humble is doing though.

Indeed. But part of making an investment is knowing what's possible to change. People who invested in Microsoft in the days of DOS knew that there was more ahead for the company. Same goes for people who invested in Amazon when they only sold books. That applies here as well. Investing in a company merely so you can rake off the cream that's already flowing is for businesses that are old and have plateaued.

My point about Valve and Steam is that there is a lot of potential in that market segment, and certainly Valve hasn't exhausted all of it. Indeed, one could imagine the Humble Bundle working with Valve to get included in Steam sales.

Humble Bundle has a brand people recognize, like, and trust. A hell of a lot of industry connections. And an established track record. I don't know the depth of the gaming industry well enough to know exactly how wise this investment move is, but it seems like it could be fairly reasonable to me.

There's also the indie software market, and also the sass market

Right, but why do they need a huge influx of cash just to keep growing an already successful enterprise? Especially when the founders have to give up some control over the company to get it.

3. Profit! 4. Raise VC Money 5. ???

That's a common question in situations like this. Essentially they have a scalable business model, so rather than waiting a few years to grow to size organically they can jump to that stage in the business much earlier. Sure, they give up some control, but Sequoia are awesome folks and they massively de-risk the business this way.

5) Build out a sales team

these guys are smart, they're probably going to use social media,social buys,etc to gain leverage over existing indie distribution channels.

I also smell a partnership with a big gun (like Xbox Live Arcade)

I love the humble bundles, I bought all 3, but after taking VC money shouldn't they drop the "humble"?

I think the humble mostly refers to the games/apps inside the bundles. They might be indie hits, but they aren't mainstream. That's the way I took it at least.

That's what I thought. It's not very humble anymore is it?

Indeed! This company seems to be gettin' a bit too big for its britches! Somebody oughta knock 'er down a peg or two!

"The big question, of course, is how Humble Bundle itself plans to make money. Buyers can 'tip' the company when making purchases, but clearly that isn't the business model."

Why not? It seems pretty smart to me. The average purchase price is $5.

Honest question - can someone explain the value proposition for investors and potential business models for humble bundle?

Basically, the value proposition seems to be something like Groupon. Humble Bundle will become a place known to offer low priced games. People will go there in order to find low priced games. The fact that so many people go there will attract game developers to offer their games there at a huge discount hoping to get their name out and get some traction. I am not sure it will work but I am pretty sure this is their plan.

Do you think "low-priced" is a necessary part of the offering? I'd be strongly tempted to emphasize the other parts (aesthetic, Rage Against The Machine, etc), deemphasize "pay however little you think is fair", and walk up the number of sales in the $40+ bucket.

Humble Bundle is becoming the go-to place for platform agnostic independent game sales. Imagine what would happen if Humble Bundle, Inc. became the defacto, cross-platform Steam competitor. On top of that, Jeffrey Rosen's connection into the gaming industry puts him one step ahead of any potential competitors.

I saw this on Twitter earlier, and quite seriously thought it was a joke at first. Seems incredible they would raise funding too; I would figure they could grow just on revenue.

I'm starting to think you could get investment for almost anything right now...

Awesome, nice work guys!

Congrats guys!

The slider defaults to tip Humble Bundle 15%... seems fair. We implemented something similar at Kiva where the users could optionally donate 10% but it was defaulted in... 85ish% of people made the donation.

Who pays for payment processing? The slider indicates that 100% of the money goes either to the developer, charity, or Humble Bundle.

Their "Humble Tip" was set to a lower default on the Humble Bundle #2, their last multi-developer bundle.

Interestingly, one of their stats at their Independent Games Summit talk was that the average tip % went up from the default...

They use Paypal, Google Checkout or Amazon. 100% of the money after the fees have been taken out.

It's misleading because if you put in $100 and say "all to developer" it says that $100 will go to developers. Not a big deal, it's just easier to present the data this way even though it isn't strictly true.

Unrelated to the story, but interesting:

According to a counter on its website, Humble Bundle has generated over $730,000 in sales on 147,000 bundles ($4.96 per bundle). Linux users pay the most at $11.72 per bundle, Mac users are in the middle at $6.31 and Windows users bring up the rear at $3.95.

Linux users clearly want games. I dropped $10 myself for the Frozenbyte bundle.

Yeah, I dropped $11.37 for it as a Linux gamer.

Why not $13.37?

Haha, you're right. I was actually mis-remembering. I did spend $13.37.

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