Finam Technology Fund I, a closed-end mutual fund based in Russia, made a follow-on investment in Badoo.com social network and increased its stake to 20%. The Fund exercised a call option received in 2007 when Badoo.com raised capital for the first time.
Finam Technology Fund I first invested in World Wide Vision, the company operating Badoo.com in 2007. The Fund committed to invest $30m and received 10% equity stake and a call option for additional 10%. Badoo.com achieved impressive operating and financial results in the last two years, and broke even in Q3 2009. By that time Badoo.com had 48 mln. registered users, with more than half of them using the social network on regular basis. Finam acknowledged success of the Badoo.com by exercising its option to increase the Funds’s stake to 20%. The follow-on investment will be completed in several tranches in the next 2 years based on the performance of the Company.
Badoo.com became one of the few global social networks to break even within the first 2 years of operation. Its business model is based on the pay-as-you-go philosophy and proved robust in the highly competitive market for social networking utilities. Badoo.com customers make micropayments for various communications services offered by the site, as opposed to flat subscription fees charged by competing networks. This model was first utilized by Mamba, the leading online dating service in Russia, which was also backed by Finam in 2005.
Badoo.com delivered impressive subscriber growth in 2009. As of today, two new users register on the network every second. Three quarters of Badoo.com subscribers live in Western Europe (50%) and Latin America (25%), where social networks traditionally rank high in terms of usage and traffic. For instance, according to Comscore data, 75% of Europeans (211 mln people) frequent social networks. In South America, internet users spend average 6 hours per month communicating via social networks (50% higher than the world average). Such usage pattern is among the driving factors behind the success of Badoo.com.
“In nine months 2009, Badoo.com managed to seriously boost its user base and improved revenue generation. The company chose the right monetization strategy, first tested by Mamba in Russia and proved successful on the global scale. We believe in continued growth in 2010 and are confident exercising our option to invest in additional 10% of the company”, Managing Director of Finam Capital Sergey Oparin says.