Tumblr gets funding and premium services
Tumblr has gotten 4.5 million from among others Union Square Ventures, whom I greatly respect for investing in stuff that I really like. Their recent investment into Boxee is another example. Martin Varsavsky, who was an early investor has a nice short post about it. The important part is this one.
> Next year the company will roll out a premium service and further attract external developers on their platform to extend its features.
There are two important items in there. For one, I have the slight feeling that Tumblr might interconnect the external developer bit with monetization, which sounds like a very good idea. It might also split up the premium service into smaller bits, meaning not having one big block but several small ones. I have to say that I really like services out there that are cheap and make it up in volume. Remember the Milk is a great task manager and at $25 per year, having a Pro account is fully worth it, especially with Todo on the iPhone connected through the RTM API. The same is true for Xing, with a few EURs a month or Flickr for $24.95 per year (though I am thinking about Smugmug with full HD Video Option). But all in all, taking a little fee and scaling it up is a very nice Web 2.0ish idea.
The other side that is important also for Tumblr, namely that they have just 6 employees. So they are running very lean, and have a good amount of cash in the bank to continue running without revenue and can probably go profitable with little money. If I remember correctly, the $4.5 million will let them go over 2 years, meaning roughly 2 million burn a year. With 15 million uniques on the platform, and 500k users, they can at least argue that they have an option to go profitable. If 10% of their users would be $4 per month or $50 per year, they are just fine.
I like these kinds of companies but I am just not 100% sure what VC money has to do with it. They will probably make a good return on this, but it won’t be a 10 times return on investment. Of course I would be happy to be proven wrong.