Investment Committee Memo · Bessemer Venture Partners
Investment thesis
Twitch is creating a fundamental shift in game consumption by converting video gameplay into interactive media experiences.
We are excited by the fact that Twitch is creating a fundamental shift in how games are consumed by turning gameplay into media experiences.
Traction
Twitch has grown viewership by an average of 9.6% month-over-month to 18 million monthly uniques watching nearly 4 billion minutes of live gaming.
Since then, Twitch has grown viewership at an average of 9.6% month over month to 18m monthly uniques watching nearly 4B minutes of live gaming.
Average daily unique visitors spend over 75 minutes watching content on Twitch.
In addition, average daily unique visitors now watch over 75 minutes of content while on the site.
Twitch generated $635k–$670k in net revenue per month from Feb–Apr 2012 and expects a $1M run-rate in June 2012 as ad sales ramp up.
Twitch did between $635k and $670k in net revenue in each of February, March, and April 2012. They claim to be on a run-rate of $1m in June now that CBSi is more fully ramped up.
Business model
CBS Interactive sells 60% of Twitch ad inventory at $35-$40 CPMs and 40% at $8-$9 CPMs, splitting the revenue equally with Twitch.
CBS Interactive sells advertising on Twitch’s behalf with 60% of the inventory sold as premium “e-sports content” generating $35-$40 CPMs and the remaining 40% on private exchanges with $8-$9 CPMs. It shares half of this revenue with Twitch.
Twitch's revenue is broadly distributed across the streaming community, with no single broadcaster accounting for more than 1% of total monthly views.
However, even the largest streamer represents less than 1% of the total viewership in any given month. As a result, Twitch’s revenue is highly distributed across the streaming community.
Competition
Twitch faces potential competition from other streaming video platforms and game publishers who may build streaming functionality directly into their games.
In addition, Twitch faces potential competition from other streaming video platforms and game publishers if they decide to build Twitch functionality into their games.
Investment context
Bessemer Venture Partners recommends investing $13 million in Twitch.tv at a $53 million pre-money valuation for an 18.3% ownership stake.
We recommend that BVP invest $13 million in Twitch.tv (fka Justin.TV) at $53 million pre-money to own 18.3% of the Company.
What founders can learn
- The traction evidence that carried weight: Bessemer Venture Partners wrote that Twitch has grown viewership by an average of 9.6% month-over-month to 18 million monthly uniques watching nearly 4 billion minutes of live gaming.
- How the model was assessed: Bessemer Venture Partners wrote that CBS Interactive sells 60% of Twitch ad inventory at $35-$40 CPMs and 40% at $8-$9 CPMs, splitting the revenue equally with Twitch.
Source and provenance
Investment Committee Memo published by Bessemer Venture Partners on bvp.com. Read the original
