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Benchmark Capital's Barry Maloney on Bebo

Richard Maven With seats on nine boards, including Bebo and O2 Ireland, Benchmark Capital partner Barry Maloney is a busy man. But we grabbed him for a few minutes to discuss VC activity, the commercialisation of Bebo, and how the hugely popular site plans to extend social media to mobiles.

How does the climate for VCs compare to five years ago?
The first observation would be that the web is back in vogue again. But what's different this time is that there are well-thought-through business models. Companies are now being established by people that have built successful businesses before, and you're seeing business models that actually make sense. However, four or five years ago, a few of them did get it right - Betfair is a great example of an internet business started four or five years ago and that's turned out to be a huge success.

How much competition is there among VCs at the moment?
I would say there's a reasonable amount of competition. I think that the more educated and savvy entrepreneurs know there are a few people that are looking at these businesses. There aren't really many firms with pedigree in this space, let's put it that way. The pond you're fishing in is relatively small, when compared to the US, for example.

What's Bebo's business model going to be?
The beauty of someone like Bebo is that they have lots of options. Bebo is in a unique position because it has the real estate. There are lots of ways they can monetise their user base - the issue is just picking the right ones. With other companies you look at, you are trying to find one that might work. But with Bebo, there are several options, and I think the key is to pick the right one that doesn't alienate the users in any way. That's where the science will come into it.

What was your reaction to the ad partnerships Facebook and Myspace recently signed?
A lot of people are approaching Bebo to do this deal or that deal, but we're being very careful that when we announce something, it will fit in well with the user group that is attracted to the site. The good news is that the business doesn't have a huge expense base - it's growing very rapidly but isn't burning a huge amount of cash. So we can afford to keep building the community very economically, and then when the right deals come along that we feel are thought through properly we can do them. Everybody's trying to work out the relationships that make most sense. That goes for Bebo and YouTube - anybody out of that genre.

Looking at your investment in Newbay, how do you feel blogging and online communities can work in the mobile space?
Well, it's interesting - the mobile operators are watching what's going on, and the big challenge for them is to turn their customer bases into social networks. Newbay is a structure, and the products it offers allow the mobile operators to do that. The operators have struggled in terms of data applications anyway, so user generated content is potentially very attractive to them.

What plans does Bebo have in the mobile sector?
Well, we're looking at a couple of things at the moment. One of the things we discovered during our due diligence on Bebo is that the duration an average Bebo user is on site is nearly an hour, which is incredible. The mobile companies have also realised that when the kids are doing this, they stop texting. That was a kind of unintended consequence. Given that a lot of the users are prepaid and a lot of them are very heavy texters, there's a potentially very interesting play between Bebo and the mobile companies. They are the kind of people we are talking to in terms of building a relationship which would sit logically with the user group. There are a number of different features that we think could be attractive to Bebo users, and could be potentially lucrative for the mobile operators. That's something being discussed.

With all the reports of bids going round, what's the end-game for your investment in Bebo?
Well it's very early days. Bebo has the chance to become a very big, independent company. Our investment in it was to help Michael Birch make it a successful, international company and that's the way we think about it. It's all about building the infrastructure now, bringing in the right management, and singling out the right model, and keeping it growing as it is.

Techcrunch reported recently that the asking price for Bebo was over US$1 billion. When Myspace was sold for US$580 million, do you think that would be a fair valuation of Bebo as it stands now?
The question I would ask is what is Myspace is worth now, and that would be a far more relevant number to what Bebo might be worth at some point in the future. What Myspace was sold for is largely irrelevant in the context of where Myspace is now. It shows you the value of what can be built in this space. We're still talking about only 10% of advertising budgets being spent online, so it shows you what's out there to play for.

How does it feel going up against Rupert Murdoch?
We're used to it. We've had the same with Setanta going up against Sky, so we tend to be around his ecosystem quite a bit. It's good fun.