Social media investor Howard Lindzon took a pass on putting money in Zynga (of Mafia Wars and Farmville fame), said no to investing on microblogging hit Twitter, and missed the angle once more on location-based networking darling Foursquare.
“I said no to Zynga, no to Twitter. Guess I didn’t learn anything because I said no again to Foursquare and look how big those three are now,” Lindzon said last week during a talk in Toronto presented by StartMeUp Ryerson. StartMeUp is a program designed to provide entrepreneurs with education, resources and funding. It’s run by Ryerson University’s Students in Free Enterprise.
Lindzon made costly mistakes for a tech industry angel investor. But he’s not one to cry over spilt milk.
“There were lessons learned and these lessons can be applied by any investor or start-up owner,” according to the founder of Social Leverage LLC, a Phoenix, Ariz.-based social net investing firm. Social Leverage’s portfolio now includes URL shortening site bit.ly, online gaming site Virgin Gaming, online ad managing and measuring firm Buddy Media and desktop app TweetDeck.
The 45-year-old Toronto native has been investing his life savings since he was a teenager, and has learned from his missteps to actually gain a better foothold on the microblogging scene. What’s more, he’s now able to monetize the technology.
While he may have missed the boat on Zynga, Twitter and Foursquare, Lindzon said he was able to gain valuable information which he used to also start StockTwits, a microblogging site for investors. Founded in 2008, StockTwits has collected over $8.6 million in funding.
Show me the money
The main concern Lindzon had with Twitter was that he couldn’t see how the company would make money out of the technology. “I just couldn’t see how they were going to make money. I would have paid to use the technology but they were not charging me anything.”
Related story: How Twitter plans to turn its data store into a cash cow
Lindzon was also hesitant to jump into the three social media platforms until he had a greater understanding of the technology. “These people were totally different from me. They were looking to change the world. I was looking for an investment.”
When social networking exploded it brought about an emphasis in open communication and free sharing of ideas. Sites that facilitate this activity are continually amassing massive amounts of data.
“Everyone today is into content archiving and delivery. People are still experimenting on how to make money out of that service and archive of information,” Lindzon explained.
Lindzon and fellow investors started StockTwits with a “Twitter for the finance world” in their minds. The group used microblogging and has tag technology to enable StockTwit members to share stock tips, financial information, links and other finance-related data as real-time updates on a single site. Access to the site is free.
Just as some Twitter users use the service to keep track of hot trends, StockTwit users can use the service to monitor specific sectors or stocks because users can isolate the companies they want to follow.
The money-making component for StockTwits include a paid services such as StockTwits Premium blogs and data products which users can access via monthly or annual subscriptions.
On the way to building StockTwits, Lindzon learned these key lessons:
Take part in the conversation – Lindzon read and frequently made funny comments on the blog of Fred Wilson, principal of Union Square Ventures. This caught Wilson’s attention who later asked to meet with Lindzon. Wilson of course offered the Canadian investor early stage investment opportunity on Twitter. Upon finding out what Twitter was about Lindzon responded “Are you absurd.”
Twitter went on the close first-round funding at $100 million with a valuation of $1 billion. Lindzon missed the boat but gained a connection with Wilson who would later provide him with a Rolodex of potential investors for ventures such as StockTwits.
That Rolodex included Mark Pinkus, creator of Zynga, which unfortunately Lindzon also turned down. Lesson, according to Lindzon: “I’m a putz.”
Be in the flow of information – With his connections Lindzon is able to be “in the flow of information” around the social media space. This provides him with an opportunity to share ideas with experts who could provide advice on new technologies and rising companies.
One important caveat, “give back”. Don’t just get information, share information with others as well.
Follow trends- Don’t get stuck with one idea. The world is ever changing. Follow trends and find out which ones you should ride.
Invest in what you understand – Don’t throw money in something you have no idea about, cautions Lindzon. Although he may have missed the boat on Zynga, Twitter and Foursquare, Lindzon still thinks he followed did the right thing.
“I refrained from investing because I wasn’t sure about the business model. I used the technology later when I saw a way to make money,” he said.