Flipboard recently raised $50 million dollars while announcing their $200 million dollar valuation. Another key figure that wasn't mentioned with the announcement is that they have earned $0M so far. It's only natural people are starting to question the valuation figure:
The $200 million valuation sounds big for a "pre-revenue" company, but let's be honest, this is mostly based on the strength of Flipboard's team and its product so far.
So let's get right to it, why does Flipboard need another $50M? The answer McCue gave to TechCrunch is that "he needs $50M to scale". Scale what exactly?
The next milestone is to be cashflow positive. I feel like I can get to cashflow positive with about 50 to 60 people. So our plan is to hire another 18 to 28 people, we have 32 now, then hover there and build out an advertising business with publishers. The bulk of those people will be engineers. Publishers will sell their own ads. . . . Assuming we can build an audience with a really good product, then we need about 100 to 150 publishing partners to build a really big business. We have 17 now.
So Flipboard wants to hire a bunch of engineers when their main focus is to build out an advertising business with publishers. Sounds odd. Engineers are not very good at securing advertising publishers. Nevermind this answer from McCue. The reason they are really raising funding he says is that "it's the competition":
I see a lot of competition down the pike. There's talk that some people at Google are saying they are building a Flipboard killer, and I've heard those rumors. What I felt was a better approach was to build the best product no matter what the competition does.
So the real reason for raising $50M is to hire 28 engineers to try to battle a supposed Flipboard killer which Google is developing. Forget the advertising revenue business, lets try to outbuild something which a few engineers at Google might working on. The question now becomes: How certain are we that Google is building this thing?" The answer is in the quote below.
Its future is uncertain in the product reorg going on right now at Google. In other words the Flipboard Killer might itself get killed before it ever sees the light of day.
This story just keeps getting more and more interesting. Do the Flipboard folks really know why they raised $50M and are hiring people?