Searching for the 'new Club Penguin'

February 21, 2008 - Vancouver Sun

Marke Andrews

There were no virtual birds from Antarctica waddling inside the Vancouver International Film Centre Wednesday, but Club Penguin was all the buzz at the early first-day sessions of Fusion, the two-day Digital Media Venture Forum.

"We're looking for projects with the capacity to grow, the new Club Penguin, if you will," said Earl Hong Tai, director, western region of Telefilm Canada, which currently invests $14.5 million in new media projects.

"The social networking landscape is changing," said Tanner Philip, CFO of Lions Capital Corp, one of six venture capital panelists in a session called Meet the Investors. "But there will always be one-off anomalies and stories like Club Penguin."

Club Penguin is British Columbia's digital-media Cinderella, a Kelowna-based children's virtual world and social networking website populated by penguin avatars created by kids. Walt Disney Company bought it last summer for $350 million, with another $350 million pending should the site meets revenue expectations.

Some panelists believe other Club Penguins could be out there in the B.C. digital wilderness.

"We continue to be excited about 3D [Internet worlds]," said John Borchers of California-based Crescendo Investments, which has $650 million to invest in new companies, particularly digital media. "3D Internet has a long, long way to go. The challenge is to find out which models are going to be successful and how an investor can make money."

The investment panelists said they're always interested in new ideas, but any digital entrepreneur seeking venture capital must remember that investors look for something that will strike a nerve with consumers and make money.

"We're in the business of being open-minded . . . but at the end of the day we have to ask, 'Is someone at the other end going to get some utility from this?'" said Steve Hnatiuk of Yaletown Venture Partners which will invest anywhere from $200,000 to $2.5 million in a digital media company. "We don't want to chew through $10 million or $20 million on an experiment."