My Twitter Debate With Mike McCue: Why Does Flipboard Need $50 Million?

There is no question that Flipboard has an early lead in iPad news consumption. The company just raised a massive $50 million B round to cement that lead. This comes in between iPhone photo app Color raising a $41 million A round, and LivingSocial raising $400 million so that its founders and early investors could take half of that off the table. There is obviously a lot of venture money sloshing around, especially for high-quality companies and teams.

When investors offer startups a huge pile of cash at favorable terms, it is usually a good idea to take the money. And that’s exactly what Flipboard did. But does an iPad app company really need $50 million? And does taking too much money ever backfire? Flipboard is no lean startup.

Even if Flipboard wants to expand to other devices such as the iPhone, Android and so on, that doesn’t require that much cash. Maybe he needs all that money to build out an ad sales force (those are expensive). All of which begs a question which I asked Flipboard CEO Mike McCue last night on Twitter:!/erickschonfeld/status/58741444118188032

That sparked a debate between us. McCue fired back a series of answers:!/mmccue/status/58742184530296832!/mmccue/status/58742876791771136!/mmccue/status/58743318007398401

McCue’s desire to avoid “unnatural functions to generate cash” strikes me as strange. That’s certainly a popular way to build startups: get consumers to fall in love with your product, then figure out how to charge for it later. But generating cash is one of the defining characteristics of every business. There is nothing unnatural about it.!/erickschonfeld/status/58743959719133184

McCue realizes this, and he had a good response. The $50 million gives him time to find teh best revenue model.!/mmccue/status/58744970399580160!/mmccue/status/58745301300822016

And then Shervin Pishevar, who somehow got pulled into the debate, ended it by Erickrolling me:!/shervin/status/58748595213565952