Destructoid: A Case of Fast Cash


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Article ImageCompany: Destructoid is a popular and growing San Francisco-based gaming blog owned by content publisher ModernMethod. The company was founded in 2006 by Yanier Gonzalez, who is also the current CEO. Destructoid features a variety of content for gamers, including news, reviews, blogs, and videos, as well as a buy/sell area for its users.
www.destructoid.com

Business Challenge: Despite the site's success, Destructoid needed to find a way to get revenue and get it fast, since it normally takes advertisers -- its primary source of income -- weeks to pay bills. Gonzalez had no luck when he turned to the banks. "When I walk into a bank and say, 'I need a small-business loan,' they say to me, 'Well you don't have a house, you don't have a car; you have this video game thing on the internet that we don't understand. You're not worth anything -- I'd rather give a loan to a guy with a food truck than your company.'"

Vendor of Choice: FastPay Partners, LLC
Officially launched in October 2011, FastPay calls itself "the first-of-its-kind lending solution specifically for digital media businesses." FastPay advances payments to businesses "at a small discount." FastPay, based in Beverly Hills, Calif., not only closes a company's outstanding invoices quickly but also aims to make it a quick and easy process.
www.gofastpay.com


The Problem in-Depth

Destructoid began as a labor of love. "I think I will continue to have cash flow problems for the next ... who knows?" says Gonzalez with a laugh. "We built the company very organically. It started as a hobby, primarily volunteer run ... we had four people, now we have 10 people."

With a growing company, more capital is always needed, says Gonzalez. "There's never enough resources, and the checks never come fast enough for our ambitions," he explains. This is an especially tough challenge because Destructoid competes with industry giants -- and money is no issue for them. "These are very, very well-funded media companies that have been doing it forever. So we always want better equipment and more people, and we want to travel, and we have a team of 100 freelancers," says Gonzalez. "So there's never enough money."

With Destructoid's primary source of income being advertising, Gonzalez says it took the company "a really long time" to figure out how it was going to be able to sustain cash flow and continue to grow. "I went to my banker. And the first time I walked in there to get a loan and had to explain what I did for a living, they were just like ‘What?' They didn't understand my business."

With no help from the banks, Gonzalez needed a way to pay his staff and meet his general operating expenses while waiting to get payments from his advertisers.

The Solution

Enter FastPay, which Gonzalez describes as "progressive" among many other glowing words. "It's so refreshing; they've completely bailed me out of all kinds of problems -- they really get it. And I could just not get this kind of help from a traditional financing situation," says Gonzalez, who has worked with FastPay since April 2010.

FastPay is not a loan; rather "it's the process of advancing payments [businesses] are already waiting for at a small discount," FastPay's site reads. In addition, "FastPay charges a small fixed fee based upon the invoice value and the time a payable is outstanding from the time you advance it, and a one-time setup fee that isn't charged until you begin using the service. There are no application fees or hidden charges of any kind -- ever."

According to FastPay, digital media businesses are desperately in need of a fast finance option because "they suffer from ultra-long receivable cycles from their advertisers (their No. 1 source of income), with 80% taking 60-90 days to pay."

FastPay founder and CEO, Jed Simon, recognized this void and became the first to address this problem in the digital media market, offering companies the option to grow their businesses without sacrificing equity and control.

Launched with $25 million already deployed to dozens of digital media businesses, FastPay says its lending platform has created a streamlined solution to advance revenues for companies in this $30-billion industry.

"One of the points everyone [in media] seems to talk about is how long it takes brand advertisers to pay," says Simon, who is the former vice president of international marketing and distribution for DreamWorks Pictures. "I thought, ‘Gosh this seems like a problem you can solve; these [advertisers] are big brands spending big dollars. It's very natural that big brands would take longer to pay.' And I thought, ‘Well, this could be a business opportunity,' and that was the start of it."

Gonzalez feels better knowing FastPay is in his corner. "Working with media companies, who knows what happens tomorrow? The check comes, it doesn't come. ... I think I've run into every possible media problem, and to not have to worry about that every 30 days is just fantastic," adds Gonzalez.

A business must currently earn at least $25,000 a month in revenues to be eligible for FastPay; there is no maximum. In terms of how much money a company might receive, Simon says, "There is no hard-and-fast formula." He continues, "We start with how much they are requesting and then review their income, needs, and growth and work with them to meet their specific funding needs. As their businesses grow, we are always happy to review and increase facilities as warranted."

The entire FastPay process is streamlined and automated, and approval takes days, not weeks, states the FastPay website. "I mean it was literally 48 hours and we had our funding," says Gonzalez.

By adding in a liquidity layer, Simon feels FastPay is helping small businesses grow. "Companies that are bootstrapping, growing slowly, organically -- we are giving them rocket fuel to grow. We are feeding the fire and helping these guys grow much more quickly," observes Simon.

Simon and his two partners in FastPay obviously want to make a difference for blossoming digital media companies. "We are the three owners, and we put in the primary capital, and we have a relationship with another capital source to sort of supplement what we put in ourselves," says Simon of himself and investors Victor Coleman (Hudson Pacific Properties) and Jonathan Glaser (JMG Capital Management, LLC).

The three partners view themselves "more as peers to our clients than as lenders to them. ... We speak the language and we understand the businesses fairly well, so we are comfortable providing capital to them," points out Simon.

The Outcome

Without FastPay, Gonzalez doesn't think his business would be thriving the way it is today. "I might've had to sell a kidney; it definitely would not be as awesome as it is today for sure," says Gonzalez. "I sleep better knowing that these guys are in my corner."

Another FastPay client, a content publisher that Simon did not specifically identify, has seen a big jump in its revenue in recent months -- and FastPay had a lot to do with it. "They were doing about a quarter of a million in revenue when we started about 9 months ago; they're going to be over $2 million [in December 2011] in revenue," says Simon. "I think this entrepreneur would cite us as one of the key growth factors. We provided the capital in a quick way, and a lot of it helped him grow."

Moving forward, FastPay wants more digital media companies to know it's here and willing -- and able -- to help them grow and thrive. "We want more digital media companies and the ecosystem to be aware that we exist; almost 100% of our clients have been referral-based, so now we are ready to come out of stealth mode and really sign people up," states Simon.

For his part, Gonzalez says he will "absolutely" continue to work with FastPay. "I'm very grateful for these guys," he says. "I don't actually think I'd be in business if it wasn't for FastPay."