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Mobile content publisher Thumbplay Inc. said Monday it picked up a pair of late-stage crossover investors and $18 million in expansion capital in a fifth investment round that brings total equity investment in the four-year-old company to $54 million. New York-based Thumbplay landed Brookside Capital Inc. of Boston and Cross Creek Capital of Salt Lake City as lead investors in the deal, joining previous venture investors i-Hatch Ventures and Redwood Partners LLC, both of New York; Softbank Capital of Boston; Bain Capital Ventures of New York; Meritech Capital Partners of Palo Alto, Calif.; and New Enterprise Associates of Baltimore. The transaction is aimed at firms specializing in deals positioned as mezzanine rounds prior to a public offering, and Thumbplay founder and CEO Are Traasdahl said the company put word out in mid-February that it was looking for money and had several term sheets to choose from before closing on Feb. 28. Brookside is the private equity arm of Bain Capital, whose venture arm led Thumbplay's $10 million third round in October 2006. Cross Creek, which is the private equity affiliate of money management firm Wasatch Advisors, was introduced to the deal by NEA. Traasdahl would not disclose a valuation for the new investment, but said the round was oversubscribed and that it came at a healthy premium in pricing on the company's $17.5 million round led by Meritech and NEA in May 2007. "We were specifically looking for public market investors and crossover funds, and there was a lot of excitement among investors that allowed us to close it in 10 days," Traasdahl said. "The high quality of our new investors is very significant, since both typically invest in companies which offer opportunities to realize substantial long-term capital appreciation." Greg Bohlen, a managing director of Cross Creek, said the firm only invests in deals it expects will be the final round before an exit, though he said the firm is successful in that goal about half the time. But he said the firm was attracted by Thumbplay's revenue growth and potential to remain an independent company. "The growth rate of the company is pure evidence they have a good model, and it looks like they could be a very good public company," Bohlen said. "It is clear that more and more stuff is being done on cell phones all the time, and becoming more attractive for multiple uses. We see them as being ubiquitous devices." Eric Hippeau, a managing partner with SoftBank, said Thumbplay has evolved with the market while claiming the largest market share as a seller of multiple forms of mobile content, including games, ringtones, music, wallpapers, videos, voice tones and text-based services. The company was recently adjudged the market leader in non-carrier revenues by research firm A.C. Nielsen & Co. in its Mobile Content Storefront Revenue report covering the third and fourth quarters for 2007. "They have grown tremendously and are clearly the market leader, and this is a classic expansion round from classic late-stage investors, Hippeau said. "They are twice the size of their nearest competitor, and what they are developing is continuing to grow as they build a catalog of licensed content and community of users." Traasdahl said the company will continue to license content from third-party developers, as well as acquire content and partners, and he said the largest focus of the current funding will be on inorganic growth. He said the company will look at all manner of potential acquisitions, while adding that the most likely deals would be for publishers with similar business models operating in new geographic markets. - Clifford Carlsen
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