Fast Pay Partners Offers Social Gaming Startups an Alternative to Financing

There’s a lot of money in social gaming — this common knowledge that has followed the success of Zynga, Playdom and other young but profitable startups. But despite claiming huge cash flows, each of these companies also ends up trading partial ownership to investors for funding. If they’re so profitable, why not go without financing?

That’s the question a new, and possibly unique, company called Fast Pay Partners wants startups to ask themselves. Fast Pay’s answer is that social gaming startups are earning money, but not actually receiving it. Ad networks and payment partners often delay paying the money they owe to startups, sometimes for months on end. So your company could have $100,000 on paper, but no cash on hand.

One solution to this problem is called asset-based lending: Fast Pay will give you that $100,000 immediately, minus fees and a reserve that it holds. Asset-based lending is common in the business world, but according to founders Jed Simon and Patrick Yee, they’re the first to try it on social games or apps.

The reserve that Fast Pay holds is still significant, at around 30 percent of the total; it’s held because money owed is typically an estimate, and can be revised in the future. But in the meantime, the startup still has $70,000 to spend immediately, giving it a huge advantage over competitors. “There’s not a lot of liquidity out there, and people have really long payment periods. But cash is king,” says Simon.

Fast Pay manages its own risk both through the reserve and by keeping direct relationships with some monetization sources, like Zong or Boku in the mobile space. And while they’d obviously like to work with large companies, they’re also open to smaller startups, down to about $10,000 per month in revenue.

Once they’ve signed a lending agreement with a startup (a process of a few days, according to Simon) Fast Pay will deliver a check every 15 days based one expected earnings.

While Simon and Yee both have entrepreneurial backgrounds and  their own company is backed by hedge fund money, giving them a solid base. If Fast Pay can establish itself as a lender to digital companies, they say, they’ll move on to providing advances on future, anticipated earnings.