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The deal that saved OMGPOP

Not too long ago, OMGPOP was on the brink.

Zynga (ZNGA) yesterday announced that it has acquired fellow social game publisher OMGPOP, for a reported $210 million (including employee retention bonuses). Sixteen months ago, it would have been unthinkable.

For the uninitiated, OMGPOP is the creator of Draw Something, a Pictionary-like game that has become the top mobile and top Facebook game since being launched just six weeks ago (bumping off Zynga’s Words with Friends).

But OMGpop is not really a startup anymore. The New York-based company was founded in 2006 (one year before Zynga), and had developed more than 20 games prior to Draw Something.

After raising seed funding in 2007 from folks like Digg founder Kevin Rose, OMGPOP raised its first institutional round of VC funding in the summer of 2008, led by Spark Capital. It then did a $5 million Series B the following year, with Bessemer Venture Partners leading and Spark returning.

By late 2010, however, multiple sources tell me that the company still wasn’t getting much traction and most VCs were losing faith.

Bessemer declined the opportunity to participate in a follow-on round at its pro rata rate, and outside leads were non-existent. So Spark agreed to basically do a super pro rata bridge, while promising to beat the pavement for other firms to join. By January, Rho Ventures and Softbank Capital had agreed to come aboard, with Bessemer (which made the first intro to Rho) reportedly also participating to a certain extent. OMGpop held a secondary closing on the round, which totaled $10.1 million (and officially was listed as a Series B-1).

What’s fascinating is that there doesn’t seem to be much, if any, quantitative reason for why Spark stayed the course. OMGpop had been spinning its wheels for more than four years, while companies like Zynga kept churning out hit after hit. Sources say that it was simply a case of Spark being enamored with the OMGpop team – a “gut feel” sort of thing.

Pretty amazing. And lucrative…

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