BUSINESS BLOGS
BUSINESS BLOGS
category: business
14 Mar 2008

Despite the tough financial climate, the week ushered a sizable investment in content producer Next New Networks (N3).

Blue-chip investor Goldman Sachs and media-oriented Velocity Interactive Group (VIG) led a $15M Series B investment round in N3. VIG is the fund that was created by way of a merger between ComVentures and Jon Miller and Ross Levinsohn’s new endeavor. Miller was actually a member of N3’s board.

After the investment, Goldman and VIG join Spark Capital, Saban Media Group and Bob Pittman (formerly of AOL and MTV) as investors. That’s as blue chip of an investment group as you can get for any media company. Spark Capital is a champion of media and content investment, something that is hitherto very rare amongst VCs, who prefer technology opportunities.

N3 - which CEO Herb Scannell described to me as Weblogs Inc. in video format (I asked him once if that would be a fair description, I am not sure if he introduces it as such) - has a range of properties which, when combined, have generated over 100M streams throughout 2007.

While the naysayers are quick to point out that this is a small number relative to TV reach, as a video producer ourselves at WatchMojo.com with a sizable library, I can attest to the fact that this is a very impressive number of streams over a yearly period. In the spirit of giving credit where it’s due, it should be noted, that Revision 3 has also crossed that threshold, too. So hats off to both companies. Broadly speaking, WatchMojo.com is similar to those companies insofar that we all create original content but we’re all very different. Ultimately, we all line up on the same side of the line of scrimmage in the sense that we all strive to convince marketers that online video is more than UGC or pirated content alone.

N3 has a fantastic pedigree of founders, executives and their investment DNA just got bolstered considerably.

Goldman Sachs, for example, invested $130M in Limelight… sheltered them for some time against the Akamai litigation. While the company’s post IPO life has indeed been challenging, it was a successful case study in how quickly Goldman could take a company to the public capital markets. This is no small consideration in light of the fact that the same markets are currently embroiled in the sub-prime mess. Of course, to paraphrase Mr. Miller, very few companies are actual IPO candidates… and it could be argued that N3 (or Revision 3) are no-brainer acquisition opportunities.

In fact, Revision3, too, has an all-star lineup of founders, execs and investors (it is founded by Digg’s Kevin Rose and Jay Adelson). They have raised $9M since launch, notably from Greylock.

Admittedly, my jaw drops a bit when I compare how much money I’ve invested in WatchMojo.com to build the library and get the traction we have… but I won’t lie: if you can raise that much money, hey, more power to you.

Many were waiting for the N3 funding news to materialize, in fact. I presume the tough climate added to the cycle time. But to raise $15M is impressive regardless of how long it takes.

Incidentally, last week I noted that Velocity Interactive Group was building a new media focused, online video-centric fund, and judging by their investment, their next investment would likely be in content.

It will be interesting to see what some of their next moves will be. If you take a step back and envision the “keiretsu” that they are building, I can imagine a few missing elements that they will be looking at filling - or reinforcing - in order to add velocity and momentum in the months to come

As a content producer ourselves, I did not specify that content would be the next piece, but knowing that Jon Miller was on their board, it was easy to see the pieces fall in place with content and Next New Networks being the “void” they were looking to fill.

Heavy Hitters

The $15M Series B pushes up NNN’s total funding to $23M, just over what Mania TV has raised ($22.7M), but still a bit less than what Heavy.com ($25M) and Ripe TV ($32M) have raised in the video content space.

Mania TV just raised an additional sum last week. This is a trend that will continue. While some, like Paid Content’s Rafat Ali, question the model altogether, and others, including Mr. Scannell or Blip’s co-founder and CEO Mike Hudack remain unsure of the model that will prevail, it is a given that online advertising will continue to grow, and that professional content will draw the bulk of video advertising.

Any way you dice it: to quote CBS Interactive CMO Patrick Keane: online video is where search was in 2002, and considering that in December 2007, there were more video streams than search queries, the best is yet to come, and investors are just starting to place bets.

In fact, while the numbers seem large, this is still far less than what the platform and aggregators have raised (see a list of funding by video company breakdown here), and it does reinforce what we outlined last year: VCs will focus more and more on content investments as advertisers reject UGC and demand premium content.

Technically, Wallstrip founder (whom CBS bought, incidentally) and TubeMogul investor Howard Lindzon was right in arguing that I was wrong on that point last year, but I think I was wrong in the timing. That did not happen in 2007… but 2008 seems to suggest that it is happening as we speak.

Believe it or not, there are more and more digital media funds being set up every day.

That this is happening against the backdrop of a financial meltdown is even more impressive.

Here’s the rundown of funding in the video space