Fortune’s Michael Copeland, whom I grew up reading, was the moderator of the next panel, on obtaining funding as a content creator, be it video or games, etc. The panel included:
- Tim Haley Redpoint Ventures (invested in Tivo, Netflix, MySpace, GaiaOnline)
- Mike Hirshland Polaris Venture Partners (part of Silicon Graphics, invested in Shutterfly and financed Goodnight and Good Luck and Inconvenient Truth)
- Dennis Miller Spark Capital (NextNewNetworks, Veoh, worked as a lawyer for Ted Turner)
- George Zachary Charles River Ventures (JibJab, Heavy.com, Turbine Entertainment)
Copeland asks: why will this time be different?
Dennis Miller, Spark Capital: In the late 1990s, Hollywood wanted to work with Silicon Valley because the Valley was making more money and VCs wanted to be movie stars. Times have changed… but indeed, most VCs should not touch content or Hollywood… but broadband is much higher. There is froth but expectations are very different, more sober.
We’re in very early days of web creation. When cable started off, content there was bad, look at it now. Same thing is happening online. Social media is the it girl and VCs are followers.
George Zachary, Charles River Ventures: “Movie making business is not a good business for investors, because talent extracts money. Money is in distribution or the conglomerate. You never see an 1,000x return business, there are no Google or YouTube returns. It’s an OPM business, or Other People’s Money. It doesn’t happen. We invest in digital media as middleware. The real money is in social networks that own users and allow people to interact and consume media.”
Mike Hirshland, Polaris Venture Partners: “Investing in content plays where the founders have experience. Heavy.com and JibJab are both companies who struggled through the last cycle and had in process figured a model. Over time, they built a brand and gained distribution. Both have been around for a few years.
We looked at a few traits, common in both:
a) both have seen success in distribution, JibJab had a few isolated wildly successful clips while Heavy.com had 5-6M uniques;
b) the team: the lessons and perseverance of sticking through thin times won us over. That gave us confidence.
c) brand: the guys had a brand not just with users but with marketers.
Today you can create popular entertainment for inexpensive total costs. If you simultaneously have an audience that scales, say 5-20M uniques, and have the ability to match it with marketers, then it can be very profitable. But to make it work, you need to have scale. Some companies have scale, most don’t. But a small size of content companies will make a lot of money.”
Tim Haley, Redpoint Ventures: “Do you invest in companies who produce content vs. making money off of content. Digital media in social network sites, for example, shifts the model of taking the old media model (hire editors and pay them to create content). Production studios remain a hits business, it’s a hard business. Social media sites leverage the content as catalyst.
We make content-centric investments, such as MySpace, or BuzzNet, but they are not content producing sites per se.”
Does FunnyorDie make sense?, asks Copeland: “The die part does,” says Miller. “There is already roadkill, there will be massive roadkill… the froth is back, because there is a lack of managers and good ideas relative to the money available. Private Equity has put $5B in the film industry and they will see that be its worst industry, Providence put $5B in MGM and they don’t understand movies, so they will be taken [for a ride] there.”
I’ll add some commentary on this one soon…
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Posted By: Ashkan Karbasfrooshan | Nov 14th
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