When former AOL CEO Jon Miller hooked up with former FOX Interactive Media CEO Ross Levinsohn, rumor had it that they would partner with a private equity firm, spend billions and roll-up media companies.
Frankly, in their hands, I’m not sure that would have been a bad idea, but with billions of dollars invested, the kind of return investors would have expected in absolute dollar amounts would have left very little room for errors. So the two men went back to the drawing board, shuffled their cards and came out with a slightly different strategy: the two would partner with a VC, invest smaller sums and set up a fund with holdings in independent companies.
It’s only been a couple of months, but giving credit where it’s due, they are on their way to build a Western-based, new media-centric, loosely based and informal keiretsu, so to speak.
According to Venture Beat:
Although there’s no formal agreements between Velocity’s portfolio companies, here’s how they are positioned to work together. First, Generate [a company Velocity just invested in] creates the content and cuts deals with advertisers.
Then, Broadband Enterprises [whom Velocity invested $10M in last month], a company that distributes videos and video advertising to many other partners, helps Generate to distribute its content across the web, mobile devices and TV networks. Meanwhile, widget company Mixercast offers a way for Generate to get its content to spread virally among social network users, as they add and share widgets that feature its artists’ works.
Broadband Enterprises, for example, competes with Tremor Media (and many others). Most of the tech platforms and ad networks actually do not “lock clients” in. I think (though I am biased) the only way you win is if you own the content. By leveraging content as the glue that holds the various pieces of their growing empire together, Velocity can add a lot of velocity to their strategy if they keep adding content and funnel it through the pipes (in this analogy, the pipes being Mixercast, Broadband, etc.)
I love to criticize financiers’ hubris; lord knows sometimes smart people stumble because they try to shove 5 pounds of meat in a 2-pound bag… but this approach is actually starting to look pretty smart. Online video’s storyline is being written as we speak and the kind of connections and vision they are bringing to the landscape is refreshing and unique.
Most VCs have hitherto focused on tech platforms and ad networks, Velocity seems to be bullish on video content, as their investment in Generate manifests. Mind you, if the former CEO of WB was working on a project, I am sure most archetypical VCs would listen, too.
I was not familiar with Generate, frankly, but they seem to share our bullishness for professional, high quality video content, via our own efforts on WatchMojo.com.
It is certainly too early to judge Miller and Levinsohn’s track record as investors, but as outsiders to the financing game with extensive media backgrounds, they seem to have the inside lane in a lot of interesting players in the video segment.
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…
Another storyline, of course, is that both Miller and Levinsohn are determined to prove something, if to no one else but themselves. While either man could have accepted a CEO job at countless companies, it’s interesting that they’ve adopted a portfolio approach to diversify their risk away from any one company.
If they pull off their game plan, they could make the existing highlights of their resumes look pretty pale compared to what they have in store as online video continues to become a bigger and bigger piece of the online advertising landscape.
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