Media Pros Venture Into Funding
Posted by admin on May 13th 2008 in Generate Press
Former Top Hands
At Fox Unit, AOL
Face Tough Odds
By JESSICA E. VASCELLARO and REBECCA BUCKMAN
May 12, 2008; Page C3
The shift from the corporate suite to the rough-and-tumble of venture capital can be unpredictable. That’s what Ross Levinsohn and Jonathan Miller are finding out.
Both are casualties of big-company corporate politics, pushed out of top jobs at News Corp.’s Fox Interactive Media digital unit and AOL, respectively, 1½ years ago. The media veterans have formed a venture-capital fund, Velocity Interactive Group, that specializes in funding digital-media start-ups.
Their corporate-provided acumen and connections, along with some fresh capital, may let them surmount the tall odds against winning in this harsh arena. Velocity added financial heft by merging in December with a Silicon Valley investment firm, ComVentures, which had $1.5 billion under management but had struggled with partner turnover.
Harnessing ComVentures’ most recent $300 million fund, the new entity, which uses the Velocity name, has announced six investments in Internet video and publishing companies. A $25 million investment in an Internet animation and production concern, Fuse+Media, is to be announced in coming days.
Even though Messrs. Levinsohn and Miller are among the best-known deal makers in the digital-media field, the economic downturn makes a tough game even tougher. Success requires that someone cash them out of the early-stage firms they have invested in. Nowadays, however, few venture-backed companies are going public.
Acquisitions also are down, since many bigger companies are worried about conserving cash — or have seen their stock prices drop, giving them less of a currency for buyouts.
“It’s a brutally, brutally tough time for doing this type of thing,” says Paul Kedrosky, a venture capitalist who is also a senior fellow with the Ewing Marion Kauffman Foundation, which studies entrepreneurship.
Experience as an executive doesn’t ensure triumph in the venture game. Former Viacom Chief Executive Frank Biondi, who co-founded the $250 million WaterView Partners LP in 1999, admits its returns have been mixed. It doesn’t matter who you are, he says. And the skills of a seasoned corporate executive don’t necessarily translate.
“Most of the skills that lead to success as an executive are a bit more hands-on,” Mr. Biondi says, comparing venture capitalists to coaches and executives to players.
Velocity’s investments reflect the partners’ corporate background. As president of News Corp.’s Fox Interactive Media digital unit, Mr. Levinsohn, 44 years old, shepherded the company’s acquisition of social-networking juggernaut MySpace.com. A smooth deal maker and an energetic sports fanatic, Mr. Levinsohn left after disagreeing with News Corp. executives about how to manage the unit.
Mr. Miller, 51, worked for Tom Feston and Barry Diller before becoming chief executive of Time Warner Inc.’s AOL. After bulking up its online-video and Internet-advertising businesses through acquisitions, the lanky workhorse Mr. Miller left under pressure amid a turnaround drive at the struggling division.
The two announced they were leaving their jobs in the same month — November 2006 — and touched base within days. They had known each other since the late 1980s, when Mr. Miller worked for the National Basketball Association and Mr. Levinsohn was at a sports agency.
As News Corp. and AOL executives, both were involved in early discussions about a joint Web-video venture involving a number of large media companies.
An early opportunity for the Levinsohn-Miller alliance fell apart. Last year, things looked promising when private-equity firm General Atlantic LLC committed to back them in buying Internet start-ups. But market prices for start-ups began climbing, and several of their deals fell apart.
The twosome say they began looking elsewhere for opportunities. A General Atlantic spokeswoman said Messrs. Miller and Levinsohn are still advisers to the firm, but she declined to comment on any deals they might be pursuing, or had pursued.
Merging with ComVentures, which hadn’t raised a new fund since 2003, carries its own problems. ComVentures has had a reputation as a specialist in wonky communications investments in hardware and software outfits, like communications-equipment manufacturer OpVista.
At first, this narrow focus limited their options. “That branding was against us,” recalls Roland Van der Meer, a ComVentures co-founder and now a Velocity partner. “We’d go into deals and people would say, ‘You do Internet? Really?’”
Messrs. Levinsohn and Miller are pushing their team to hunt for Web start-ups that aim to disrupt traditional media and business models. One example is Next New Networks, which backs highly targeted Web video series. Another is Broadband Enterprises Inc., a seller of online video advertising.
Their reputations have already helped Velocity land some sought-after deals. Velocity invested $3 million in former WB-network head Jordan Levin’s digital production and talent management studio, Generate, which is experimenting with new models for creating and distributing video content online. Mr. Levin said he went with Velocity because, unlike some other funds, its partners understood the hits-driven nature of the content-creation business and had proven track records in the field.
Mr. Levinsohn says Velocity can use its relationships to introduce start-ups and media companies, and vice versa. He believes that traditional media companies have a strong appetite for digital acquisitions and that the number of potential buyers is growing rapidly for start-ups such as advertising businesses and consumer-product companies.
“It’s a much broader list than five media companies,” he says.
