By Patricia Kutza. This article originally appeared on Law Technology News, May 19, 2014.
Backers say digital media is in the DNA of a successful capital venture
Between the four of them, they’ve structured deals for the likes of Vindicia, Garage.com, Sun Microsystems and Pixim. At the final and most-anticipated panel of the Legal Frontiers in Digital Media joint conference held May 15-16 at the Mountain View, Calif.-based Computer History Museum, venture capitalists from Onset Ventures, CMEA Capital, Venrock and Xseed Capital shared opinions about what types of digital media companies are capturing their interests—and where the funding momentum is going.
To understand how video is becoming a major force, go to Saudi Arabia, said Saad Khan, a partner at CMEA Capital. Saudi Arabians are the largest consumers of YouTube, he said. And they are less concerned with the cutting edge of technology than the content. To talk about cool technology may even be outdated, Khan said. In many ways, it already is invisible in our world.
In fact, companies that focus on hardware as a product are in for a hard landing, said Ray Rothrock, Venrock partner emeritus. They are considered a “cash-burning furnace,” according to Robert Siegel, general partner at Xseed Capital. Additionally, “the price of things are plummeting,” said Rothrock, and “what makes a great product doesn’t always make it a great investment. Companies can make themselves more attractive to investors by recruiting the right talent,” he said. “They should be hiring digital natives, kids who have grown up with digital products. They bring a view of the world totally different from previous generations and they consume media—news and consumer products—very differently.”
Can Yahoo Inc. and Google Inc. make the same type of splash that the “one-off” video series sensation “House of Cards” made for Netflix? The panelists generally agreed that companies need the DNA necessary to pull it off. It’s not for sissies, said Siegel. “Generally speaking, if you get it right, you are a genius. If not, you lose money and are considered an idiot.”
Patricia Kutza is a business and technology journalist based in the San Francisco Bay Area. Email: pkutza@pacbell.net.