Monday, January 29, 2007

SIIA Previews: Measuring the Puppy Paws

When I go to large trade shows I try to make it a point to troll through the less glamorous aisles of exhibitors to discover some of the up and coming companies and to hear their pitches. Some are obviously fully-grown small companies and others have potential that makes them look like puppies with big paws that are just waiting to turn into big dogs. The SIIA Previews event is a bit like that, with three sets of young companies trying to gain the attention of investors and publishers. The event drew more than a hundred people, which was pretty impressive given some of the competition for people's attention in a busy week of events. Companies presenting were limited to five minutes of pitch, followed by Q&A, not unlike Silicon Valley gathering of hopefuls. But this event was held in the offices of CIBC World Markets instead of some trendy Flatiron destination, appropriate given the crowd of serious investors and major publishers in attendance. Highlights:

Opening Panel: Deal Trends

The key moment for this segment was at the very end, when moderator Joel Dreyfuss, Editor-in-Chief of Red Herring, asked the panelists if 2007 would be a better dealmaking year than last year. Only after a lot of coaxing did a single hand go up, and then a couple of others. Clearly we're at the end of a business cycle and we'll start to see the effects of this within the next six to ten months. There were some good investments described by the panel and some significant wins and new ideas afoot but they're mostly incremental ideas that will take a while to evolve at this point.

The key new players in media investment are hedge funds, as tech is starting to look "safe" with 20-25 percent internal rate of ownership, better than VC's typical 60 percent stakes. Joel foresees more than one hedge funds having difficulties making investments based on a limited understanding of today's markets. Joel noted 942 million in Web 2.0 plays, no exits, 4 acquisitions including YouTube, so where there's money there's hope. Key problem: Web companies are not large employers how do you grow an economy with so few workers. Joel sees the biggest plays in mobile content, for many people a phone is their first computer. In India there are 6 million new mobile phone users every month, 42 million internet users, many in cafes. "Club" (syndicated) deals are a huge trend, 10-35 billion deals made possible because of them - it will get messy at some point try to stay away from it easier to manage in the walls of your own firm

Will Porteus, RRE Ventures

Looking at weather, storm risk solutions - eg ski areas in East, resort owners can buy policy, trading markets emerging for weather volatility. Data center technology complexity going away, new products for mid-market and consumers, storage and networking technologies, easier to use. Debate on where we are in cycle in infrastructure and content, great investments are in riding on that plumbing.

Rene Benedetto, Principal Halyard Capital

Media and Communications Sectors 12 investments in IS, B2b, papers; Opportunities in under the radar companies, avoid out of control valuations. Looking at interactive marketing, lead generation, mass media no longer effective effective for marketing, companies looking at the ROI on cost of customer acquisition. Halyard focusing on lead generation and online directories for education. Transactions-driven content moving towards pay for performance, brand knows what they will pay to get a customer, this company has the data to help them reach them, direct mail, etc.

Lex Miron ED, Interactive Media, CIBC World Markets

CIBC has good platform for media, more interactive plays, more pure plays. Focuses on content, services built around content - content that's designed for the media, Web 2.0 makes old media relevant. Avoids "atoms" - physical-world content plays - looks for plays with barriers to entry, eBay - consumer doesn't want 100 eBays as long as one works well. Prefer A management team with B idea over A idea with a B management team.

Justin Sadrian MD, Warburg Pincus

Audiences migrating to online, ad dollars following, still big lag between online time and online spend, macro trend for years to come. Lead generation is a big focus, and in general people making a buying decision. Audience is key also - looking for destination sites, looking for URL that's been typed in, natural search more defensible.

Steve Fadem, AOL (Relegence)

Bills get paid a lot quicker now, more infrastructure, used to take 5 years to build out a server farm, now a whole team managing this. Came in after "C" round, summer 2001, focused on financial services, complex perferences for four VCs, did a recapitalization round, licensing discussion turned into exit. Worst moment? SF - managing 4vc, outside investors, time horizons.

Company Previews

Decision Tree Media creates private-label web guides that drive qualified leads to sales channels. Clever idea - interactive guides on personal finance strategies and products guide educate potential investors on investment options, creating highly qualified leads. Good use of content, focused, numerous syndication options.

Eurekster empowers communities to own and refine site-based web search. Not a new-new play, but still leading edge: use Wiki-like functionality to tune popular searches. Thousands of "swickis" already developed. Interesting collaborative to improving search results - a little ahead of its time, this one had potential as a feature, not clear that this translates into an effective business model.

Generate, Inc. provides real-time vertical search (from 41 million domains), directories, and social networking services for media and publishing companies interested in generating incremental page views, subscriptions, and user value. Create complex and deep business information from content mining focused at specific business verticals. Promises to do for business information what trading systems did for Wall Street to create enterprise-ready tailored services. Keep an eye on it.

Near-Time integrates a group weblog with wiki pages, team events and shared files in a hosted and secure collaborative environment. Content can be kept private in a group or exposed in part or in whole to the public. Subscription module in the works to allow users to charge access to some or all of a site's content. Early days using Ruby on Rails development but very strong already.

Content Delivery Companies

Dragonfly provides a multi-media content delivery network that builds revenue through engagement, retention and advanced metrics. Nice technology, getting popular amongst enterprises who are swamped with videos when they least expected. A crowded space, but easy to deploy, could get a fair amount of play.

Inform Technologies LLC metatags publisher's existing content and editorial assets to deliver an enriched, personalized online experience, dramatically increasing page views, visitor loyalty and revenues. Already pretty popular amongst publishers, a good tool, not sure that it's worthy of all of the buzz that it's generated, but the stuff does what Moreover should have done.

Pando Networks offers a free, simple to use application with an unprecedented underlying network architecture for rich-media content delivery. Pando solves a simple problem with excellence and extensibility. This is a puppy with huge, huge paws - watch their growth and their potential transformation into a default repository for content of all kinds - including copyrighted entertainment materials.

RealTimeMatrix has pioneered break-through technology that enables anyone to get relevant content from the Web the instant it is published. A filtering mechanism for the "firehose" of Web feeds and other sources, good technology but needing more focus on specific problems to be solved.

Keynote Presentation: Fred Wilson, Managing Partner at Flatiron Partners & Union Square Ventures

How many times do we have to hear the "content wants to be free" speech? VCs seem to want to invest in endless streams of ad-supported plays, never acknowledging that downdrafts in advertising can kill these optimistic rubrics easily. Feeds and ads are important, but I think that Near-Time is right on message in acknowledging that for smaller readership and communities subscription social media will have strong appeal. People are always ready to pay for exclusivity if it buys them some advantages.

Content Protectors

Attributor is creating a platform that provides transparency and accountability in online content use and licensing for the rapidly growing content economy. This is pretty hot - insert a token into an original copy of a file and the Attributor crawl will ferret out copies and tell a publisher which one is which. Has far broader potential than its current uses, but interesting in its own right.

Cranium Softworks, Inc. helps streamline the publishing and content delivery process and protects online intellectual property. Good idea - track logins and figure out who's abusing single-user logins. Good negotiating tool. Needs to be implemented with controls that warn people gently to do the right thing.

iCopyright, Inc. specializes in developing technology for digital content marketing and licensing. Well-known to SIIA members, not a new tool in the strictest sense but with its settlement of legal issues and new ad-based redistribution technologies iCopyright is just starting to make waves. It's relatively gentle approach to IP management places an emphasis on effective content remarketing opportunities.

So there you have it, nary a mangy mongrel in the lot. For a first-shot event this came off extremely well, with good attendance by important players in the content industry. Kudos to Ed Keating of the SIIA and Newstex CEO Larry Schwartz for pulling this off on relatively short notice to high expectations.
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