In what looks to be a challenging funding climate for entrepreneurs, we thought it would be interesting to talk to one fund which is still making investments--Saban Ventures (www.saban.com)--a new, digital media focused venture capital fund located in Los Angeles. We talked with Richard Yen, the firm's Director of Venture Capital and New Media, about the company's link to Univision, what kinds of investments it is making, and his impressions as an investor of the opportunity here in Southern California.
For those not familiar with Saban Ventures, tell us about the fund?
Richard Yen: Saban Ventures kicked off early this year. We make Series A and Series B investments in digital media, mobile, and consumer Internet. We're the venture capital arm of Saban Capital Group, which is Haim Saban's investment vehicle and private equity firm, which he founded in 2001. Haim's background is in media and the entertainment industry, for several decades. He's an entrepreneur and operating executive, and has made investments in companies like Univision--the largest television network in the U.S.--where he is Chairman. He branched into the venture capital area last year, and brought myself and a colleague, Craig Cooper, in to invest in early stage companies.
How big of a fund is this?
Richard Yen: We don't publicly disclose the size of the fund, but we're going to make $1M to 5M investments in early stage companies. We'll typically invested $1M-3M in a Series A for a pre-revenue company, and $3M-5M for a Series B firm or for companies with revenue and traction. We're looking to build out our investment portfolio.
What kinds of companies are you looking to invest in, when you say digital media--content, technology, or both?
Richard Yen: We're fairly broad in respect to digital media. For example, our existing portfolio is content related--Next New Networks, which is in online video, creating content for super distribution on multiple sites like YouTube, Metacafe, AOL Video, Veoh, and others--happens to be a content company. But we're also technology focused, looking primarily at consumer facing software and services firms in digital media. We're also looking, at the same time, at infrastructure--infrastructure software, which advertising agencies or marketers would use.
What's your prior experience and how'd you get into this?
Richard Yen: I have been at this for five years, working for Blueprint Ventures in Silicon Valley. I led their digital media and investing practice, looking at early stage investments in Silicon Valley. I was looking to transition to a platform that focused on digital media, and Saban has a strong legacy in that area. I also grew up in Southern California, where I also went to business school. I live in San Francisco, and I spend every other week in Southern California, and also cover Silicon Valley for the firm. I've also got a partner in the Orange County area, so we've got the whole coast covered.
What are your first impressions of Southern California opportunities?
Richard Yen: I think there's a lot of opportunities with respect to lead generation, search engine marketing, and lots of fantastic teams here in those areas. We also see teams out of companies like Qualcomm and Broadcom. We've also seen lots of business models coming out of the media companies, like Fox, and others. Southern California has great opportunities for investments in that area, particularly given our relationship with the media entertainment industry. Although there are lots of firms down south, this is an opportunity for us to build a leading early stage group in digital media investing. We're excited about the entrepreneurial opportunities, and we'd like to add value to early stage startups.
What are your thoughts on the area of digital media convergence?
Richard Yen: We completely agree that digital media is a disruptive area for early stage investment. There's lots of examples--iTunes, which is now a dominant player, opportunities like Hulu, which didn't exist until recently. There's so much disruption in this space, it's an interesting opportunity for early stage startups. We are looking to find opportunities that are capital efficient, interesting products that could be complementary to our current efforts, and grow from there. We're really excited around mobile distribution for consuming digital media, and I'm personally interested in the analytics area--understanding where people are spending their time, helping advertisers and ad agencies monetize. The consumer potential is shifting so much to the Internet and digital platforms, and we think advertising dollars will flow that way, and analytics will be a major part of that.
What's your ideal investment opportunity?
Richard Yen: The ideal opportunity for us is a CEO or entrepreneur who has had experience starting another company, or who was a founder or has been there in the early stages to help build out a firm. They also need the knowledge of the particular industry they're working in. If they were working at a hardware company, and are now trying to move into digital media or advertising, that's a little more challenging to get excited about, than if you've been in a space for seven to ten years, and you know it, know the pain points, and have the network. That's the entrepreneur we get excited about working with. That's certainly the ideal, and where we have our strong preference. Also, in terms of stage, we like to get involved as early stage investors in the Series A, where the company only has half a dozen employees, the product has just been launched, and customers are adopting it--but it's still fairly early on. We want a vision and an opportunity which we can get excited about, and where we think we can add value due to our personal network, and through Saban's media and entertainment connections. We want a company where we can put our resources in and help the company grow--we're not looking for companies doing $10M, $15M, or $100M in revenues. So, in summary, we're looking for a company, early on, with a good understanding of the industry they're attacking, with a proposition that is unique, with technology behind it which gives it a differentiating barrier to entry, and has a huge market opportunity. Finally, we like to roll up our sleeves, and help our companies grow, and be a big part of it.