Boston venture firm Spark Capital launched three years ago with a relatively small $260 million fund mainly targeting early-stage investments at the “conflux of the media, entertainment, and technology industries.” Small funds typically focus on a given geographical region, in addition to their specialty areas. But on Monday, when Spark announced the hiring of former New York media executive Moshe “Mo” Koyfman as a principal, it was billed as helping the firm expand in the Big Apple. Indeed, Spark has made only a small percentage of its investments on its home turf—and it’s looking farther and wider as it establishes itself among the elite of media investors, with major plays in CNET Networks and Twitter, as well as a variety of interesting startups.
To learn more about the strategy behind the firm’s expansion, I asked Spark co-founder and general partner Todd Dagres about the trends he sees in media, technology, and entertainment—trends that are driving Spark’s investments (the company closed a new, $360 million fund earlier this year). We spoke, in particular, about how social media sites like YouTube, networking services such as Twitter, and Internet TV networks like Veoh (another Spark portfolio company) are using technology to distribute content directly to consumers—and how consumers, in turn, are using them to program their own entertainment. These changes are rocking traditional media, and everyone—old media and new media—is struggling to understand how to capitalize on the new media behaviors. The stakes are enormous. Says Dagres, “It’s hundreds of billions of dollars that are now ups for grabs in the whole distribution and consumption of content.”
Taking part in this disruption, and finding ways to monetize it, has always been a focal point for Spark—and its growing footprint in New York and beyond is only a manifestation of that.
“We had to make a decision. Do we want to invest in the best deals we can find close to home, or do we want to invest in the best deals we can find? And we decided on the latter,” Dagres says. As a result, he says, “We find ourselves less focused geographically on the New England area, and more focused on the space that we’ve targeted. Right now about a third of our companies are in New York, a third are in California [split evenly between north and south], and a third are everywhere else, including Boston. We’ve actually got more deals in New York than we do in Boston, but that’s because New York is a media capital.”
The strategy seems to be working. Judging by the scope of the firm’s deals, and its participation in major plays like CNET’s recent sale to CBS or Twitter’s financing, Spark is becoming an increasingly influential presence on the media-entertainment-technology landscape. Dagres says it took a while for the firm to make its mark. But now, three years into Spark’s existence, he says: “People know who we are. We’re productive as a team. We feel like we have a good sense of where to invest. We feel like we can compete with anybody in the areas we’ve chosen to focus on.”
So what are those areas? I asked Dagres what trends, or aspects of the ongoing media disruption, he is focused on now. He named three.
“One huge trend is monetizing all of this digital media and this social Web experience,” he says. “You’ve got lots and lots of eyeballs on the Web now looking at video, listening to music, and creating their own personal presence on the Web. The monetization has not yet caught up.” But, he says, “that’s normal. When TV first came along they didn’t know how to monetize it.” Indeed, TV shows had sponsors, rather than advertisers—and they sold tickets to the shows, he says. “And now, of course, it’s an $80 billion business.”
Dagres gave me a few examples of Spark investments aimed at “bridging that gap between the engagement online and the money that’s flowing there.” One is San Diego-based Veoh, which aims to deliver full-screen, high-quality video over the web, bypassing traditional broadcasting systems and regulatory restrictions. Another is
