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Online video distributor Veoh Networks Inc.
has secured $25 million in new third-round funding from an investor
syndicate that includes high-profile entertainment industry individuals
as well as financial services giant Goldman, Sachs & Co.
New York-based Goldman led the round. Two individuals closely associated with Viacom Inc. also participated for the first time, as former Viacom CEO Tom Freston invested through his Firefly3 LLC firm and one-time Viacom Entertainment Group chief executive Jonathan Dolgen contributed to the round. Former Walt Disney Co. chairman and chief executive Michael Eisner backed Veoh for the second time and continues to hold a seat on the startup's board of directors. Additional funding came from prior investors including Shelter Capital Partners of Los Angeles, Spark Capital of Boston and Time Warner Investments, the venture arm of Time Warner Inc. of New York. The new round brings Veoh's total funding to just under $40 million, including a $12.5 million second round in spring 2006 and an original $2.25 million funding from Shelter Capital in mid-2005. According to Veoh founder Dimitry Shapiro, Shelter managing partner Art Bilger provided most of the connections to other investors in the syndicate. Freston is among Shelter's limited partners, he said, while Bilger and Spark's Todd Dagres were both board members of Cambridge, Mass., content distributor Akamai Technologies Inc. Shapiro would not discuss Veoh's valuation, except to say that it has risen significantly since the time of the Series B round. He added that he had met with Goldman's Pete Perrone while pitching the second-round deal. Veoh has since launched its Web site and introduced a piece of Web browsing software specifically designed to watch video. Users of Veoh.com can upload and view various types of video, including user-generated content as well as TV programming from major networks and online sources such as YouTube, a property of Google Inc., of Mountain View, Calif. While its Web site is relatively similar to the more popular YouTube, Veoh has also built a browsing interface for online video that includes a programming guide for its content. It can be downloaded as desktop software, and is based on Microsoft Corp.'s Internet Explorer browser code. That product, called VeohTV, is designed to resemble full-screen television programming more than Web video as most users now experience, Shapiro said. Although Veoh's application is designed in such a way that no partnerships with individual content providers are necessary, Shapiro said the company will continue to work closely with the Motion Picture Association of America and the major television networks. CBS Inc. is already a partner, as are several movie studios. Still, the company's willingness to strike partnerships has not prevented at least one antagonistic relationship from developing. Universal Music Group and Veoh have filed lawsuits against each other, with Universal citing copyright infringement and Veoh claiming no wrongdoing under safe harbor provisions of copyright law. The round was "not explicitly" structured to include legal costs, Shapiro said, although he declined to comment specifically on the suits. Veoh expects to share revenue from targeted advertising with content providers, and Shapiro confirmed his company's commitment to prevent piracy. Company revenue is expected to be "in the millions" this year, Shapiro said. Shapiro would not say whether the company will pursue a fourth round, or will consider other sources of funding in the future. He acknowledged that the presence of Goldman Sachs among its new investors has led to speculation that the current round presages a public offering but declined to speculate whether that might occur. Jeffrey P. Higgins in the San Diego office of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP advised Veoh. The startup did not work with financial advisers.  Deal Video
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Is UMG looking to get Veoh or Eisner with this suit?