Why Polaris is backing Heavy.com

I recently made an investment in Heavy.com, one of the leading broadband video sites. Why did we invest?

Although pure “content” deals like this are a little atypical in the VC world, my partners and I found Heavy to be a pretty compelling investment opportunity.

Clearly, there is a ton of demand right now for good broadband video content. It is no mystery that broadband video sites are starting to get funded, not to mention mainstream media companies ramping up their broadband video efforts.  As more and more broadband video pours onto the web, it will become a lot harder for young companies to rise above the noise. We think Heavy.com is uniquely positioned to grow and succeed even when this supply/demand imbalance evens out (which it will).

As we evaluated the opportunity, what really stood out for us was the Heavy team’s unusual ability to consistently create content that not only was highly appealing to their audience, but was equally appealing to the advertising community that tries to reach that audience. Heavy’s appeal to its audience is clear enough and seen in the size (over 10 M unique visitors/month), growth and behavior of its viewer base.  The team’s creative genius was readily apparent and pretty well supported by their track record.

But, what we found really special about Heavy was that their creative genius speaks equally strongly to advertisers.  As we got to know the company (duirng which we spoke to about a dozen advertisers and/or agencies), we were struck by how consistenly we heard the same thing. To advertisers, Heavy has a very distinct personality and brand (“cool” “hip” “cutting edge” were what we often heard) within the 15-35 male demographic, and the advertisers felt very strongly that their own brands benefited by being associated with the Heavy brand. This was in part because of the strength of Heavy’s brand, but also in part because Heavy helped its advertisers create and integrate advertising content so that the advertising itself was part of the overall entertainment experience at the Heavy site. 

The result is a site which is succeeding both in establishing and growing a committed, habitual audience, and in creating a highly profitable business model.  So, with some growth capital to support expansion, a few key hires, and a little luck (yes, luck is part of it), we think Heavy is in a great spot to grow into a substantial and important business — the broadband media network of the future.

On Reforming and/or Disintermediating the VC Industry

Not sure if it is a good or bad omen (most likely neither) that the same weekend I start my VC blog, there emerges a ”wisp of a discussion materializing in the tech blogosphere about reforming the VC industry.”  Uh-oh…

VC Rick Segal seems to be getting the credit for lighting the flame here, with blog notables like Dave Winer picking up the baton and carrying it forward.

It is getting late and I think I am going to take a pass on joinng this particular fray, other than to say that Tom Evslin has a typically thoughtful and balanced post on the topic which I’d recommend.

VC Mike on Internet Investing and Startups

As a VC jumping into the blog community, I suppose it only makes sense to start off by sharing some of my thoughts on the sectors I tend to focus on, namely Internet/Digital Media related opportunities (for more on me and my investment areas go here).

First, though, a disclaimer: while I, like all my VC brethren, have thoughts, observations and hypotheses about the markets I invest in, let’s not kid anyone — I for one learn much more from the entrepreneurs I meet and work with than from my own research, analysis and navel gazing. So I guess what I am saying is that you are advised to take my rants and ruminations with the grain (or small boulder) of salt that I do.

Also, I plan to use this blog not just to offer general thoughts and observations, but I am also going to take a crack at spelling out some of the thinking that goes into the particular investments I am making.  We’ll see how it goes — I am hoping the combination of general discussion together with specific investment rationales will be of some interest to those of you good enough to visit my blog.  But I am going into it with an open mind, and would love any suggestions on what works and what is a waste of time. 

Enough of that. Here is what I am thinking these days about the Internet and Digital Media startup world.

First, I fully agree that we are going through a wave of innovation at least as significant and important as Internet 1.0. We may all be polyannas, but I think it is an incredibly exciting time for those of us in Internet/digital businesses.

Second, while most of the attention out there (including my own) tends to focus higher up “the stack,” I do believe that the mass adoption, and mobile-ization, of broadband, will continue to generate infrastructure opportunities.

My partners Bob Metcalfe, who did that ethernet thing, and my other partner George Conrades, who ran and currently is Chairman of our portfolio company Akamai Technologies, both know just a tad bit more than me about moving bytes and bits around, but suffice it to say that our partnership will continue to look for Internet infrastructure opportunities.

Third, there will be new opportunities in the emerging “Web 2.0″ software layer.

While my partners and I have enjoyed backing software companies that help folks take advantage of new computing platforms (including the likes of Powersoft for the client-server platform and Allaire for the Web 1.0 platform), I think this is a trickier game with regard to Web 2.0 software companies. 

Whether it be business model, the fact that really robust software can be built relative quickly and inexpensively, or the existence of many more mature, cash laden companies in the industry, it seems to me that most Web 2.0 software startups are best served raising seed capital and then selling fairly quickly to a Yahoo! or Google. This does not bode well for the so-called “venture returns” we look for.

That said, I am confident a couple important new platform companies will emerge from the Web 2.0 entrepreneurial soup, and I have spent much of the last year trying to find real contenders. (Stay tuned, I have some more specific ideas on this…).

Fourth, I love the fact that so many Web 2.0 companies are at once both technology and media companies. While Internet 1.0 companies like Yahoo! and Google clearly have figured out how to make decent money, I think alot is still up in the air regarding how Web 2.0 companies can maximize this dual business model. Those who figure it out early, though, stand to profit greatly, and I hope to be there when they do!

Fifth, and finally, I passionately buy into the belief that all this stuff we are talking about promises to fundamentally change the media world and what it means to be a “media company.” 

Alot of my time these days is spent with companies that are participating in this transormation, either by enabling the new platforms or by developing and delivering content for them. In fact, I just closed an investment with a broadband content company, which will be the subject of my next post. Until then…

 

Happy New Year

So, in addition to the typical annual New Years Resolutions (get in shape, lose weight, etc…), this New Year I am vowing to get my act together and start blogging. I’ve got some projects in the hopper which I am really excited about and look forward to sharing in the upcoming weeks. Things certainly are not dull these days for those of us in the digital media world! Stay tuned for more…