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Media-related Venture Activity Is in Bloom in NYC

Paul Vidich — Tue, 02 Feb 2010 17:30:22 +0000

New York is the capital of media, advertising, and finance, but historically Silicon Valley and Boston have overshadowed the city’s efforts to encourage and fund technology entrepreneurs. In the past two years, however, that’s changed — big time — especially when it comes to media-related ventures.

Since early 2008, at least several dozen web-based startups have made New York a hub of web innovation. Startups like Boxee, Bit.ly, Foursquare, Daylife and numerous others have established New York City’s prominence as a nurturing environment for early-stage activity. Some seek to solve problems that are unique to an urban environment (Foursquare), or provide solutions that accelerate the disruption of incumbent New York media, including ad optimization (Quattro, Quantcast, Tremor Media. Others are participating in general startup trends, such as location-based activity (Outside.in, HotList), while still others are exploring entirely new forms of content and navigation (Boxee, Worldwide Biggies, Next New Networks, Someecards).

Why is the renewed activity in New York different from the last boom, of 2000-02? Several things have converged to suggest that New York is becoming a larger — and more permanent — center of web innovation and entrepreneurship. The talent pool of software engineers, designers, and programmers has expanded significantly in Lower Manhattan and Brooklyn, a clustering of human capital that provides a pool of employees to staff startups. Meanwhile, opportunities for innovation in New York have surged as well. Disruption in the cable, television, newspaper, book, advertising, magazine, ad agency, ad network, music and finance industries accelerated during the 2008-09 economic collapse. And web entrepreneurs are building products and services that provide consumers with better, faster, more convenient solutions than existing one, notably those provided by declining traditional media.

The scale of such an opportunity is defined by the revenue at risk. Traditional media’s $100 billion-plus in annual revenue is vulnerable to smart web solutions, and the next several years will see a continuation of that shift. For example, download sales of music, which began ramping up in 2003 and represented 40 percent of U.S. recorded music sales in 2009, are expected to account for 80 percent of such sales by 2014.

To be sure, there are startups in Los Angeles and Silicon Valley that see similar opportunities. But the exodus of employees from the traditional media businesses in New York has provided a cadre of smart, experienced old media talent — which when combined with smart, new media engineering talent, is catalyzing business opportunities. And there is a growing community of successful serial entrepreneurs — among them Kevin Ryan, David Morgan, Chris Dixon, John Borthwick and David Rosenblatt — to provide the angel funds and mentoring that is so critical to creating a sustainable startup economy.

(Related GigaOM Pro Research: Developers, Meet Your Hungry New Market: The News)

Supply vs. Demand for New York-based Venture Capital

San Francisco-based angel investor Ron Conway allocated one-third of his 2009 investment funds to New York-area startups, centered primarily around urban social networking, real-time web services and content navigation. Meanwhile Betaworks, a New York-based firm (for which I am an adviser) that combines techniques from seed-stage venture investing and agile software development, has invested in and nurtured a dozen New York-based startups — including URL-shortener Bit.ly — since launching some 18 months ago.

New York has fewer than 10 venture capital firms focused on the convergence of media and technology. The best known, Union Square Venture Capital, has a policy to largely limit its investments to New York-area firms so that it can remain close to management and help guide each investment’s direction. The other notable media-focused New York-based funds include RRE, Betaworks, Founder Collective (recently closed a $25 million fund), Greycroft (currently raising a new $125 million fund), Venrock, Bessemer, and Insight Venture Partners. Coming in from Philadelphia or Boston are First Round, ETF, Polaris, Spark and General Catalyst. First Round recently hired a New York partner to represent its interests in the city, and Polaris opened a seed camp in lower Manhattan.

The number of media-related startups have also increased in San Francisco and Boston since 2008. Indeed, New York’s emergence as a center of startup activity is not at the expense of activity in those two cities; rather, it reflects a change in business opportunities in New York, often unique to a dense urban environment, and in the maturity of web innovation generally.

Fertile Ground

Media-focused venture startups in New York attack the periphery of the incumbent media businesses with disruptive ideas often formed by executives formerly employed in those businesses, targeting innovation around their products and services. Or they fulfill consumer needs with new, web-unique products and services. Much of the media-centric innovation has focused on marketing/advertising platforms, publishing platforms and services, social networking among consumers and navigation/access to content. Examples include:

Marketing/Advertising Platforms: Tacoda (provider of ad-targeting services), Quattro (mobile ad network), Targetspot (Internet radio ad network), Scanscout (video ad network); Tremor Media (video ad network), BBE (video ad network), Oddcast (user-personalized viral marketing) and Simulmedia (improving effectiveness of TV promotions).

Online Publishing Platforms/Services/Brands: Daylife (publishing of contextually driven content matches), Associated Content (content selection based on search topic popularity, based in NY and Denver), Daily Beast (celebrity news), Huffington Post (news etc., based in NY and LA) and College Humor (comedy).

Social Networking Platforms/Services: Bit.ly (URL-shortener), Outside.in (hyperlocal information), Foursquare (location-based social networking) Tumblr (microblogging), Hot Potato (entertainment) and Meetup (facilitates local groups).

Content Navigation: Boxee (media organizer application), Adaptive Blue (socially-oriented content recommendations), Feedtrace (content popularity exposed with real-time web tools) and Fanfeedr (real-time sports data).

Talent Pool

Two things have broadened the talent pool of web-savvy entrepreneurs in New York in the past three years. First, software design advances and innovation in programming languages have made available user-friendly web authoring software tools, so that creative talent can code successfully without needing to know more complex scripting. This has broadened the field of startup talent beyond hardcore computer science engineers and allowed for more diverse backgrounds in business, design, marketing and conventional media.

Second, the pool of software engineering talent in New York has expanded. Google’s New York headquarters employs more than 2,000 people on West 14th Street, and AOL’s employs about a quarter of that number on Union Square. NYU’s Tisch School of Interactive Telecommunications has seeded New York startups with design, engineering and computer science talent, and programming talent has come over from Wall Street.

Clustering

Silicon Valley and Israel emerged as centers of early-stage entrepreneurship in part due to an effect called “clustering,” in which a density of collaborative thinking reinforced willingness to take risks, provided an iterative refinement of ideas and catalyzed innovation.

Three centers of web innovation have since emerged in New York as we: Lower Manhattan is home to two centers, and Brooklyn to one. An area bounded by the Flatiron building to the east and the Meat Packing district to the west benefits from relatively low rents, the presence of repurposed warehouses and Google, and includes Betaworks, Union Square Venture Capitol, Pinch Media, Medianet, Quantcast and many others.

The lower Broadway corridor, which runs from Union Square to Canal Street, and east to Hudson Square, also has seen a large influx of startups whose 10-40 employee staffs are ideal for the smaller footprint lofts and warehouses in the area, which includes AOL’s New York headquarters. Located here are NYU’s Tisch School of Interactive Telecommunications, Daylife, Quattro, Lime Wire, Open Road and others. And Brooklyn’s Williamsburg and Dumbo sections also are home to many startups (Boxee, Outside.in, Drop.io, and others).

The concentration of activity in a dense urban environment has facilitated networking, community, idea exchange and casual interaction. For example, NY Video, an ad-hoc organization of 3,000 New York-based web video professionals, meets monthly to showcase and discuss emerging trends in the industry. Each month local startups, content producers and media companies demo their latest products in front of 400 or so peers.

Opportunities and Exits

Some larger macro trends have also helped inject life in NYC’s startup scene. Capital requirements and risk, formerly barriers to digital media startups, have been reduced. Talented entrepreneurs now have access to open-source platforms, outsourced software engineering, and sharply reduced costs for bandwidth and infrastructure. Innovative web products and services require relatively small amounts of capital investment to reach business proof points.

In the near term, the exit market will consist of mergers with other early-stage companies, or sale to larger media companies, many of which are headquartered in New York. IPO exits will also be available when that market returns. Because New York web startups often target the vulnerabilities of large media companies, they often find themselves being acquired by their predecessors. Acquirers of web media startups are also often customers/clients/partners with which the startup has an established commercial relationship.

Between 2007 and 2009, the combined industries of television, radio, book and magazine publishing; cable; commerce; recorded music; advertising agencies and general media spent over $3 billion to acquire more than 50 early- and middle-stage companies. Acquirers included CBS (5), IAC (4), News Corp (7+), Hearst (5+), Comcast (6), NBC (4+), Viacom (2), Publicis (1), WPP (4) and Walt Disney (10). A second tier of media companies in the New York area, while less visible than the major corporations, has also been actively pursuing acquisitions. Acceleration of the disruption of existing media’s more than $100 billion in revenue is likely to support a robust exit market in the next 3-5 years. Obviously, New York companies buy innovative startups regardless of location, and attractive New York startups will be targets for any acquirer. But the density of activity in New York provides important real-time intelligence to potential buyers.

The Bottom Line

New York venture activity will be an important and permanent part of the rapid evolution of the U.S. media landscape. Venture capital funds in Silicon Valley, Boston, and elsewhere that want to be in the New York venture deal flow, and to closely manage their New York assets, should consider establishing a New York presence.

Paul Vidich, an adviser at Betaworks, also sits on the boards of ScanScount, MediaNet, and ReverbNation.

Image courtesy of Flickr user berk2804

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What's Coming in 2010: Forecasts From Around Our Network

Sebastian Rupley — Tue, 08 Dec 2009 00:00:06 +0000

Change is the only constant. As another year gets closer to its end, editors and writers from all around our network have been making predictions as to the many controversial and exciting developments that are likely to arrive in 2010. Here’s what we see coming:

The Fabulous 5 for 2010 — Om notes that we are on the cusp of a massive change in technology, and lists five companies that are so central to driving such change that they’ll all be making headlines next year.

On Apple’s Horizon– In addition to prognostications for the iPod and iPhone, TheAppleBlog also has Apple-related predictions for everything from the cloud, to 2010′s Mac lineup to what lies ahead for iLife, iWork and iTunes.

What WebWorkerDaily Is Looking Forward to in 2010 — Simon weighs in with predictions ranging from newly improved integration among web apps to a bright future for next-generation browsers.

Three Mobile Tech Predictions for Next Year — James over at jkOnTheRun foresees three major developments taking place on the mobile tech scene in 2010. He predicts that one heavily discussed product won’t arrive at all, and that there may be some unexpected freebies available.

What’s Ahead for Open Source in 2010 — This was one of the biggest years on record for disruptive open source developments. OStatic delivers a series of forecasts as to what will and won’t work in the open source arena next year.

Big Wins and Busts In Online Video — The folks at NewTeeVee see a bright year for TV Everywhere in 2010, but trouble ahead for some key players.

The Biggest Green Tech Hurdles — Over at Earth2Tech, Katie takes a look at the biggest hurdles looming on the green scene for next year. She also forecasts the post-stimulus 2010 future.

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Boxee's Open Attempt to Crack the Closed World of Content

Sebastian Rupley — Fri, 04 Dec 2009 01:00:25 +0000

Boxee, the popular open-source media center platform, will signal its long-term strategy this Monday with the launch of a new consumer electronics device on which the platform will run — the Boxee Box. In the meantime, NewTeeVee reported today that Boxee is also adding the Clicker app, which provides slick program guide and search features, to its software. And the company continues to strike new deals with content providers.

But Boxee is, in many ways, swinging for the rafters with its attempts to insert an open source media center software platform into the path of territorial media executives, who are used to striking cloistered — and typically proprietary — content deals. This fact came to a very public head a few months ago, when Hulu demanded that Boxee remove its video content from its platform.

The company’s potential for massive success — and failure — with the Boxee Box is becoming increasingly apparent. Boxee must not only keep its platform open, as OStatic recently noted, but it must find ways to woo content partners. And it must handle said content partners with care. As Ryan over at NewTeeVee wrote:

“If Boxee simply ports the software and all the channels that it and others have created into its Boxee Box without the permission of content owners — in other words, if it’s committed to remaining open and allowing anyone to build content channels for the device — then it risks alienating potential content partners.”

The post prompted a response in the comments section from CEO Avner Ronen, who said that “Boxee will remain an open platform, while respecting the rights of content owners.” Ronen also responded to the OStatic post, with:

“Boxee and XBMC [Boxee's open source core] are based on GPL, so any partner of ours need to accept it as a requirement. In our discussions with CE makers and content partners it is being raised as a concern, but in most cases we are able to address it. There is still a lot of misconception regarding what it means to work with an open-source project.”

And he went on to add that:

“There is still lots of work for us to do to make them feel comfortable about working with Boxee. The main issue has to do with the concern media companies have about upsetting their existing channel (i.e. Cable/Sat).”

We’ll know much more about how Boxee intends to marry its open platform with potentially closed-minded content executives in just a few days. Stay tuned.

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7 Fun App Ideas for the Weekend Tinkerer

Sebastian Rupley — Wed, 25 Nov 2009 22:58:45 +0000

Here in the U.S., we’re getting ready to celebrate Thanksgiving, which for many folks means a long weekend — my favorite time to tinker, particularly with software. So I’ve gathered together seven free app tinkering ideas from around the GigaOM Network that you may get a kick out of.

Handbrake Speaks Video. Handbrake has long been a favorite open source video transcoding and DVD ripping application. Over on OStatic, Lisa discusses the latest release, which has a slew of new features, including better picture quality and ways to make ripping DVDs easier. You can also use preview features to see how a video will look before you go through a lengthy transcoding process.

Create Your Own Game. If you don’t think you have what it takes to create your own multiplayer online game, check out this post on Arianne, a free software framework for creating slick ones. Create your own game environment and Arianne does the work to deliver your game to users online.

Music Muscle. The world of applications you can use to enjoy, organize and share music is hardly limited to iTunes. There are lots of free applications that are fun to dig into. Do you want to play Doom on your own customized OS for iPods or most other music players? Do you need customized music library management for multiple software platforms? Check this post for 8 free, open source tools that let you do those things and more. Also check out this post on the popular Amarok music app, organizer, and media player, which is out in a new version.

Blender University. Blender has long been one of the most popular free, open source 3D animation and graphics applications. You can access almost 70 hours of free online instruction from Tufts University on how to use the app; you can learn how to create a great-looking logo, how to execute special effects and more. Blender has been used to produce striking full-length animated films and is worth getting to know if you haven’t tried it.

A Free Book on GIMP. In “6 Ways to Get Much More Out of GIMP” the OStatic editors collected a number of excellent resources for the powerful, free, open source GIMP graphics application, available for Windows, the Mac and Linux. You’ll find a complete, free online book on GIMP, tips on getting plug-ins and more.

Weekend Zen. Do you write a lot? I sure do, and if you do, too, you may enjoy WebWorkerDaily’s take on free, Zen word processors. They strip away the interface annoyances found in most word processors and leave you with a tabula rasa experience that some writers really like.Try a little tinkering.

Free Media Centers. Have you tried out any of the free media center software platforms that are available? Boxee is a very popular one, but there are other good ones for Windows, the Mac and Linux. Read about four here .

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Boxee vs Hulu: Battle of The Words

Om Malik — Fri, 05 Jun 2009 18:13:51 +0000

Chris Albrecht over on NewTeeVee has a video interview with Boxee CEO Avner Ronen thought of Hulu’s recent launch of its desktop app. He also talks about the new TV-friendly browser YouTube launched this week. Also check out my post about why Hulu doesn’t quite much care about Boxee.

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So That's Why Hulu Hates Boxee

Om Malik — Thu, 28 May 2009 20:51:33 +0000

Hulu, the popular television content aggregator backed by major Hollywood companies, today launched a desktop application that can only be used on PCs. Of course, we wouldn’t expect the company to do it any other way — after all, if it ran on set-top boxes, it would dry up the lucrative money stream that flows from cable operators to Hulu’s partners and parents.

The launch of this desktop application explains why Hulu went after Boxee, the New York-based startup that developed an interesting content aggregation platform. The two companies tussled for a long time. It was believed that Hulu’s big bad backers were forcing its hand against Boxee. The launch of the desktop app shows that Hulu was being nothing but anti-competitive in an underhanded sort of way.

When All Things D’s Kara Swisher asked NBC CEO Jeff Zucker about Hulu making it difficult to watch its service on TV via software like Boxee, he said. “Right now we’re committed to Hulu being an online experience, and that’s where our vision is today, and I think that will continue.” Right! That is why Hulu released the desktop version.

http://www.hulu.com/embed/EgF07I6lLJ94Hqma-6Fi5w

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Why Does Everyone Heart Boxee?

Chris Albrecht — Fri, 06 Feb 2009 17:35:28 +0000

The buzz has been building for Boxee lately. Mainstream news outlets like The New York Times, BusinessWeek and NPR are getting hip to the little open-source media center that could quite possibly change the way you experience TV.

I first met Boxee CEO and co-founder Avner Ronen at a NewTeeVee meetup in New York roughly a year ago. At the time, I was contemplating buying an Apple TV. He politely shook his head and said I shouldn’t bother, that his company had something better in the works.

Indeed, Boxee launched its alpha last June, it has since gone on to aggregate some big-name content, allowing users to watch Hulu, ABC, Joost and even stream Netflix video through its clean interface. Boxee now has more than 240,000 users checking out its alpha, and, oh yeah, it raised $4 million in October, helping ensure that its 12-person staff will have jobs through 2009.

With all it has going for it, it’s no wonder everyone is jumping on the Boxee bandwagon. I asked Ronen why people love his company so — he credits the diligence with which Boxee listens to its audience. Twitter plays a big part in what Boxee does; Ronen himself maintains the @Boxee account on the micro-blogging service answering questions, delivering news and taking advice from users. The company also continuously combs through its forums and changes up its product road map based on what its community is saying.

The approach reminds me of Hulu CEO Jason Kilar’s talk at NewTeeVee Live, in which he described his staff’s near-constant vigil with the Hulu community, solving and responding to even minor technical issues at all hours of the night.

That’s not to say Boxee’s success is guaranteed. The more tech-savvy may not mind downloading and configuring an app and plugging a computer into TV screen, but that solution isn’t for everyone. And while Boxee is building a sizable following right now, it still needs to show that it can make money at some point. But Ronen and his Boxee crew are aware of the issues before them and are realistic about tackling them. For now they can bask in the moment, and prepare for the next version of the alpha, due out March 5.

So what lessons can be learned from Boxee?

Pay attention to your audience and use all the tools available to communicate with them. Ronen & Co. are always on Twitter and use it as a two-way street.
Be willing to take in good ideas that come from outside the company. Boxee adjusts its product road map as it receives input from the community.
Be efficient. Boxee was built using open-source tools, and the company has only 12 employees with no plans to get any bigger anytime soon.

But the real reason I like Boxee? It, like so many other successful companies, seems to be a direct extension of its leader. Ronen’s a genuine, soft-spoken guy with just the right amount of overconfidence; he sincerely wants to build a great business, and isn’t looking for a quick cash-out. Because he is sincere, Boxee, by extension, is, and audiences pick up on that and want to be a part of it.

http://blip.tv/play/AerzYIX+KQ

Pasted above is a quick video I shot of Ronen talking about how Boxee uses Twitter and forums to stay connected with fans, how they’re going to move into the mainstream, and how the company would implement a Facebook integration.

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