Spark Capital’s Media-Entertainment-Technology Play, The Sequel
Investors are so eager to get behind Boston-based venture firm Spark Capital—which has focused its $260 million Spark I fund exclusively on early-stage companies at the crossroads of media, entertainment, and technology–that the company has had little trouble raising an even larger amount of money for its second fund, Spark II. After rounding up $360 million in commitments, the firm announced Tuesday that it has closed Spark II to further investment.
Companies backed by the Spark I fund include thePlatform, a digital media publishing company purchased by Comcast in 2006 for a reported $80 to $100 million, as well as Internet TV network Veoh and cell phone ringtone and entertainment provider SendMe. “In fund I we validated that this ‘confluence’ theme is powerful, and in fund II we’ve decided to expand on that,” says Todd Dagres, general partner at Spark. (We spoke with Dagres yesterday about storage appliance company Netezza.)
Dagres thinks plenty of profitable ideas remain to be hatched in areas such as cross-platform media publishing and broadband networking. “There are still a lot of things that we can’t do with technology that we are going to be able to do down the road,” he says. “Internet video, for instance, drives a need for better network quality, which drives the networks to evolve, which leads to better content. We’re optimistic this is a virtuous circle.”
Spark I is 75 percent invested and will add roughly five more companies to its portfolio before year’s end, Dagres says. Spark’s partners saw that if they wanted to keep going in the same direction, they’d need more money by early 2008—hence the Spark II offering. The funds may differ in small ways, Dagres says. Whereas Spark I holds only minority stakes in its portfolio companies, for example, Spark may use the Spark II money to become the lead investor in some ventures. But as with Spark I, according to Dagres, the firm’s intention is to invest the entire amount raised, without holding back money to cover its own fees—something investors like to hear, Dagres says.
That formula could still earn Spark some money, as long as its portfolio companies continue to blossom. Spark experienced its first “liquidity event” even before the Spark I fund turned two years old: Comcast’s purchase of thePlatform. The company offers a software system that allows traditional-media companies to more easily distribute their content to Web browsers and mobile phones. “If you’re the Food Network and you’re creating TV content and you want to monetize that over the Web, rather than doing it yourself, you go to thePlatform,” Dagres explains. “That’s a case of a new media company allowing a traditional company to have their own new media property. The Comcast acquisition was good for them and for us.”