Todd Dagres on the Media Trends Taking Spark Capital Way Beyond Boston

9/17/08Follow @bbuderi

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Next New Networks, a New York startup founded by veterans of AOL and MTV, among others, to produce web-based “micro television networks” that combine traditional TV programming with community-based Web interactivity. Still another is Eqal, the Los Angeles studio behind the cult Web video series Lonelygirl15. While Veoh is a distribution platform, both of the last two companies are content creators that use the Web to get around the traditional media dominance of distribution channels. As Dagres puts it, “You don’t need a studio or network to be involved, or give up economics to them.”

The second big trend is what Dagres calls “life streaming.” Here, there are few better examples than Twitter, the text messaging/social networking/microblogging service in which people convey to their friends and followers what they’re doing at the moment.

“Twitter has taught me something that I didn’t know,” he says. “There’s a growing community of people out there that basically want to stream their lives, and they want to consume…the streams of other people’s lives.” This might sound strange to many, he says. But he notes that there are hundreds of millions of people, most of them under 30, who don’t find it strange at all. “These people, they connect with their friends and they connect over the Web in a way that we only used to do in physical venues,” he says.

Besides Twitter, another Spark investment that seeks to capitalize on this trend is called i’minlikewithyou, or IILWY. Dagres describes it as a cool little New York startup that produces multi-player, social games that attract communities of like-minded players. He calls it half game playing and half life streaming. “I think you are going to see more examples of live content flying around the Web where people are almost creating a kind of virtual proximity,” he says. “I think that’s a very powerful trend that we’re going to see.”

The third trend, an “infrastructure backlash,” stems from the disruptive power of the other two. The upheaval in media and entertainment is not all about applications and content, Dagres says. At some point, the information infrastructure will have to go through what he calls a generational shift in order to handle all the new forms of interaction and consumption. “We’re going to run out of…what I call quality of service,” he says. So to counter that, and provide the connections needed to do what people want to do, he predicts, there will be a wave of investments to add capacity and features to network systems.

One investment Spark has in this space is Intune Networks, an Irish firm that is developing optical switching technology for next-generation metropolitan area networks that will be better able to deliver high-bandwidth content such as streaming HDTV. Another Spark company, Westford, MA-based Verivue, is developing advanced networking solutions for enabling next-generation IPTV (Internet Protocol TV), in which digital television content is transmitted in the form of Internet data packets.

We spoke about one last aspect of Spark’s investment strategy that relates to the current turmoil in financial markets, including the poor market for public offerings—and investor concerns about whether portfolio companies will need lots of additional financing before an exit is possible. “Right now, everybody’s worried about what’s going on with the markets, and when is there going to be an IPO,” Dagres says.

Spark’s approach is to continue being aggressive in its investments, but not to pour huge amounts of money into firms that will need lots of additional capital any time soon—allowing the firm to be patient with its investments. “We pay attention to that, but we don’t let that paralyze us,” he says of the financial climate. “And our early stage focus allows us to let companies pursue big ideas rather than try to get to cash flow break even.”

Especially in these times, that would be welcome news to any entrepreneur.

Bob is Xconomy's founder and editor in chief. You can e-mail him at bbuderi@xconomy.com, call him at 617.500.5926. Follow @bbuderi

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