Do VCs Get Online Video?

TechCrunch.com guest contributor Ashkan Karbasfrooshan has a provocative post up today about the failures of VCs when it comes to online video startups.  Some tidbits...

Yesterday’s final implosion of video site Veoh, which declared bankruptcy after burning through $70 million of venture capital, was a long time coming. A lot of so-called smart money went into Veoh: investors included Goldman Sachs, Time Warner, Intel’s venture arm, Spark Capital and former Disney CEO Michael Eisner. And it was hardly an isolated incident. Joost, another high-flying video startup launched by the founders of Skype, went through $45M in VC money before ending up in a fire sale.  Who’s next?

More importantly, why is so much venture capital that funded video startups going down the drain when the number of videos watched on the Web is going through the roof?

Making things worse is this “crazy ass backwards” investment thesis that they should invest in 10 companies and watch seven burn to the ground, hope that two do “ok”, and pray that one will be a “grand slam”.  Forget the theory of diversification, which underpins all of finance, VCs keep aiming for the fence and let’s face it, finding winners in business is as hard as finding them in Hollywood.  You win with singles, doubles, triples and occasioanlly home runs. basing your strategy on grand slams is futile, which takes us to VCs odious track record in online video.

Where are the grand slams other than YouTube?  There aren’t any.

Our Next 2 Industry Events (Maybe)...

Two small but potentially meaningful new opportunities for both indy film financing and distribution may be the topic of our next industry-focused events.  New websites like Kickstarter and IndieGoGo are offering opportunities for micro-film financing directly from the public. The Hollywood Hill's media partner Armchair Revolutionary is also moving into this space to finance social change documentaries by way of public funds. Ted Hope's December piece in The Wrap bullet points some of these pioneers and the sense of energy coming from this new movement.

And in the online distribution space, Boxee, Hulu, and Youtube and Netflix are battling it out in different ways.  Youtube recently rolled out a limited program to test online film rentals.

We'll see if we can get these players in the same room for an evening. Stay tuned...