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Bucks for Brightcove

It’s still very early in the year but today, Cambridge MA based Brightcove announced the closing of the largest venture round of the year.  The two and a half year old Internet TV (and Ad Network) startup closed a $59.5 m series C private placement.  The round added a number of strategic corporate and international investors to Brightcove’s slate of stockholders which now includes:  AOL/Time Warner, General Electric, Accel Partners, Allen & Company, General Catalyst Partners, IAC/Interactive Corp, The New York Times, The Hearst Corporation, Brookside Capital and Transcosmos Investments (Japanese firm which also has money in CinemaNow).

The financing was a private placement in which Morgan Stanley and Allen and Company acted as placement agents. The capital, according to press releases, is earmarked for international expansion.  It may also be used to secure additional partnerships or even efforts toward consolidation in the developing, but crowded Net TV market.  (Brightcove acquired Metastories in March 2006, and could be out to buy up other companies to enhance its offerings).  

Notable to me is not so much the size of the deal (though it’s large) but the involvement from major media companies like the New York Times and Hearst co.  Brightcove has gained the confidence of many traditional media companies and this stands to expand those relationships.

Brightcove’s principal business to date has been its ad-supported Net TV platform, and a syndication marketplace for ad supported video content where ads are contextually targeted.  Brightcove also provides some tools for smaller user-generated content and helps clients of all size categorize video content and optimize it for search and RSS feeds.  

With Net Video advertising yielding a higher CPM than traditional net advertising, and video advertising becoming more in demand as both marketers and startups try to capitalize on the popularity of Net Video – many news outlets have been exploring Brightcove’s offerings through partnership.  Among entities using Brightcove’s platform and network are Dow Jones Online (Wall Street Journal Online, and Barron’s online),  Time Life, MTV Networks (Viacom) and AOL.  Following this investment round it’s likely that Hearst properties and the New York Times will increase involvement as well.

As is the case with most net video – these relationships for distributing content are not exclusive to Brightcove.  Content providers are tending to spread their wares around with some frequency in an effort to both test market opportunities, and be positioned regardless of which companies prove to have staying power in the infant Net TV Market. Still the acceptance of so many big media companies is, at least for now, a validation of Brightcove’s status in the market so far.

If the money is used internationally, as referenced in some releases, it stands as an aggressive move by Brightcove when the marketplace for their service, while changing rapidly, and getting much speculation, is still in its infancy domestically as well.  An international land grab could help them gain valuable market share and advantage or it could prove a catastrophic over-expenditure.  Growing too fast is always a gamble and history shows plenty of failures and successes.

With over 100 employees, and sophisticated technology development, Brightcove is far from a garage start-up.  I’m curious what kind of operating expenses they are running (e.g. how high is their burn rate) and how many of their deals have been structured for gaining market territory over gaining revenue (e.g. how heavy a discount have they given their partners to induce them to work together). 

Brightcove’s budding Ad Network appears compelling. I’m curious what revenue it’s generating, or they’re projecting it will generate.  I also wonder how much of the new money is needed for operations and how much really is “mad money” for expansion.

The valuation for this C-Round was likely compelling to pass the review of sophisticated previous investors like Accel. (It doesn’t look like this deal included any buyout of earlier round investors).   And a private placement with outside placement agents is different animal than a simple venture financing. Both are signs Brightcove has big ambitions (though that is hardly a newsflash).

Being a private company, there are no SEC required public financials for me to get a look at, no way for me to get answers to my questions (unless someone with a copy of The Private Placement Memorandum wants to forward me a copy), but $59m in financing sure makes me curious. 

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