Sand Hill Road in Silicon Valley remains ground zero for venture capital investment. In 2007 Silicon Valley outpaced its closest geographic competitor by a factor of nearly three to one (via PWC Moneytree). Still, even with a smaller scale Hollywood Blvd. is getting busier, generating more investment traffic, and building buzz. Saban Capital Group is the latest to hang up a V.C. shingle to address the SoCal market.
First reported in the Hollywood Reporter, Haim Saban’s Saban Capital Group (SCG) is expanding from a focus on broad, large, traditional private equity deals to now also include more venture oriented digital media component in their portfolio mix.
Historically, SCG has been known for large media transactions. Haim Saban himself was behind Fox Family Worldwide which News Corp sold to Disney for $5.2b in 2001. In 2003 SCG was a leading member of a consortium of private equity firms that privatized German satellite TV firm ProSiebenSat.1 (Other investors included Bain, Thomas Lee, Providence Equity Partners and Hellman & Friedman). In 2007, SCG sold off that stake to KKR and Permira. Current holdings include stakes in Univision, Bezeq and Keshet Broadcasting.
The new digital media focus area will fall short of formally being called a venture fund. There have also been no comments on capital allocation or funding prerequisites. Instead, the firm is characterizing the initiative as an “incubation platform” and emphasizing the broader ability to invest across the different stages of corporate development it will give them.
As Craig Cooper, the former Softbank and VantagePoint Partners VC tasked with running the new group put it when the news broke, “no other media investment group in Southern California has that capability [to invest across stages of development] and [the] depth of operating expertise.”
The task SCG is undertaking won’t be small. The operational and managerial challenges vastly differ for companies of different maturities. Sourcing and identifying investment opportunities can also vary dramatically when reviewing a startup versus a mature business. Simply put, there ’s a reason few firms don’t take so broad a vision: it can be hard to do so much.
On the other hand, more and more investment attention is migrating south to try and capitalize on the increasing convergence between Hollywood entertainment and Silicon Valley style high technology. Already, several Hollywood talent agencies (WMA and CAA) have struck deals with experienced Venture Funds to create a SoCal footprint. Then there are also private projects from Michael Eisner (Tornante) and Terry Semel (Windsor Media). If the deal flow and dollars follow the flight south, SCG’s deep pockets and broad focus could be a valuable tool for rolling up and packaging companies and services.
(So far, despite all the buzz generated for SoCal investment, the dollars aren’t there yet. According to PWC Moneytree Survey, LA/Orange County Investment for 2007 totaled $1.67b across 205 deals. That was actually down from 218 deals that generated $1.93b in 2006. San Diego in contrast was up more than 50% from 2006 to 2007. Silicon Valley saw venture investment grow from $9.52b across 1169 deals in 2006 to $10.06b on 1184 deals in 2007).
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