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It’s been an up and down week for the year old IPTV startup Joost but it’s ending on a high note; a very high note.

After several big announcements were made about content and advertising partnerships, the web was abuzz at the beginning of the month that the supposed broadcast-quality, free, peer-to-peer,  net-television service was officially going live (from beta).   Those announcements were slightly misleading (as access was dependent on invitation) but there was a spike in traffic, and interest.    Shortly thereafter, the Joost blog reported that the company’s central servers, which are located in Luxembourg, were having problems handling the demand and load. 

While Joost may be struggling to get it’s systems tuned to scale with demand, Joost released news that will likely leave the week, and the month, on a positive note no matter what happens next.  Earlier Thursday, the company announced the closing of a substantial Series A financing round.  In total, $45m was raised.

The venture round was led by Sequoia Capital and the European firm, Index Ventures (which also invested in the Joost founder’s prior company, Skype).

Though, as is the norm for private/venture transactions, little information was announced regarding valuation, it is clear  that the pre-money valuation accepted by the investors was substantial. The $45m dollar investment was characterized as buying a minority stake in the company which translates to a pre-money valuation of greater than $45m – though it’s not clear how much money was invested previously by the founders (who were flush with cash from the sale of Skype to eBay).  $45m pre-money is still  a staggering number for a year old company yet to have revenue or roll out its product in a wide release.   

Perspective on just how big a transaction this is comes with a comparison to investment in Joost’s competitor Veoh Networks.  In April 2006, Veoh a rival P2P IPTV company closed its Series B round. That transaction raised $12.5m from venture investors Shelter Capital and Spark Capital as well as Time Warner and other corporate partners. That round also resulted in two board seats going to industry heavyweights Michael Eisner (former CEO of Disney) and  Art Bilger (the former vice-chairman of Akamai and current managing partner at Shelter.).

The Joost deal is nearly 4 times the size of the Veoh investment – and it’s an A–round financing, not a Series B.   In what should be the understatement of the month,  Joost co-founder Janus Friis said “This funding represents a tremendous vote of confidence in Joost’s platform.”  Sequoia, which recently saw a tremendous return on its investment in YouTube, and hasn’t been scared to take large gambles in its transactions,  is clearly betting big on Joost.

In an indication that, like Skype, Joost’s has global plans from the start, the round included investors from the United States (Sequoia), Europe (Index) and also Asia, which was represented by the Li Ka-Shing Foundation.  

As much as it’s hard to call a Series A Financing a Strategic Investment Round, this deal merits the title.  In addition to the prior named investors, the transaction also included two notable corporate investors: Viacom and CBS Corporation.

Viacom and CBS began working with Joost in February after Viacom’s initial efforts with YouTube failed to work out, and before Viacom sued Google/YouTube in March for $1billion for copyright infringement.  (That Viacom and CBS are aligned together is not surprising.  They’ve only been independent companies since a restructuring separated the companies in two on December 31, 2005)

In addition to the financial investment, both Viacom and CBS are contributing substantial content for airing on the Joost platform (and likely have a substantial-revenue sharing agreement relating thereto).  CBS has made available more than 2000hrs of programming including premier programming like CSI (the entire franchise), NUMB3RS, The Evening News, and some college football programming.  Viacom is providing content from across its entire product portfolio including programming from Comedy Central, MTV and Paramount Pictures.  Presumably premium content from DreamWorks, Nickelodeon and its other brands will be available as well.

For more background on Joost, it’s been discussed here and here on Metue.

An Afterthought:
After re-reading my post, I was thinking about the deal and had a further thought worth noting. Does anyone else find it interesting that one of the lead investors in this deal is same firm that backed YouTube and also has one of its partners on Google’s board of directors? In backing Joost, they’re not only backing a potential competitor to Google/YouTube but they’re also now co-investors side by side with Viacom – a company suing YouTube for $1billion. (With regard to potential competition: admittedly YouTube’s focus is more on user-generated-content and Joost’s is IPTV but the gap between the two kinds of video content could be easily closed).