In this current financial crisis, the Internet venture capital (VC) world is currently suffering from the same two diseases that have long afflicted their counterparts in Hollywood: group-think and paralysis. Over the past six months, I have heard many of the top Internet VCs speak at seminars and events about being open to innovative companies and ideas. However, it seems Internet VCs are all going into the same fields and investing in these areas only after one major VC firm has made a commitment in that particular space – making it ‘safe’ for the rest to enter in.
One area that Internet VCs were funding in 2007 and early 2008 before the financial crisis, was the development of online video content. However, the field has improved in many ways since then. The mass use of iPhones and other smart phones, the mass acceptance of social networking sites such as Facebook, and the ability to watch online video on regular TVs has created an encouraging situation ready for an explosion in this space. Unfortunately, the previous experiences of VCs and their industry group-think have caused them to back away completely from this space. However, continuing to ignore this space will mean that these Internet VCs are missing out on the future direction of entertainment.
We are not speaking about a marginal field. In June, Eileen Naughton, Google’s Director of Media Platforms, spoke at the OMMA Video Conference and stated that 77% of all Americans watch Internet videos and online video viewing grew over 40% from last year. This trend is only going to continue. Even with economic slowdowns, everyone keeps their high-speed Internet access and watches even more videos. eMarketer believes the number of online video viewers in the US will grow 31 percent in the next five years, from 144 million this year to 188 million in 2013.
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