You advise Comcast Ventures’ portfolio companies. What are the most interesting and exciting aspects of emerging media businesses and what tend to be their stumbling blocks as they grow?
There are a lot of exciting things happening in the media space. It has never been cheaper or easier to create high-quality content and distribute it at global scale. If you look back five or 10 years, most of the emerging video content was coming from vloggers (video bloggers).
In 2011, I made an investment in a company called Fullscreen, which is supporting a lot of those individual content creators to find their voice and hone their craft on YouTube. Content back then was raw and it has become better and better over the years, because the tools have improved. There is no scarcity of storytelling talent nor restrictions on distribution.
So, now we see them building brands and fandom and their content getting better and better with a lower cost basis, at a much greater scale. One example is a company called Cheddar, in which we invested about a year and half ago. They have built a financial news network that is OTT [over-the-top – content delivered over the internet]. The quality of content was under par when they launched 18 months ago, but it has been improving every month and now their content is fantastic. Their fandom is strong and they are on their way to building a large and important media brand. We have seen the same thing in companies like Tastemade, also in our portfolio, and Vox Media. All this is very exciting to me.
The flipside is that the barrier to entry has never been so low, bringing about intense competition. Even though audiences are easier to reach today, the businesses are not as easy to scale. The key lies in superior management team – for example, Cheddar is headed by Jon Steinberg, who was president of BuzzFeed and a tenacious entrepreneur, also people like Larry Fitzgibbon, who helped build Demand Media, or Jim Bankoff at Vox. Such people are focusing on building brands and extensive fandoms, which we think can serve as a differentiator of the business, even if you have copycats that come along.
If the barrier to entry is so low, does that often mean lower returns or does the branding help solve that problem?
Generally speaking yes. I think original video content is not a great place to generate huge returns, since competition is very intense and much of the content is easy to substitute. That is not true where you have a strong brand and large fandom in sub-categories where the barrier to entry is circumstantially slightly higher.
We invested in Cheddar because we thought the barrier was higher than in other categories. They started in business news, they broadcast live from the New York Stock Exchange eight hours a day. To be able to do that, you have to book dozens of guests that are C-suite calibre or politicians. A newcomer cannot just start from scratch and get there the way they can. In addition, the emerging fan base and loyalty that has resulted makes it unlikely that there would be a meaningful shift even if someone did copy them.
What is the most recent deal that you have done and you would like to talk about?
One company I am really passionate about is Zola, a wedding registry business. They offer couples fantastic tools to manage the whole process – from guest lists to registering for products at a place like Macy’s. It is a service that consumers love, but what I think is interesting, from a media perspective, is that there are a number of ways to create a moat around a business. When you start from scratch in a large category with a nascent brand, it is important to build your way up, create awareness and drive media exposure. We started working with emerging e-commerce companies like Zola to help them build awareness.
How do you balance strategic and financial considerations when evaluating an investment opportunity?
In the late 1990s, Julian Brodsky realised that strong financial returns are a great proxy and probably a leading indicator for strategic relevance to Comcast, so he launched our corporate venture arm, originally called Comcast Interactive Capital. We still follow that proxy today.
Rather than trying to find what may be strategically important to us at any given time, we take a slightly different approach. We consider companies in a variety of sectors with a focus on strong financial returns. We benchmark ourselves against traditional venture funds and try to generate returns that are at least as good. The belief is that if we generate a return, the companies we will have invested in could be important companies and Comcast may find them strategically relevant, potentially leading to fruitful commercial partnerships.
In reality, sometimes commercial partnerships are struck before an investment, sometimes in parallel with our commitments and sometimes many years afterwards, as certain companies need time to mature and become relevant to Comcast’s core business.
Comcast Ventures’ criteria are often summarised as “idea, technology, team”. In an ideal investment case, what would make an idea great, a technology promising and disruptive, and what makes a team great?
First and foremost, we are focused on backing superior teams. A great team can stem from deep domain expertise or other factors depending on the company and the area we are looking at. For instance, we invest in areas like communications equipment, which is capital intensive, with a well-defined ecosystem, where domain expertise comes at a premium. Someone who has been in the industry and has that credibility is quite valuable.
However, sometimes the opposite is true. In digital media, it is not about the depth of expertise but about looking at a problem from a fresh perspective. In either case, we seek to back teams that can inspire and motivate prospective investors to invest, excellent candidates to join, partners to want to do business with them. A CEO or a founding team who has shown an ability to motivate stakeholders to stand behind a vision is something critical to success.
We also look at evidence that the founder or the team can persevere through challenging times. Every company I have invested in has been besieged by challenges or has gone through near-death experiences. That is a trait we value highly.
What type of resources and expertise do portfolio companies receive from your corporate parent?
In addition to a number of operational resources across Comcast NBCUniversal, Comcast Ventures recently launched a program called Accelerate, which is focused on helping portfolio companies with customer acquisition by leveraging our TV assets. We have a number of active companies in the program, including Zola, travel and luggage business Away, online dollar-store experience Hollar, personal price protection bot Earny, women’s hair colour subscription service Madison Reed, and KiwiCo, an e-commerce site focused on activities for kids. We support the entire process from creative development to media planning, measurement and optimisation.
Comcast Ventures has also had notable successful exits, such as Dollar Shave Club and Icontrol. For how long do you look to keep a stake in a company before exiting?
One of the big differences we have from an institutional fund is the fact that we have only one limited partner – Comcast – that is an extremely healthy company and has been very committed to venture investing for almost 20 years. The investment horizon is therefore very flexible in our case. If there is an opportunity which requires patience and support longer than a traditional fund would be willing to give, we are happy to do that. It is great when we can drive large financial outcomes sooner – who wouldn’t prefer that – but we do not have those artificial pressures to show gains early in the fund’s life that other institutional investors feel. As long as we believe the investment thesis is intact and the management team of a company is great, we are patient and willing to support it.
