Six-year-old US-based technology media company GigaOm found itself with a second veteran media company as a backer after a spot of deal-making last week. The news provider snapped up PaidContent, another media company, from UK-based Guardian Media Group. The deal marks a classic marriage of old and new, which is so common in corporate venturing.
It sees the Guardian keep a minority stake and have an observer seat on GigaOm’s board. The newspaper group which stretches back to the 19th century (from its merger with the Manchester Evening News), is taking share ownership in GigaOm as part of the deal alongside the corporate venturing unit of Reed Elsevier, which also has its roots in the 1800s.
Reed Elsevier Ventures led a $6m round for GigaOm last year, which news provider TechCrunch said valued the portfolio company at $40m.
GigaOm, which is also backed by venture capital firms True Ventures and Alloy Ventures, appears to be a potentially disruptive investment for old-media businesses.
Similar to News Corporation’s purchase-and-majority-sale of MySpace, the latest deal is a swift about-turn by the Guardian, which had bought PaidContent in 2008 for £4m ($6.3m).
It appears the Guardian thinks it can make more of a return from its investment in the media company by sitting in a minority, corporate venturing style position, than in ownership.
Kevin Brown, a partner at Reed Elsevier Ventures and who is on GigaOm’s board, said: "A lot of the rationale for buying PaidContent was that it has a strong, complementary European presence.
Everyone in technology in California knows Om Malik [GigaOm’s founder] and GigaOm, yet PaidContent has a more visible European presence. Everyone also believes GigaOm is a very attractive growth story. From the Guardian’s point of view doing the deal with stock rather than cash allows them to ride the upside."
The deal involved some interaction between Reed Elsevier and the Guardian, as well as the Silicon Valley company. Brown added: "I did meet with the Guardian a few times about the deal, although the connection came from several places. It was a pretty obvious tie-up when it became clear that it was something that the Guardian was open to – there are not many places with a stronger fit than GigaOm."
GigaOm is pleased to have secured two sizeable media companies as backers. Paul Walborsky, chief executive of GigaOm, said: "Reed Elsevier has a very interesting exhibitions business, Reed Exhibitions, and we are doing our first event in Europe in Amsterdam this year, while the Guardian, under the leadership of Andrew Miller, its chief executive, is really embracing technology and experimenting with new platforms."
But, as ever, in corporate venturing it will be interesting to see who learns and gains more from this marriage of old and new.