The 125-year old Hearst Corporation, founded by fabled businessman William Randolph Hearst, has been a stalwart of corporate venturing for nearly two decades. As an early adopter of corporate venturing, it can lay claim to starting its investment programme as one of five corporate investors in Netscape, the US-based search engine which is widely credited as kicking off the dot.com boom due to the success of its initial public offering in 1995.
Kenneth Bronfin, of Hearst’s corporate venturing unit Hearst Ventures, said: “Our first investment was Netscape, and that was a great place to start. At the time, the founders of Netscape had the insight to reach out to a number of large, progressive media companies to encourage them to publish on the internet. We followed their advice, got started on our web efforts around the company, and also made a strategic investment in the company.”
Bronfin said the Netscape deal was brokered by Hearst’s then chief executive (CEO), Frank Bennack. The corporate venturing link to the top of the company lasts to this day. Bronfin said: “We have an investment committee. However, our CEO ultimately reviews and approves all investments. We have four investment leaders – me, Scott English, Darcy Frisch and George Kliavkoff.”
Besides Netscape, the company has had other notable successes. Bronfin added: “We invested in video on the internet in the early days. Our first investment in the space was Broadcast.com, with Mark Cuban. This became a valuable company, ultimately acquired by Yahoo. Another example, we were an early investor in Brightcove, which has built itself into a terrific company serving the publishing community.”
The company has also backed Roku, an over-the-top television company, which is growing in popularity. “Roku has a very unique perspective on the over-the-top television sector. While there are many ways for consumers to stream media to televisions, Roku is the media delivery platform that consumers use most often, with the best technology and the largest collection of content. We expect to learn a lot from each other.”
The company does corporate venturing to stay abreast of the changes in the sector. Bronfin said: “Our corporate venturing provides us with perspective and valuable insights. While it is important to monitor developments in the industry through industry consultants and the media, we believe it is far more valuable for us to be deeply involved in the sector – hands on, spending time with entrepreneurs and investing in this sector.”
Its investment approach by sector has remained largely consistent. Bronfin said: “I would say that our sectors of interest have essentially remained the same. We are focused on companies with the potential to change the media landscape.”
He said the company had been able to invest in directly adjacent fields to its main businesses – such as non-pure media plays like Roku – as well as areas where the corporation was less active, such as music, where it had backed companies such as XM Satellite Radio and Pandora.
The company has also maintained a consistent strategy around the size of deals. Bronfin added: “Part of the secret of our success has been sticking to our knitting. We have maintained and fine-tuned our strategy throughout the years. For example, we have not gone, like some, for seed-stage deals. Our target initial investment is around $5m, although we have a great deal of flexibility depending on the type, size or stage of deal.”
Yet the business is broadening its geographical focus. Bronfin said: “We have expanded our focus geographically and are actively investing, directly and with our partners, in China. Having invested significantly in China, we are now spending more time looking at other parts of the world – Asia, South America and possibly Russia – although we have not pulled the trigger on any of those yet.”
Bronfin also said Hearst Ventures was looking at investments in ecommerce. “All consumer media companies are, in one way or another, in the path of commerce activities – bringing together consumers and merchants. It is logical that media companies want to expand their reach into the commerce business, yet it has been a challenge for most of them. Many companies have experimented building commerce capabilities into their own sites, or developing standalone commerce businesses. However, I am not aware of any truly significant successes.”
He added: “We are now seeing another generation of innovative business models around commerce. We will seek to invest in these businesses to expand our own strategic insights and perhaps tie them to operating relationships with our media properties. Likewise some of these commerce businesses are getting into the media business and are surrounding their commerce activities with rich editorial content.”