Steamboat Ventures, the corporate venturing division of media group Walt Disney, has joined the US government’s venture capital unit in funding Elemental Technologies, a US-based provider of video processing technology, and made a quick exit from its investment in social gaming group Playdom.
Elemental has raised $7.5m in its series B round. Steamboat Ventures led the round, and was joined by repeat VC investors General Catalyst and Voyager Capital.
Scott Hilleboe, a managing director at Steamboat, has joined Elemental’s board and said: "Steamboat clearly recognises the opportunities and challenges created by consumers’ insatiable appetite for video.
"Elemental’s disruptive video processing solutions are poised to change expectations regarding content delivery to any device or screen with exceptional video quality and unmatched price-to-performance. The company’s technology allows a publish once, display anywhere model, supporting the broadest distribution of rich media."
In-Q-Tel, the independent strategic investment firm that identifies innovative technology solutions to support the mission of the Central Intelligence Agency and the broader US intelligence organizations, backed Elemental in February last year, seven months after its $7.1m series A round from the two VCs.
Elemental uses parallel processing technology to convert video from one format to another for viewing on portable devices.
The company was co-founded by Sam Blackman, Jesse Rosenzweig and Brian Lewis, who previously worked at venture-backed Pixelworks, a semiconductor company that floated in 2000.
The Elemental investment was made as Disney confirmed it would buy Playdom for $563.2m and a $200m earn-out just weeks after Steamboat Ventures had backed social game developer’s $76m series A round with a $33m investment.
This A round valued Playdom at about $345m, according to analysis at NextUp Research, which had estimated it to be worth $2.04 to $2.34 per share.
Robert Iger, executive president of Disney, said: "This acquisition furthers our strategy of allocating capital to high-growth businesses that can benefit from our many characters, stories and brands, delivering them in a creatively compelling way to a new generation of fans on the platforms they prefer."
By acquiring Playdom, Disney will boost its digital gaming portfolio and provide consumers new ways to interact with the company on social networks, such as Facebook and MySpace.
In an interview with news provider PEHub (click on link), David Cowan of Bessemer Venture Partners, which became a Playdom investor last month alongside Steamboat, was asked by interviewer Daniel Primack:
"Playdom reports fewer monthly numbers than did Playfish at the time of its acquisition, but is being acquired at a price that’s around 90% higher. Why?"
Cowan: "I think there are three answers here. First, you always have to look at the specific acquiror and the strategic fit and value of the company being acquired. I don’t know the specifics of the valuation that went into Playfish, but do know that Disney expects a lot of synergies as it brings the Playdom team into other Disney properties.
"Second, number of users is only one metric. I think that Playdom’s revenues were significantly more at the time of acquisition. Third, Wild Ones [a Playdom game] is totally, totally awesome."