Todd Dagres Takes A Chance On Media Tech
Dow Jones Newswires, March 01, 2006
Todd Dagres Takes A Chance On Media Tech. With His Spark Capital, Ex-Battery Ventures GP Bets On Power Of Internet.
By Russ Garland
Todd Dagres confessed that his biggest mistake as a venture capitalist was getting carried away during the late 1990s technology bubble. “Thinking that pigs could fly for a brief period of time…I lost a bit of discipline in what a really solid business is,” he recalls.
Back then Dagres was a general partner at Battery Ventures. When the firm downsized in 2004 in response to the tech bust, he left and started two film production companies. But last year he returned to the venture business and cofounded Spark Capital. He wanted an investment vehicle devoted to companies at the confluence of media, entertainment and technology. And, he said, “I had a real desire to be an entrepreneur, and starting your own venture fund is basically an entrepreneurial endeavor.”
These days, Dagres’ new Cambridge, Mass.-based venture firm is generating a lot of buzz because of its media and entertainment focus. “Content will find its way to a hard drive attached to a big-screen TV,” Dagres said. “That’s going to change everything.”
Dagres said his original inspiration for Spark was Pixar Animation Studios because the filmmaker, which Walt Disney Co. is acquiring, bridged the gap between media and technology. That gives it an advantage in the industry that no one could match. “It was an example of things to come,” he said.
Another influence was his work with Broadbus Technologies Inc., Boxborough, Mass., which sells video-on-demand servers to cable television companies. Dagres and Spark co-founder Santo Politi, then a partner with Charles River Ventures, helped start the company. Battery and Charles River were among the start-up’s initial investors in 2002.
Content distribution via the Internet is something the 45-year-old Dagres knows about. Akamai Technologies Inc. was one of his big wins during his eight years at Battery. The company, which went public in 1999, a little more than a year after its start, at a pre-money valuation of more than $2 billion, developed technology to speed delivery of Web pages by storing them on servers near users.
Dagres is betting that one day in the not-to-distant future, all content, including music and video, will be distributed via the Internet on-demand, making DVDs and broadcast television largely irrelevant. A few cable and telephone companies will dominate the landscape. “Everything eventually is going to be encapsulated in Internet protocol,” Dagres said. “Those who can deliver packets will be around for a long time.” Big-screen TVs won’t be the only destination of those packets, he said. Little cellphone screens will have a profound effect as well.
Since closing its $260 million debut fund last October, Spark has made three investments, only one of which has been announced. That was in an $8 million Series B round for thePlatform Inc., a Seattle provider of software for digital content distribution, especially video, to computers and mobile phones. Customers include ABC News and Starz Entertainment Group’s Vongo service. Spark led the round, which closed in December with participation from prior investor Generation Partners, a small private equity firm based in Greenwich, Conn.
Spark prefers to provide companies with their first institutional money, as was the case in its other two deals. One, a first round, is for a company involved with user-generated content, Dagres said. The other, he said, is a gaming company that Spark is incubating.
Dagres has had some notable failures as an investor. He was on the boards of two communications companies that went belly-up after raising more than $100 million apiece in venture capital – Convergent Networks Inc. and Equipe Communications Corp.
Nonetheless, he says that like great baseball hitters, VCs have to avoid being too cautious: “You’ve got to give yourself a chance to swing for the fences.”
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