VentureBeat

It’s official: Maven Networks, a video platform services provider, has sold to Yahoo for around $160 million. I covered the deal in some detail, when news of it leaked a couple of weeks ago.

Maven, which provides video hosting and video ad distribution software to large media companies, had some high-profile investors, including Accel Partners‘ Jim Breyer, who also is a board member and large investor in Facebook, Walmart Stores, Inc., and Marvel Entertainment. I spoke with Breyer this morning to get some context on how Maven fits in with Yahoo, as well as his views on the larger opportunities in the online video market — and Facebook’s own monetization efforts around video.

Accel has been investing in video for close to 20 years, including Macromedia (maker of the Flash online video-playing technology, bought by Adobe), Real Networks, and others. Current investments include user-generated video-sharing site MetaCafe, peer-to-peer file-sharing service BitTorrent and Maven rival Brightcove where Jim also is on the board.

VentureBeat: The word on the street is that many venture-backed online video startups are struggling to monetize, even as their hosting and bandwidth costs eat up their investment dollars. How are online video companies going to turn into big — and profitable — businesses?

Jim Breyer: Monetization is still being defined, and that’s one of the attractions of online video, from an investment standpoint. Nobody has figured out a strong video monetization strategy while seamlessly using the web environment. There’s a lot of experimentation going on, and I expect YouTube to break new ground in terms of how it might work.

The clearest monetization for now, and the most interesting, is happening with technology enablers to major content and advertising companies. Maven and Brightcove are providing hosting and advertising services to these companies, and have fast-growing revenue streams — and they have defensible technology.

There’s no doubt that consumer-facing video sites need to monetize, and that this part of the video market has been overfunded [Breyer notes that consumer-facing video site MetaCafe, a competitor to market leader YouTube, has gained significant traction, especially in Europe].

The adoption prerequisites are in place… standardized video-playing technology like Flash, lower hardware and hosting costs, bandwidth ubiquity, etc. These prerequisites will continue to enable widespread adoption, and new niches will emerge. We expect to do more investments in video companies this coming year.

VB: Maven faces many competitors, including Accel-backed Brightcove — what stands out about it?

JB: Maven, specifically, has developed a nice set of hosted video service technologies, that are defensible, that sit at the intersection of video hosting and distribution. There are a significant number of companies that have wanted to deploy their own video and also pursue a hosted service model. I expect Maven to give Yahoo significant momentum in offering video services, including hosted video and advertising services for Maven clients.

[Maven clients include Fox News, Gannett, Hearst, Sony BMG, Univision, TV Guide, The Financial Times and a long list of other big-media clients. Yahoo plans to pair Maven with its existing video services and ad sales team. More here.]

VB: What opportunities do you see between online video and social networks like Facebook. Example: Will Facebook introduce its own video ad network for video applications on the site?

JB: Video will continue to become more fundamental to social networks, as we’ve seen with the popularity of Facebook’s video-sharing service. Much of our brainstorming at Facebook is in building relationships with third-party application developers — applications that enable video-sharing within Facebook. Through my partners at Accel and through our work on the Facebook Fund investment committee [a fund comprised of Facebook and its venture backers, that invests in promising ideas for applications, our coverage], we are seeing a number of small startups and entrepreneurs working on video-related facebook platform ideas.

Over the long-term, we’ll absolutely have a variety of video ad networks on Facebook — for now, it’s very much about building deep relationships with small video publishers that build engaging content on top of the facebook platform.

Etsy, a site for buying and selling hand-made crafts, has raised $27 million in a round led by Accel Partners, with Accel’s Jim Breyer joining the company’s board of directors.

Think eBay’s e-commerce site, but for arts and crafts, and also more tastefully designed. Etsy’s crafts range from handmade furniture to bracelets (sample below).

The vision behind the company is that it can help small-time craftspeople find customers and make a living, while reducing society’s reliance on mass-produced consumer goods. “We believe that the world cannot keep consuming the way it does now, and that buying handmade is part of the solution,” founder Rob Kalin writes in this post about the funding, and the company’s future plans.

Etsy charges sellers a $0.02 listing fee per item and 3.5 percent commission on any sale, as well as letting sellers pay a small fee to showcase their goods in prominent locations on the site. It is making money and at break-even.

The site also offers a feedback system, a Paypal payment option, online forums, online sessions on craftsmaking aired live from the company’s headquarters, and even street teams that help reach out to local users.

It has around 650,000 registered members, including 120,000 craft sellers, and lists nearly 1 million items. Most site visitors are in the US, Europe and down under, by the looks of this map (pictured) on the company’s site, although it has sellers in more than 127 countries. The site had more than a million unique visitors in December, according to Comscore.

Previous investors Union Square Ventures and Hubert Burda Media joined in this round. The company received angel funding from Flickr co-founder Catarina Fake and other individuals. Previous funding totaled $5 million. Note: Investors have apparently been drooling over the company for years.

Accel Partners, the Silicon Valley firm that backed Facebook two years ago and expects to make a major profit from that company, has raised a new $520 million fund.

The new fund comes at a time of considerable momentum for the firm. Over the past year, ten of its companies have been bought or gone public each boasting a value of $100 million more.

The cash gives the company fresh “gunpowder” to invest in new companies, now that it is close to finishing investing from its previous fund.

For the past few years, venture capital firms Sequoia and Kleiner Perkins have shared the spotlight as the valley’s most successful, after their investment in Google – which yielded one of the most phenomenal investments ever. However, with its past year’s results, plus its investment in Facebook, Accel shows that it ranks as a top-tier player.

The new fund is Accel’s tenth, and follows a $400 million fund it had raised in 2004. That fund, which includes Facebook,

The new fund includes new partners such as Richard Wong, who is focused on mobile investments, and Andrew Braccia, focused on Internet companies. Kevin Efrusy (left top), who is credited with having sourced Accel’s investment in Facebook, is also a full partner, having been promoted two years ago. He has continued to manage that investment along with partner Jim Breyer (left bottom), who made a personal investment alongside the firm’s investment.

The firm’s four IPO companies are Riverbed, Comscore, MetroPCS and Infinera. MetroPCS, which provides mobile phone services, was the largest U.S. technology IPO in this year, raising $1.15 billion. Accel shows how patience can pay off. It was the investor in the first round of financing for each of these companies, meaning that it invested at when the private value of the companies were low, and so generally got a large ownership stake in the companies. In the case of MetroPCS, it backed the company for 12 years, sticking with it even during the bleak years of 2002 and 2003 when many other venture groups pulled out or shut down.

Accel’s companies that got acquired are Airgo, Brassring, Reactivity, Acopia, Xensource, and Zimbra.

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There’s a remarkable revision occurring in Silicon Valley, with the old business lore being edited so that Microsoft suddenly emerges as a friend — even after decades of being outcast as an aggressive bully.

Microsoft has long been known for its predatory behavior: It would strike a partnership with your start-up, to get an inside look at your technology — and then build an in-house clone to drive you out of business (Read Jerry Kaplan’s book Startup: A Silicon Valley Adventure, which contains staple description of Microsoft tactics ). There was the Netscape saga, when Microsoft scrambled to to snuff out that early browser by bundling its own Internet Explorer browser into its software — choking Netscape into eventual insignificance.

But now that Google has emerged as the all-pervasive menace, Microsoft has been transformed into an aging, less threatening knight, albeit with pockets and interests deep enough to help you against the Google onslaught. Microsoft’s alliance with Facebook — which calls for Microsoft to invest $240 in that company — has capped the transition.

Suddenly, those old stories of bad Microsoft are being labeled as so much fiction. Look at what Jim Breyer, venture capitalist at Accel Partners, and board member of Facebook, has to say: “Many of the stories of Microsoft putting start-ups out of business, historically, were simply false,” he tells Silicon Valley’s newspaper, the Mercury News in today’s edition. The stories were overblown — some of them myths, even lies — or excuses made up by various valley entrepreneurs such as Kaplan for why mediocre businesses never were able to succeed on their own. That is how it is being recast.

Not mentioned, too, is how Accel’s Breyer is partial. Microsoft has been an investor in Accel Partners (see Breyer’s account of why he brought Microsoft in as an investor). Microsoft, however, was not an investor in the specific Accel fund that invested in Facebook, so the software giant did not already own an interest in Facebook from Accel’s investment in Facebook a few years ago. Microsoft announced this week it had bought a 1.6 percent stake in Facebook, which despite the news it generated, is tiny — again, not making Microsoft that much of a threat.

Another investor in Facebook, The Founders Fund, also had reasons to favor taking money from the Borg in Redmond, Wash. The Founders Fund is run by a group of former PayPal executives, foremost among them by Peter Thiel, former PayPal CEO. They’ve watched on as Google has tried to attack PayPal with its own Google Checkout. There’s also Thiel’s competitive positioning. The Founders Fund is trying to emerge as a leading Silicon Valley venture firm, at a time when older firms Sequoia and Kleiner Perkins lay claim to the mantle of best venture capital firms, because of their backing of Google. There’s bad blood, too, between Thiel and his partners (Sean Parker, among them), on one hand, and Sequoia on the other, stemming from former skirmishes at PayPal and Plaxo.

Finally, it’s easy to forget all the antitrust lawsuits filed by Sun and others. Since then, Microsoft has settled left and right. This week, it dropped its legal battle with European Union regulators, agreeing to share technical information with rivals and reduce the royalties it charges.

Dan’l Lewin, who became Microsoft’s “ambassador” to the region in 2001, said making peace with Silicon Valley was part of the corporate strategy. “We normalized relationships with Sun. That was a milestone,” he tells the Merc, which summarizes Microsoft’s multiple moves to assuage the valley. Those include the building of a Microsoft campus here, Bill Gates’ giving millions to the United Way Silicon Valley and his donation, through his foundation, of $15 million, to the Computer History Museum in Mountain View.

So somehow, when we read of Microsoft’s great earnings performance yesterday, in which it earned $1.2 billion more revenue than expected, and boosted its margins — sending its stock up to $35.50, giving it a value at heights not seen since 2001 — it’s not with animosity anymore, but relief.

There’s a notable piece at Boston.com today about how Battery Ventures partner Scott Tobin (pictured left) decided not to invest in Facebook when Mark Zuckerberg pitched him three years ago in Boston.

Tension between the firm’s East and West Coast offices contributed to the firm’s rejection of the Facebook founder (Battery, by the way, has since been quite open about the division, and says it has cleared things up). However, Facebook has become a billion dollar company, on paper (of VC termsheets) at least. So when Boston-based Tobin says his pass “may turn out to have been a mistake,” it’s a huge understatement.

We’d agree with Accel’s Jim Breyer, who also comments in the piece.

Breyer, who ended up backing Zuckerberg, argues Facebook became as big as it did only by coming out to the valley. Breyer cites the execs from area companies like Yahoo, eBay and Google who have helped Facebook. Also, early employee Sean Parker, also out here, helped Zuckerberg navigate the VC world, and cut some good deals.

Tobin responds to Breyer’s comments, saying: “Folks in the Valley are incredibly geo-centric to a point of snobbery.” That’s not quite fair. Breyer has been on the record often over the years (see our coverage), saying the Valleyites were too self-centric during the last boom, “smoking their own exhaust fumes.” However, that’s since changed: Silicon Valley’s Accel has moved to China and Europe, as have other valley firms. In fact, Battery, led by its East Coast office, has been relatively slow to move abroad. It’s hard to argue the West is more self-centric or snobby than the East Coast.

The story also notes that early Facebook investor Peter Thiel invested $500,000 of his own money, in return for 10 percent of the company (valuing the company at $5M). That’s a steal, but it doesn’t match up with the rest of the story, which says Zuckerberg was demanding better terms (valuing the company at $15M when he was back in Boston).