Roku leaps ahead with $45M in new funding

Today, the TV freedom fighters of Roku closed a $45 million deal. The money came not from Silicon Valley hotshots but from a carefully selected string of strategic investors in media and entertainment.

This round’s investors include News Corp. (parent company of Fox) and BSkyB (that’s British Sky Broadcasting), among other unnamed partners. Previous Roku venture investors Menlo Ventures and Globespan Capital Partners also joined the round.

“The investment is important to us, because there’s also a commercial deal with each of the strategic investors,” said Roku CEO Anthony Wood in a phone conversation with VentureBeat this evening.

The exec told us the new money would be used primarily for an advertising/marketing blitz, akin to last year’s big holiday push, as well as for expanding Roku’s services and continuing research and development activities.

John Miller from News Corp will additionally be joining the Roku board.

“We’ve had two great quarters this year,” Wood said. “Toward the beginning of the year, we passed 3 million boxes sold. Q1 and Q2, we beat our internal budgets quite handily. The streaming stick [the company’s new USB-sized device that connects smart TVs to its content network] will start to ship this December.”

All in all, Wood concluded, the business’ fundamentals are solid.

And on the content side, he said, “We’re adding more than one new channel every day.” This is possible because, as today’s new strategic investments show, content creators are stepping up to the plate, as well.

“Generally, there’s this big shift of content moving more and more to the Internet and premium TV becoming mainstream,” said Wood. “For us, a big part of this partnership is credibility with the entertainment industry… making them comfortable with moving content to the Internet. We want to keep that momentum moving.”

For example, he said, Roku first started working with News Corp last year, rolling out three channels for the company’s various brands. “They were very happy, and they want to bring more content to our platform,” Wood said.

Other entities are getting onboard in other ways. “Dish has dropped AMC from their lineup,” said Wood, “and if you call their customer care line … they send you a free Roku player and some credit so you can buy it on Amazon. It’s definitely part of the mix now. The Internet is changing the dynamics of those negotiations.”

But this shift has come slowly and has cost all parties involved, from studio execs to couch potatoes, a certain amount of pain and suffering. “There’s a huge amount of money in content distribution,” said Wood. “Companies aren’t sure how the Internet will change their economics.”

But even though Roku and its ilk are without question disrupting traditional TV, Wood sees his own company as disrupting in a way that doesn’t rock the boat enough to drown key partners.

“We’ve had a strategy from the beginning to try to have excellent relationships with [entertainment companies],” he said. “A lot of tech startups are about trying to change the business models of industries, like Boxee or BitTorrent. … When Google started with YouTube, there was a lot of pirated content.”

Obviously, he said, “Entertainment companies don’t like that, but for tech companies, it’s part of what drives their business.” Still, Wood contends, “That’s just not productive in terms of building a real business. Real businesses have partnerships; it’s rare to see them be successful while being adversarial.”

We finished our chat by asking if Roku, which still operates at a loss due to its aggressive growth, will be taking any more funding in the near future. “As far as we can tell $45M is enough to sustain us for a long, long time,” Wood said.

Roku was founded in 2002 and has taken a total of $67.4 million in funding to date. The company is based in Saratoga, Calif., pretty near Cupertino in the Bay Area.