SA heavyweight driving the WWW – Roelof Botha
You might know this already. We didn’t. A bunch of friends were chatting the other day at a table in Melville and we started talking about the phenomenon that is YouTube and the fact that it was sold for $1.65 billion after running for less than two years, one of our friends mentioned that one of the owners of YouTube was not only a South African but also the son of Pik Botha. We of course thou…
ght this was a joke, as the person telling this story just happened to be a Botha too (you know who you are) and for some reason it sounded ridiculous that a South African would be behind one of the biggest deals in the history of the internet business. Plus this guy has that kind of sense of humour. Ridiculous. Until we went to Wikipedia to look up Roelof. See here. And here for YouTube’s story.
No Jokes. Roelof Botha is indeed behind not only YouTube but PayPal too! But he is the GRANDSON of Pik Botha. He is part of an exciting and dynamic venture capital company Sequoia Capital based in Silicon Valley in the States and our boy is kicking some serious internet touches. Vat hom Fluffie!!!
“Roelof Botha focuses on services and software investments. Prior to joining Sequoia Capital in 2003, Roelof served as the Chief Financial Officer of PayPal (EBAY). Earlier, he worked as a management consultant for McKinsey & Company. Roelof is a certified actuary (Fellow of the Faculty of Actuaries), and has a BS in Actuarial Science, Economics, and Statistics from the University of Cape Town and an MBA from the Stanford Graduate School of Business. ”
Sequoia looks like the kind of company that is truly global nd working in developing markets – bravo – with operations in Israel, India and China – let’s face it, Roelof seems like a hell of a creative guy who is willing to take risks and believe in creativity and wild and wonderful ideas.
The best part is – his company wants to hear your business plan. So brothers and sisters, let him know what you are thinking – you never know. Check it out here.
To Roelof, thanks for making us proud and for flying the South African flag way up high. Much Respect You Rock! Represent.
Here’s the info on the deal:
SAN FRANCISCO – Even in Silicon Valley, it is rare for so much money to be made so fast – and by so few.
The biggest winners in the $1.65 billion acquisition of YouTube by Google are the YouTube founders, Chad Hurley and Steve Chen, who have parlayed their stakes in the 19- month-old start-up company into Google shares that are likely to be worth tens of millions of dollars. YouTube’s roughly 60 employees no doubt are celebrating as well.
But only one venture capital firm got in on what has turned out to be one of the hottest Internet deals since Google went public in 2004: Sequoia Capital.
Sequoia, which is among the most successful venture firms in Silicon Valley, invested $11.5 million in YouTube between November and April. It may be walking away with more than 43 times that amount. Its stake in YouTube has been estimated at roughly 30 percent, which would give it a value of $495 million.
That kind of payday, especially for an investment less than 12 months old, is unusual even in Silicon Valley. But it is not likely to rank among Sequoia’s biggest. The firm, which was founded in 1972, has backed a roster of technology superstars including Apple Computer, Cisco Systems, Oracle, Yahoo and Google itself.
Sequoia’s go-it-alone investment in YouTube represents the kind of aggressive move for which Sequoia is known. A more traditional and safer approach would have been to share the risk and rewards with other investors. That is especially true with an early-stage investment in a company that since its inception has faced the prospect of costly lawsuits over the copyrighted material that peppers the site.
“They had an absurdly high level of confidence with what they were doing,” said Paul Kedrosky, a venture capitalist and author of the blog Infectious Greed.
Sequoia did not return calls seeking comment.
The connection between Sequoia and YouTube can be traced back to PayPal, where Chen and Hurley had worked. After PayPal was bought by eBay, the two men hit upon the idea of starting a site that would help users exchange video files.
In the summer of 2005, the pair showed their site to another PayPal alumnus, Roelof Botha. Botha, who had been chief financial officer at PayPal, was by then a partner at Sequoia. In November, he agreed to invest $3.5 million in YouTube. Five months later, the firm put $8 million more into the site.
“It wouldn’t be surprising” if Sequoia owned 30 percent, said Michael Kwatinetz, a founding general partner at Azure Capital Partners.
The fact that the man who is perhaps Sequoia’s best-known partner, Michael Moritz, sits on the board of Google could have given the search giant more insight into the legal risks associated with YouTube, and therefore more confidence in pursuing a deal, Kedrosky, the venture capitalist, said.
The deal between two firms that share an investor is right out of the playbook of Kleiner Perkins Caufield & Byers, the venture firm that imported from Japan the notion of a keiretsu, or network of companies with interlocking relationships, Kedrosky said.
“The whole idea of the keiretsu was friends selling to friends,” he said. “The model worked gangbusters for Kleiner.”
Venture firms like Sequoia typically raise funds from large institutional investors like pension funds and university endowments. They then invest those funds in promising start-ups, although they often end up with more misses than hits. At successful venture firms – and Sequoia ranks among the most successful – hits on the scale of YouTube more than make up for the misses.
A venture firm makes money only when the start-ups it has funded are sold or go public.
It then splits the profit among its investors after taking a share, which can be between 20 percent and 25 percent.
The YouTube deal was the first major acquisition in the booming Internet video sector. In a conference call, Eric Schmidt, the Google chief executive, called it “one of many investments that Google will be making to make sure that video has its proper place in people’s online lifestyle on the Internet worldwide.”
A spokesman for Google said Schmidt was not necessarily talking about more acquisitions. But the prospect of more deals has other investors and entrepreneurs salivating.
“It’s good to hope,” said Peter Clemente, chief marketing officer of the Denver-based company ManiaTV, which produces live video programming for the Internet. ManiaTV is backed by Benchmark Capital, Intel Capital and Centennial Partners.
“This is obviously the talk of the sector,” said Mike Hirshland, a partner at Polaris Venture Partners in Boston, which has invested $11 million in Heavy.com, an Internet video site aimed at men between 18 and 34 that was founded in 1999.
The success of YouTube, as well as of MySpace, the No. 2 video site on the Internet, has spawned a new generation of competitors, said Josh Felser, president of Grouper, a video sharing site that Sony Pictures Entertainment bought this year for $65 million.
“There are hundreds,” Felser said of the emerging sites focused on the creation and sharing of videos.
Katie Hafner contributed reporting.
SAN FRANCISCO Even in Silicon Valley, it is rare for so much money to be made so fast – and by so few.
The biggest winners in the $1.65 billion acquisition of YouTube by Google are the YouTube founders, Chad Hurley and Steve Chen, who have parlayed their stakes in the 19- month-old start-up company into Google shares that are likely to be worth tens of millions of dollars. YouTube’s roughly 60 employees no doubt are celebrating as well.
But only one venture capital firm got in on what has turned out to be one of the hottest Internet deals since Google went public in 2004: Sequoia Capital.
Sequoia, which is among the most successful venture firms in Silicon Valley, invested $11.5 million in YouTube between November and April. It may be walking away with more than 43 times that amount. Its stake in YouTube has been estimated at roughly 30 percent, which would give it a value of $495 million.
That kind of payday, especially for an investment less than 12 months old, is unusual even in Silicon Valley. But it is not likely to rank among Sequoia’s biggest. The firm, which was founded in 1972, has backed a roster of technology superstars including Apple Computer, Cisco Systems, Oracle, Yahoo and Google itself.
Sequoia’s go-it-alone investment in YouTube represents the kind of aggressive move for which Sequoia is known. A more traditional and safer approach would have been to share the risk and rewards with other investors. That is especially true with an early-stage investment in a company that since its inception has faced the prospect of costly lawsuits over the copyrighted material that peppers the site.
“They had an absurdly high level of confidence with what they were doing,” said Paul Kedrosky, a venture capitalist and author of the blog Infectious Greed.
Sequoia did not return calls seeking comment.
The connection between Sequoia and YouTube can be traced back to PayPal, where Chen and Hurley had worked. After PayPal was bought by eBay, the two men hit upon the idea of starting a site that would help users exchange video files.
In the summer of 2005, the pair showed their site to another PayPal alumnus, Roelof Botha. Botha, who had been chief financial officer at PayPal, was by then a partner at Sequoia. In November, he agreed to invest $3.5 million in YouTube. Five months later, the firm put $8 million more into the site.
“It wouldn’t be surprising” if Sequoia owned 30 percent, said Michael Kwatinetz, a founding general partner at Azure Capital Partners.
The fact that the man who is perhaps Sequoia’s best-known partner, Michael Moritz, sits on the board of Google could have given the search giant more insight into the legal risks associated with YouTube, and therefore more confidence in pursuing a deal, Kedrosky, the venture capitalist, said.
The deal between two firms that share an investor is right out of the playbook of Kleiner Perkins Caufield & Byers, the venture firm that imported from Japan the notion of a keiretsu, or network of companies with interlocking relationships, Kedrosky said.
“The whole idea of the keiretsu was friends selling to friends,” he said. “The model worked gangbusters for Kleiner.”
Venture firms like Sequoia typically raise funds from large institutional investors like pension funds and university endowments. They then invest those funds in promising start-ups, although they often end up with more misses than hits. At successful venture firms – and Sequoia ranks among the most successful – hits on the scale of YouTube more than make up for the misses.
A venture firm makes money only when the start-ups it has funded are sold or go public.
It then splits the profit among its investors after taking a share, which can be between 20 percent and 25 percent.
The YouTube deal was the first major acquisition in the booming Internet video sector. In a conference call, Eric Schmidt, the Google chief executive, called it “one of many investments that Google will be making to make sure that video has its proper place in people’s online lifestyle on the Internet worldwide.”
A spokesman for Google said Schmidt was not necessarily talking about more acquisitions. But the prospect of more deals has other investors and entrepreneurs salivating.
“It’s good to hope,” said Peter Clemente, chief marketing officer of the Denver-based company ManiaTV, which produces live video programming for the Internet. ManiaTV is backed by Benchmark Capital, Intel Capital and Centennial Partners.
“This is obviously the talk of the sector,” said Mike Hirshland, a partner at Polaris Venture Partners in Boston, which has invested $11 million in Heavy.com, an Internet video site aimed at men between 18 and 34 that was founded in 1999.
The success of YouTube, as well as of MySpace, the No. 2 video site on the Internet, has spawned a new generation of competitors, said Josh Felser, president of Grouper, a video sharing site that Sony Pictures Entertainment bought this year for $65 million.
“There are hundreds,” Felser said of the emerging sites focused on the creation and sharing of videos.
Katie Hafner contributed reporting.
SAN FRANCISCO Even in Silicon Valley, it is rare for so much money to be made so fast – and by so few.
The biggest winners in the $1.65 billion acquisition of YouTube by Google are the YouTube founders, Chad Hurley and Steve Chen, who have parlayed their stakes in the 19- month-old start-up company into Google shares that are likely to be worth tens of millions of dollars. YouTube’s roughly 60 employees no doubt are celebrating as well.
But only one venture capital firm got in on what has turned out to be one of the hottest Internet deals since Google went public in 2004: Sequoia Capital.
Sequoia, which is among the most successful venture firms in Silicon Valley, invested $11.5 million in YouTube between November and April. It may be walking away with more than 43 times that amount. Its stake in YouTube has been estimated at roughly 30 percent, which would give it a value of $495 million.
That kind of payday, especially for an investment less than 12 months old, is unusual even in Silicon Valley. But it is not likely to rank among Sequoia’s biggest. The firm, which was founded in 1972, has backed a roster of technology superstars including Apple Computer, Cisco Systems, Oracle, Yahoo and Google itself.
Sequoia’s go-it-alone investment in YouTube represents the kind of aggressive move for which Sequoia is known. A more traditional and safer approach would have been to share the risk and rewards with other investors. That is especially true with an early-stage investment in a company that since its inception has faced the prospect of costly lawsuits over the copyrighted material that peppers the site.
“They had an absurdly high level of confidence with what they were doing,” said Paul Kedrosky, a venture capitalist and author of the blog Infectious Greed.
Sequoia did not return calls seeking comment.
The connection between Sequoia and YouTube can be traced back to PayPal, where Chen and Hurley had worked. After PayPal was bought by eBay, the two men hit upon the idea of starting a site that would help users exchange video files.
In the summer of 2005, the pair showed their site to another PayPal alumnus, Roelof Botha. Botha, who had been chief financial officer at PayPal, was by then a partner at Sequoia. In November, he agreed to invest $3.5 million in YouTube. Five months later, the firm put $8 million more into the site.
“It wouldn’t be surprising” if Sequoia owned 30 percent, said Michael Kwatinetz, a founding general partner at Azure Capital Partners.
The fact that the man who is perhaps Sequoia’s best-known partner, Michael Moritz, sits on the board of Google could have given the search giant more insight into the legal risks associated with YouTube, and therefore more confidence in pursuing a deal, Kedrosky, the venture capitalist, said.
The deal between two firms that share an investor is right out of the playbook of Kleiner Perkins Caufield & Byers, the venture firm that imported from Japan the notion of a keiretsu, or network of companies with interlocking relationships, Kedrosky said.
“The whole idea of the keiretsu was friends selling to friends,” he said. “The model worked gangbusters for Kleiner.”
Venture firms like Sequoia typically raise funds from large institutional investors like pension funds and university endowments. They then invest those funds in promising start-ups, although they often end up with more misses than hits. At successful venture firms – and Sequoia ranks among the most successful – hits on the scale of YouTube more than make up for the misses.
A venture firm makes money only when the start-ups it has funded are sold or go public.
It then splits the profit among its investors after taking a share, which can be between 20 percent and 25 percent.
The YouTube deal was the first major acquisition in the booming Internet video sector. In a conference call, Eric Schmidt, the Google chief executive, called it “one of many investments that Google will be making to make sure that video has its proper place in people’s online lifestyle on the Internet worldwide.”
A spokesman for Google said Schmidt was not necessarily talking about more acquisitions. But the prospect of more deals has other investors and entrepreneurs salivating.
“It’s good to hope,” said Peter Clemente, chief marketing officer of the Denver-based company ManiaTV, which produces live video programming for the Internet. ManiaTV is backed by Benchmark Capital, Intel Capital and Centennial Partners.
“This is obviously the talk of the sector,” said Mike Hirshland, a partner at Polaris Venture Partners in Boston, which has invested $11 million in Heavy.com, an Internet video site aimed at men between 18 and 34 that was founded in 1999.
The success of YouTube, as well as of MySpace, the No. 2 video site on the Internet, has spawned a new generation of competitors, said Josh Felser, president of Grouper, a video sharing site that Sony Pictures Entertainment bought this year for $65 million.
“There are hundreds,” Felser said of the emerging sites focused on the creation and sharing of videos.
Katie Hafner contributed reporting.
SAN FRANCISCO Even in Silicon Valley, it is rare for so much money to be made so fast – and by so few.
The biggest winners in the $1.65 billion acquisition of YouTube by Google are the YouTube founders, Chad Hurley and Steve Chen, who have parlayed their stakes in the 19- month-old start-up company into Google shares that are likely to be worth tens of millions of dollars. YouTube’s roughly 60 employees no doubt are celebrating as well.
But only one venture capital firm got in on what has turned out to be one of the hottest Internet deals since Google went public in 2004: Sequoia Capital.
Sequoia, which is among the most successful venture firms in Silicon Valley, invested $11.5 million in YouTube between November and April. It may be walking away with more than 43 times that amount. Its stake in YouTube has been estimated at roughly 30 percent, which would give it a value of $495 million.
That kind of payday, especially for an investment less than 12 months old, is unusual even in Silicon Valley. But it is not likely to rank among Sequoia’s biggest. The firm, which was founded in 1972, has backed a roster of technology superstars including Apple Computer, Cisco Systems, Oracle, Yahoo and Google itself.
Sequoia’s go-it-alone investment in YouTube represents the kind of aggressive move for which Sequoia is known. A more traditional and safer approach would have been to share the risk and rewards with other investors. That is especially true with an early-stage investment in a company that since its inception has faced the prospect of costly lawsuits over the copyrighted material that peppers the site.
“They had an absurdly high level of confidence with what they were doing,” said Paul Kedrosky, a venture capitalist and author of the blog Infectious Greed.
Sequoia did not return calls seeking comment.
The connection between Sequoia and YouTube can be traced back to PayPal, where Chen and Hurley had worked. After PayPal was bought by eBay, the two men hit upon the idea of starting a site that would help users exchange video files.
In the summer of 2005, the pair showed their site to another PayPal alumnus, Roelof Botha. Botha, who had been chief financial officer at PayPal, was by then a partner at Sequoia. In November, he agreed to invest $3.5 million in YouTube. Five months later, the firm put $8 million more into the site.
“It wouldn’t be surprising” if Sequoia owned 30 percent, said Michael Kwatinetz, a founding general partner at Azure Capital Partners.
The fact that the man who is perhaps Sequoia’s best-known partner, Michael Moritz, sits on the board of Google could have given the search giant more insight into the legal risks associated with YouTube, and therefore more confidence in pursuing a deal, Kedrosky, the venture capitalist, said.
The deal between two firms that share an investor is right out of the playbook of Kleiner Perkins Caufield & Byers, the venture firm that imported from Japan the notion of a keiretsu, or network of companies with interlocking relationships, Kedrosky said.
“The whole idea of the keiretsu was friends selling to friends,” he said. “The model worked gangbusters for Kleiner.”
Venture firms like Sequoia typically raise funds from large institutional investors like pension funds and university endowments. They then invest those funds in promising start-ups, although they often end up with more misses than hits. At successful venture firms – and Sequoia ranks among the most successful – hits on the scale of YouTube more than make up for the misses.
A venture firm makes money only when the start-ups it has funded are sold or go public.
It then splits the profit among its investors after taking a share, which can be between 20 percent and 25 percent.
The YouTube deal was the first major acquisition in the booming Internet video sector. In a conference call, Eric Schmidt, the Google chief executive, called it “one of many investments that Google will be making to make sure that video has its proper place in people’s online lifestyle on the Internet worldwide.”
A spokesman for Google said Schmidt was not necessarily talking about more acquisitions. But the prospect of more deals has other investors and entrepreneurs salivating.
“It’s good to hope,” said Peter Clemente, chief marketing officer of the Denver-based company ManiaTV, which produces live video programming for the Internet. ManiaTV is backed by Benchmark Capital, Intel Capital and Centennial Partners.
“This is obviously the talk of the sector,” said Mike Hirshland, a partner at Polaris Venture Partners in Boston, which has invested $11 million in Heavy.com, an Internet video site aimed at men between 18 and 34 that was founded in 1999.
The success of YouTube, as well as of MySpace, the No. 2 video site on the Internet, has spawned a new generation of competitors, said Josh Felser, president of Grouper, a video sharing site that Sony Pictures Entertainment bought this year for $65 million.
“There are hundreds,” Felser said of the emerging sites focused on the creation and sharing of videos.
Katie Hafner contributed reporting.
SAN FRANCISCO Even in Silicon Valley, it is rare for so much money to be made so fast – and by so few.
The biggest winners in the $1.65 billion acquisition of YouTube by Google are the YouTube founders, Chad Hurley and Steve Chen, who have parlayed their stakes in the 19- month-old start-up company into Google shares that are likely to be worth tens of millions of dollars. YouTube’s roughly 60 employees no doubt are celebrating as well.
But only one venture capital firm got in on what has turned out to be one of the hottest Internet deals since Google went public in 2004: Sequoia Capital.
Sequoia, which is among the most successful venture firms in Silicon Valley, invested $11.5 million in YouTube between November and April. It may be walking away with more than 43 times that amount. Its stake in YouTube has been estimated at roughly 30 percent, which would give it a value of $495 million.
That kind of payday, especially for an investment less than 12 months old, is unusual even in Silicon Valley. But it is not likely to rank among Sequoia’s biggest. The firm, which was founded in 1972, has backed a roster of technology superstars including Apple Computer, Cisco Systems, Oracle, Yahoo and Google itself.
Sequoia’s go-it-alone investment in YouTube represents the kind of aggressive move for which Sequoia is known. A more traditional and safer approach would have been to share the risk and rewards with other investors. That is especially true with an early-stage investment in a company that since its inception has faced the prospect of costly lawsuits over the copyrighted material that peppers the site.
“They had an absurdly high level of confidence with what they were doing,” said Paul Kedrosky, a venture capitalist and author of the blog Infectious Greed.
Sequoia did not return calls seeking comment.
The connection between Sequoia and YouTube can be traced back to PayPal, where Chen and Hurley had worked. After PayPal was bought by eBay, the two men hit upon the idea of starting a site that would help users exchange video files.
In the summer of 2005, the pair showed their site to another PayPal alumnus, Roelof Botha. Botha, who had been chief financial officer at PayPal, was by then a partner at Sequoia. In November, he agreed to invest $3.5 million in YouTube. Five months later, the firm put $8 million more into the site.
“It wouldn’t be surprising” if Sequoia owned 30 percent, said Michael Kwatinetz, a founding general partner at Azure Capital Partners.
The fact that the man who is perhaps Sequoia’s best-known partner, Michael Moritz, sits on the board of Google could have given the search giant more insight into the legal risks associated with YouTube, and therefore more confidence in pursuing a deal, Kedrosky, the venture capitalist, said.
The deal between two firms that share an investor is right out of the playbook of Kleiner Perkins Caufield & Byers, the venture firm that imported from Japan the notion of a keiretsu, or network of companies with interlocking relationships, Kedrosky said.
“The whole idea of the keiretsu was friends selling to friends,” he said. “The model worked gangbusters for Kleiner.”
Venture firms like Sequoia typically raise funds from large institutional investors like pension funds and university endowments. They then invest those funds in promising start-ups, although they often end up with more misses than hits. At successful venture firms – and Sequoia ranks among the most successful – hits on the scale of YouTube more than make up for the misses.
A venture firm makes money only when the start-ups it has funded are sold or go public.
It then splits the profit among its investors after taking a share, which can be between 20 percent and 25 percent.
The YouTube deal was the first major acquisition in the booming Internet video sector. In a conference call, Eric Schmidt, the Google chief executive, called it “one of many investments that Google will be making to make sure that video has its proper place in people’s online lifestyle on the Internet worldwide.”
A spokesman for Google said Schmidt was not necessarily talking about more acquisitions. But the prospect of more deals has other investors and entrepreneurs salivating.
“It’s good to hope,” said Peter Clemente, chief marketing officer of the Denver-based company ManiaTV, which produces live video programming for the Internet. ManiaTV is backed by Benchmark Capital, Intel Capital and Centennial Partners.
“This is obviously the talk of the sector,” said Mike Hirshland, a partner at Polaris Venture Partners in Boston, which has invested $11 million in Heavy.com, an Internet video site aimed at men between 18 and 34 that was founded in 1999.
The success of YouTube, as well as of MySpace, the No. 2 video site on the Internet, has spawned a new generation of competitors, said Josh Felser, president of Grouper, a video sharing site that Sony Pictures Entertainment bought this year for $65 million.
“There are hundreds,” Felser said of the emerging sites focused on the creation and sharing of videos.
Katie Hafner contributed reporting.
SAN FRANCISCO Even in Silicon Valley, it is rare for so much money to be made so fast – and by so few.
The biggest winners in the $1.65 billion acquisition of YouTube by Google are the YouTube founders, Chad Hurley and Steve Chen, who have parlayed their stakes in the 19- month-old start-up company into Google shares that are likely to be worth tens of millions of dollars. YouTube’s roughly 60 employees no doubt are celebrating as well.
But only one venture capital firm got in on what has turned out to be one of the hottest Internet deals since Google went public in 2004: Sequoia Capital.
Sequoia, which is among the most successful venture firms in Silicon Valley, invested $11.5 million in YouTube between November and April. It may be walking away with more than 43 times that amount. Its stake in YouTube has been estimated at roughly 30 percent, which would give it a value of $495 million.
That kind of payday, especially for an investment less than 12 months old, is unusual even in Silicon Valley. But it is not likely to rank among Sequoia’s biggest. The firm, which was founded in 1972, has backed a roster of technology superstars including Apple Computer, Cisco Systems, Oracle, Yahoo and Google itself.
Sequoia’s go-it-alone investment in YouTube represents the kind of aggressive move for which Sequoia is known. A more traditional and safer approach would have been to share the risk and rewards with other investors. That is especially true with an early-stage investment in a company that since its inception has faced the prospect of costly lawsuits over the copyrighted material that peppers the site.
“They had an absurdly high level of confidence with what they were doing,” said Paul Kedrosky, a venture capitalist and author of the blog Infectious Greed.
Sequoia did not return calls seeking comment.
The connection between Sequoia and YouTube can be traced back to PayPal, where Chen and Hurley had worked. After PayPal was bought by eBay, the two men hit upon the idea of starting a site that would help users exchange video files.
In the summer of 2005, the pair showed their site to another PayPal alumnus, Roelof Botha. Botha, who had been chief financial officer at PayPal, was by then a partner at Sequoia. In November, he agreed to invest $3.5 million in YouTube. Five months later, the firm put $8 million more into the site.
“It wouldn’t be surprising” if Sequoia owned 30 percent, said Michael Kwatinetz, a founding general partner at Azure Capital Partners.
The fact that the man who is perhaps Sequoia’s best-known partner, Michael Moritz, sits on the board of Google could have given the search giant more insight into the legal risks associated with YouTube, and therefore more confidence in pursuing a deal, Kedrosky, the venture capitalist, said.
The deal between two firms that share an investor is right out of the playbook of Kleiner Perkins Caufield & Byers, the venture firm that imported from Japan the notion of a keiretsu, or network of companies with interlocking relationships, Kedrosky said.
“The whole idea of the keiretsu was friends selling to friends,” he said. “The model worked gangbusters for Kleiner.”
Venture firms like Sequoia typically raise funds from large institutional investors like pension funds and university endowments. They then invest those funds in promising start-ups, although they often end up with more misses than hits. At successful venture firms – and Sequoia ranks among the most successful – hits on the scale of YouTube more than make up for the misses.
A venture firm makes money only when the start-ups it has funded are sold or go public.
It then splits the profit among its investors after taking a share, which can be between 20 percent and 25 percent.
The YouTube deal was the first major acquisition in the booming Internet video sector. In a conference call, Eric Schmidt, the Google chief executive, called it “one of many investments that Google will be making to make sure that video has its proper place in people’s online lifestyle on the Internet worldwide.”
A spokesman for Google said Schmidt was not necessarily talking about more acquisitions. But the prospect of more deals has other investors and entrepreneurs salivating.
“It’s good to hope,” said Peter Clemente, chief marketing officer of the Denver-based company ManiaTV, which produces live video programming for the Internet. ManiaTV is backed by Benchmark Capital, Intel Capital and Centennial Partners.
“This is obviously the talk of the sector,” said Mike Hirshland, a partner at Polaris Venture Partners in Boston, which has invested $11 million in Heavy.com, an Internet video site aimed at men between 18 and 34 that was founded in 1999.
The success of YouTube, as well as of MySpace, the No. 2 video site on the Internet, has spawned a new generation of competitors, said Josh Felser, president of Grouper, a video sharing site that Sony Pictures Entertainment bought this year for $65 million.
“There are hundreds,” Felser said of the emerging sites focused on the creation and sharing of videos.
See full article on International Herald Tribune here. Taken from the New York Times. Written by Miguel Helft and Matt Richtel.
