Liveblog: CC Ventures opening investor chat

You can follow the CC Ventures startup pitching session right now on Twitter; winners here later this evening; and pitch session video online very soon! Meanwhile here’s a liveblog post on the competition’s opening panel…

Venture capital firms are supplying the funding for many of the startups whose innovation is opening up new opportunities for the TV and other creative industries – but also disrupting them.

This afternoon at the Connected Creativity Forum, two VCs appeared on stage for a chat to introduce the CC Ventures contest. Jean Bourcereau is general partner at Ventech, while Dharmash Mistry is partner at Balderton Capital. The moderator was consultant and investor Olivier Ezratty.

Reed MIDEM’s director of entertainment Anne de Kerckhove kicked things off with a few words about startups’ role at MIPTV.

“Frankly, before a few years ago it was tough to be a startup and come to MIDEM, MIPTV or MIPCOM,” she said. “Yet it’s absolutely vital, especially in the world of creative industries that are facing such disruption right now, that the startups be part of the ecosystem.”

Over to the VCs. Mistry invests in LoveFilm, TopUpTV, MOG, Ricall, 7Digital and Habbo Hotel among other companies. Meanwhile, Bourcereau has invested in Musiwave, MXP4, Viadeo and others.

“The internet and the recent evolution of the mobile world made it simpler to launch companies,” said Boucereau. “You can probably reach some point of critical mass with less money than you needed 10 years ago. That said, Color still needs $41 million to kickstart their application…” [referring to US startup Color, which recently raised that amount and launched a photo-sharing app].

“When you deal with internet and mobile applications, you have to either go really early and put €1 million or €2 million with the company and see if you have a winner, or you have to wait to the next window, which in my view will not be €5 million, it will be €20 million.”

Mistry said Balderton Capital is geography and stage-agnostic – it looks for great entrepreneurs with disruptive ideas, and some ‘proof points’ for their business. “Our last ten deals, five of them were pre-revenues / early stage,” he said.

What business models are they looking for? Mistry said at a very early stage, it’s more about whether a product is interesting, but slightly later when Series A funding comes in, it’s more about “how do you scale this business and thinking much harder around business models”. But he maintained that the key is “a great entrepreneur with a very disruptive idea and a big potential market size“.

Mistry said Balderton is seeing huge growth in virtual goods at the moment – Habbo Hotel did about $100 million in revenues from virtual items last year – but also in a la carte micro-transactions.

Bourcereau said he has seen two different waves in the entertainment market. First: digitising content changed the dynamics of those industries, with companies taking advantage with similar business models to what had been done before. “That was a big wave that the music industry had a very rough time to face,” he said.

“And then you have another wave of people proposing new products and business models, like virtual goods. When people like Zynga come in, it’s more getting a new way to take some money out of the purse of the customer rather than adapting the old business model to the new world.”

Mistry chimed in. “Ad-funded models are pretty challenging in the digital space.” He cited the challenge of infinite supply and lower demand, which drives down the prices of advertising. “You can see why the newspapers are thinking about payment – even if they only convert 1 or 2% of their users, they’ll still make more money than they are from advertising.”

Bourcereau talked about social networking and consumer-oriented services, where customer engagement is  huge factor, and Mistry agreed. “We live in a data-oriented world. The expectation at a minimum is that the entrepreneur is close to the data of their business.” By which he meant they are able to quickly pick up trends from how people are using their service or product, and iterate accordingly.

Who are the big players in terms of controlling the market – who should startups partner with besides Facebook and Apple? Mistry said the media value chain is quite complex, and “there’s a fight to the consumer interface and the payment wall, which is where a lot of the money will be made”. He pointed in TV to studios looking to go direct, TV manufacturers creating closed app stores, and telcos trying to get into content.

“We’ve seen this movie before. The movie we’ve seen before is in the mobile industry, where the operators created walled gardens, the handset manufacturers were partly disintermediated, and then the world moved on.” To iPhone and Android, where Apple and Google control the user interface.

The pair discussed the importance of Apple, Google and Facebook,too. “15 years ago, two of those companies didn’t exist, and one was walking dead,” said Bourcereau. “Are they in a very good situation? Yes? Is it going to last forever? No. The pace is not slowing down.”

What is their advice to startups who want to go international? Bourcereau said Ventech encourages its companies to go international, to ensure they are not overhauled by a bigger global company that comes into their home market.

Mistry said Balderton does invest in single-geography companies – online gambling firm Betfair being one example.

The final question focused on rightsholders and content companies – are they doing as much as they could be to help innovative startups get up and running? In a word, no.

“I think it’s an issue,” said Mistry. “Both the film industry and the music industry are clearly protecting yesterday’s profits.” By which he meant putting more effort into cracking down on digital piracy than on fostering innovative new business models and services. “In both these industries the world is changing, but maybe not fast enough for the startup ecosystem.”

However, Mistry said this does not stop firms like Balderton from investing in startups that require licensing deals with music, film or TV rightsholders, and cited signs of new thinking within the content companies – for example, the way Hollywood studios are now allowing video-on-demand services to sell movies two weeks after their cinematic debut, albeit at a high price.

“The world is shifting, and so will the progressive guys in studios and labels,” said Mistry.