VC Firm Goes Insane: Dumping $100 Million into NBCU-News YouTube Killer


…at a $1 billion valuation.  Not done deal yet, but Providence Equity Partners is apparently ready to sign. 

Initial reaction: Providence has gone nuts.  The firm specialises in traditional media, so that could be one explanation (initial internet forays by trad-media kingpins are often boneheaded), but Providence has made at least one not-horrible Internet investment: NexTag. 

Let’s review: $1 billion valuation for a site that:

  • hasn’t launched
  • has no name (after six months of brainstorming)
  • has 120 employees and a big burn rate (call it $10 million a year)
  • has a deeply entrenched, globally dominant competitor
  • is two years too late
  • has been shunned by the other big dogs in the industry (CBS, Disney, Viacom)
  • is a joint venture between two companies that hate each other.

When Google paid $1.7 billion for YouTube, remember, it was already dominant worldwide.  It was also an unconflicted start-up with no pre-existing agenda.  In the New York Times‘s write-up of this latest deal, celebrity VC Roger McNamee points out that joint ventures almost never work.  Todd Dagres of Spark Capital added that the valuation is “startlingly rich,” which is an understatement.

Considered reaction: Providence has gone nuts.

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