New Media Venture Partners –

SALT LAKE CITY – When you think of Salt Lake City, venture capital, new media and enabling technologies are probably not the buzz words that come to mind — that’s just fine with New Media Venture Partners (NMVP).

NMVP is a fast growing digital media holding company focused on investing in and developing core technologies that will drive what the firm believes is the next phase of the Internet – the development and distribution of digital media and content.

The firm was founded in 1998 by Scott McKinley, who now serves as the firm’s chairman, president and chief executive officer. Prior to starting NMVP, McKinley founded, and served as managing director, of Chase Capital Partners in Asia, where he led the firm’s direct investments and venture capital operations throughout Asia.

McKinley says he picked Salt Lake as the firm’s headquarters because he believed the Rocky Mountain region was, and still is, vastly under-served when it comes to venture capital. “In our market, if you look at the venture dollars distributed around the U.S., you realize that it’s an undercapitalized group of states Arizona, Colorado, Idaho, Utah, even Southern California and the Pacific Northwest,” he says.

“If you draw a line westward from Denver to the Coast and throw away Silicon Valley – we’re not competing for deals with those guys, they have too much money, they are chasing too few deals and the deals are too expensive,” McKinley says.

Just by its name, it’s not hard to figure out what industry sector NMVP is focused on. However that just scrapes the surface. “Clearly we’re looking at information technology – preferably software and preferably a technology that has broad scalable implications, not niche strategies,” McKinley says. “In specific industry areas, we’re looking for communications, wireless telecommunications, broadband compression all areas that have a lot of room to grow,” he adds.

NMVP typically looks for the software piece that makes things happen. “Once you own the proprietary software, it may manifest itself in a series of different vertical markets – as far as we’re concerned the more the better,” McKinley says. “We like to find technologies where we can say, hey we think this first market is going to be attractive, but if it isn’t, there are five to 10 markets where the technology can be applied’.”

As McKinley puts it, there are basically three legs to the firm’s investment stool: geographic focus, core technology/digital content and international acceleration.

With regard to first leg, NMVP is concentrated on Series A and B financings in the Western U.S. – excluding Silicon Valley. As for the second leg, McKinley says, “if you think about software, it does one of two things – either you use the software tools to create information or content, or the software enables data to move more efficiently – faster, better, cheaper – down a pipe. We think about it in those two buckets.”

Lastly, NMVP is in the process of rolling out its international acceleration strategy. The principles at the firm have between 10 and 20 years of international operating experience, covering a number of languages and countries. NMVP is in the process of establishing a Tokyo office.

While NMVP hasn’t raised a fund yet, it’s definitely not ruling out plans for doing so. “We do have plans [to raise a fund], no announcement yet,” McKinley says. “It will be a natural progression for us to take our existing portfolio and wrap it up as portfolio No. 1 and move on to portfolio No. 2. We still preserve the right to go public, if for whatever reason the market for the ICGs, CMGIs or Divine Interventures of the world ignites again, or if we can figure out a way to intelligently differentiate ourselves from those guys, then we’ll look at going public.”

Following its incorporation as a Delaware C corporation in January 1999, NMVP set about raising capital and checking out some rather interesting companies.

NMVP received initial backing of $38 million during a Series A round from Houston Partners, Cornerstone Capital and Hewlett Packard, which contributed $17 million comprised of $2 million in equity and a $15 million loan. On top of that, the firm also received over $10 million from angel investors.

The firm is currently wrapping up a Series B round. At press time, it had closed on $15 million of $20 million. Hewlett Packard contributed in an incremental $10 million.

In hindsight, NMVP probably would have to preferred to start out as an LLC. “What happened – and I don’t think we’re alone – is that we started out structuring NMVP as a Delaware C corporation. Essentially we were pursuing a type of “ICG Rockies” model. That’s fine when stocks are blowing out of the roof. However, when they’re not, people look at the C corporate structure and say, well I understand why you are structured that way but ideally if you could start over again, it would be as an LLC’,” explains McKinley.

NMVP is now in the process of doing just that. McKinley anticipates that the bulk of the firm’s future capital will come in through special purpose LLCs or GP/LP structures. “Frankly it will be a heck of a lot easier attracting capital under that structure, than it was in the last six months as a C corporation.”

NMVP has four companies in its portfolio, and at press time, the firm announced a $3 million investment in TeleSuite Corp. The Dayton, Ohio-based company develops and operates virtual presence conferencing enviroments over its digital broadband private network. McKinley said the firm expects to close one more deal in the next month or so. The firm’s portfolio includes WhizBang Labs Inc., Flip Dog.com, Campus Pipeline and Moon Crescent Studios, which McKinley refers to as Pixar on Steroids’.

The firm prefers to be the lead investor in deals. “Because of where we are located there are not a lot of firms deploying money, so we’re going to get an early look and lead the deal,” McKinley says. NMVP’s typical investment size ranges from $3 million to $7 million. McKinley says the firm is going to be prepared to put money into its portfolio companies until they exit. Most of the deals NMVP looks at are in the $10 million to $50 million valuation range, have good management, good business plans and are probably through the first beta versions of their product or service.

When it comes to an exit strategy, McKinley says NMVP is open to an IPO or trade sale. The firms said it did not have immediate plans for any exits; however McKinley says there may be one “late this year or early next year.”

The team at NMVP is comprised of McKinley, Chief Financial Officer Dennis Bayes; Vice President of Business Development Dave Furbush; Vice President and Managing Director of International Business Graham Doxey; Vice President of Marketing Mark Schaeffer; and three associates.

Following are some of New Media Venture Partners portfolio companies:

WhizBang Labs Inc. (Provo, Utah) has developed next generation data retrieval, classification and aggregation software capable of changing the way in which data is retrieved and presented from the Web.

Co-investors include Dominion Ventures, UBS Capital Americas, Bear Stearns, Hewlett-Packard and Spiral and Stars.

Flip Dog.com (Provo, Utah) is an online job recruiting portal. The site uses technology from WhizBang that crawls the Web and links to job openings found on employer Web sites, and presents a more comprehensive directory of jobs found on the Web.

Co-investors include Dominion Ventures, UBS Capital Americas, Bear Stearns, Hewlett-Packard and Spiral and Stars.

Campus Pipeline (Salt Lake City) is a fully integrated enterprise platform that leverages the Internet as both an application platform and a portal for the worldwide higher education market.

Co-investors include SCT, Oak Investment Partners, Amerindo Investment Advisors, General Motors Investment Management Corp., Access Technology Partners, Cornerstone Capital Group and Inktomi.

Moon Crescent Studios (Los Angeles) is an independent entertainment company with expertise in the digital animation and live-action arenas. There were no co-investors.

New Media Venture Partners is located at 6995 Union Park Center, Suite 475, Salt Lake City, Utah 84047. Tel (801) 566-1900, fax (801) 566-0090.

The firm’s Web site is http://www/nmvp.com.