Accel, William Morris to co-star in new fund

Accel Partners has teamed up with the William Morris Agency to raise a seed fund to make digital media investments, PE Week has learned.

The move comes on the heels of a similar effort launched late last year by Draper Fisher Jurvetson and Creative Artists Agency. That fund, called CrossCut Ventures, is trying to raise between $150 million to $200 million.

Meanwhile, another major Hollywood talent agency, International Creative Management, continues to look for a financial partner for a digital media fund of its own, as first reported by

Representatives for Accel and William Morris did not respond to requests for comment.

Two sources told PE Week that the agency and venture firm plan to raise between $30 million and $50 million to make seed investments in digital media companies. The sources were not privy to the fund’s strategy, although there has been speculation that it may be related to Accel’s investment in social networking site Facebook.

One source says that in addition to Accel, another venture firm and a large corporation are also involved in the project, but PE Week was unable to confirm the information before press time.

Investors who are experienced in the digital media space say it is a tough nut to crack.

“One of the challenges in working with talent agencies is that actors and other artists that the agencies manage are used to getting paid up front,” says a VC who has been involved in digital media since the mid-1990s. “In some cases, they are unwilling to consider equity as a form of compensation. They often insist on guarantees that are paid in advance of any work that is performed.”

Even if a VC can convince a celebrity to take options instead of payment up front, just having a celebrity associated with a website is no guarantee of success.

To date, no celebrity-endorsed website has been a smashing success. For example, comedian Will Ferrell’s, which reportedly has raised $15 million in backing from Sequoia Capital, has seen its traffic plummet since the comedy video website launched in April 2007. Its traffic rating was about 1,000 shortly after it launched, but it is currently 5,323, which is well below websites that air the dirty laundry of celebrities, such as (with a ranking of 787), according to website tracking service Alexa.

Not even household names, such as Oprah Winfrey and Martha Stewart, are close to cracking Alexa’s Top 500 list: ranks 4,179, while ranks 6,861.

“It’s difficult to sustain celebrity,” says the veteran digital media investor. “Will Ferrell is hot at the moment, because he has a new movie coming out, but where is he going to be in two or three years? VC ventures take time to grow. It’s no accident that VC funds last for 10 years.”

William Morris, a worldwide talent and literary agency, apparently wasn’t jaded by its first attempt at getting its clients into the Net business. In 2000, the agency introduced Whoopi Goldberg to, a website that offered unique Internet currency that users could accumulate and cash to make online purchases.

After the actress/comedian met with the CEO of Flooz, she signed a contract within a week and “was shooting print ads—becoming in the process the third-largest shareholder in the company,” the New York Times reported in June 2000.

But even $54.5 million in funding from the likes of Brentwood Venture Capital, Maveron and Oak Investment Partners couldn’t keep Flooz from failing.

Guess Goldberg should have demanded cash up front.