Eisner backs Veoh, enters video-sharing fray

When a big name CEO signs onto a little tech startup, people notice. Witness the attention that video-sharing site Veoh got last week when it raised funding from Tornante, an investment firm run by Michael Eisner, former CEO of The Walt Disney Co.

Time Warner Inc. and Spark Capital joined first-round investor Shelter Capital in the $12.5 million Series B round.

The company raised $2.25 million in a first-round deal in August 2005, according to market researcher CapitalIQ.

The $12.5 million infusion will certainly be a boon for Veoh, which is competing against Revver, YouTube and Google Video, among others in a crowded market.

Plus, Eisner, who joins the board along with Todd Dagres of Spark, gives the company some sorely needed credibility after bloggers have accused it of scraping videos from across the Web and posting them on its site without giving due credit to the video’s creators.

The money may also help Veoh fend off newer entrants, such as Grouper Networks, which recently released a video on its site of a Bruce Lee-type character with his head replaced by the Grouper logo. The character then beats up a roomful of goons with their heads similarly replaced with the logos of competitors, such as Veoh.

The video ends with a threat: “We’re coming after all of you. Get ready…” Grouper raised $3.8 million from Duff Ackerman & Goodrich LLC and T-Venture Holding GmbH in the fall.

The other video-sharing sites are similarly armed with investors. YouTube raised $8 million from Sequoia Capital in its second round of financing on April 6. Revver raised $8.7 million four days later in its second round of funding from Draper Fisher Jurvetson, Bessemer Venture Partners, Draper Richards and former Kleiner Perkins Caufield & Byers investor William Randolph Hearst III. Revver had raised $2.5 million in its first round of financing.

And that’s just in the online-only world of video content sharing and distribution. VCs have been upping the ante for set-top box companies as well. Sling Media raised more than $46 million in financing to help accelerate the launch of its set-top box for “place shifting” videos to a variety of display devices in January.

In February, MovieBeam, a Disney spinout, collected about $49 million from VantagePoint Ventures, Mayfield Fund, Norwest Venture Partners, Cisco Systems, and Intel Capital. The startup is trying to digitize the movie rental business by delivering high-definition downloads via public broadcast airwaves to a box on top of TVs.

And older players, such as video-on-demand service Akimbo, are making powerful new pushes. The company inked a deal with AT&T last week to deliver TV and movie downloads through a service called Homezone. Akimbo has raised more than $32 million from Kleiner Perkins and other investors.

It never hurts to have friends with connections, but it remains to be seen if Eisner can broker content and channel deals with the likes of ABC and ESPN, Disney subsidiaries, after his ouster in 2005.