Index Ventures backs hacker ‘DVD Jon’

At the ripe old age of 24, Jon Lech Johansen has come to understand that making money is important.

As a teenager, “DVD Jon” was all about hacking into the products of large corporations. He made news in 1999 when, at the age of 15, he cracked the software that protects DVDs, a feat that resulted in his being prosecuted by the Norwegian government.

After he was acquitted in 2002, he turned his attention to breaking various other digital rights management (DRM) codes. He cracked Apple’s DRM code for iTunes in 2006. Last year, he discovered a way to activate the music playback and WiFi capabilities of Apple’s iPhone without signing up for AT&T service.

Now, like hackers Shawn Fanning and Bram Cohen, Johansen is hoping his black-hat talents will help him succeed as a white-hat entrepreneur. His San Francisco-based startup, doubleTwist, has raised $2.4 million from Index Ventures and Danish venture firm Northzone Ventures.

The catalyst for Johansen’s change was entrepreneur Monique Farantzos. After reading about the hacker impressario in The Wall Street Journal, she tracked him down and pitched him on the idea of collaborating. So it was in April 2007 that they started doubleTwist. They originally planned to sell file-formatting software to businesses, but Index Ventures convinced them that their code was better suited for enabling consumers to play their digital media on multiple software platforms and devices and share with friends.

Index and Northzone co-invested in May 2007, but did not disclose the financing until last week, when doubleTwist launched its product. “Talking to Index basically seduced us,” Farantzos says. “So we went for it and focused on the consumer opportunity, which was much larger than the enterprise.”

Farantzos compares doubleTwist’s technology to email. “When you receive an email, you can read it on your Blackberry, Web mail or Outlook,” she says. “E-mail just works.” Using media applications on different platforms is a nightmare by comparison. “The digital media landscape has become a Tower of Babel, alienating and frustrating consumers,” Farantzos says.

Last week, doubleTwist released beta versions a PC desktop application for unlocking and managing music and video files. Using doubleTwist’s software, consumers can take DRM-protected iTunes files, turn them into MP3 files, and play them almost anywhere, from a PC to a PSP. Exactly how the company does this, and whether or not it is enabling users to violate DRM policies is unclear.

The value proposition might be the logical next step from a product such as Sling Media’s Slingbox, which allowed consumers to watch digital media through either their television or their computer or portable device. (EchoStar Communications Corp. bought Sling Media last fall for $380 million.) But Farantzos sees a few specific differences. “We’re about the flow of media between different devices,” she says. “We’re the Switzerland of digital media because we’re not pushing any device or platform.”

Originally named SpiceFlow, the company changed its name to doubleTwist when it decided to target consumers. “It really accentuated the fact we’re trying to be the glue that binds all of these devices together, just as DNA binds life together,” Farantzos says.

If the name sounds familiar, it’s because it was once used by a genomics company backed by MPM Partners and IVP. That company, which used a capital “D” in its name, filed for a $86.25 million IPO in September 2000 only to withdraw it in March 2001 and go out of business in 2002.

Oddly enough, there is a thin connection between the old DoubleTwist and the new doubleTwist: Farantzos once worked for a biotech portal that received an acquisition bid from DoubleTwist. The mistake, she says, was not to take it. “We had done about three months of work and they were already offering us a couple of million dollars or something like that,” she says. “Things were so irrational then. I learned a lot about market timing from that.”