NewsMarket Downloads $4M

The NewsMarket is a successful online video distribution company that reported $2 million in revenue last year. The New York-based company impressed investors with its business model enough to raise a $4 million Series B investment that, announced last week, brings its total funding raised to $10 million.

NewsMarket allows news media outlets to download video footage over the Internet free of charge. Corporate clients pay a fee to supply content through the company.

“The key here is the use of new technology,” says Boldcap Ventures co-founder and USA Networks founder Kay Koplovitz. “Everything is going in this digital direction. The distribution of news and information in the broadcast platform is in digital and broadband.”

Boldcap was a new institutional investor in the round, which was led by Apax Partners. The Hearst Corporation followed Apax’s lead but invested the same amount. Apax co-founder Alan Patricof and Hearst Interactive Media Division vice president Scott English will join the company’s board.

Ascend Ventures, Coastal Ventures and the New York Community Investment Co. also invested in the round. The company raised a $3 million Series A round in 2002 and has seed funding from its founders and individual investors, including Bruce McLaren, the chairman of International.

Company co-founder and CEO Shoba Purushotaman says that she had to convince VCs that the amount of funding they were seeking was right. “One of the challenges we faced was that the deal size was considered too small,” she says.

NewsMarket employs about 30, most of who are in New York. Purushotaman expects to employ 45 within a year. The company also has operations in San Francisco; Hong Kong; London; Mumbai, India; Munich, Germany and Singapore and plans to expand its Asian presence.

While the company has no plans to raise a Series C, investors and company management alike are keeping the possibility of another round open.

The Series B deal is part of what investors and media company executives see as an increased interest in venture and private equity investment in the space.

“We’re getting more phone calls asking, What’s new and how can we work with you?'” says Kenneth Bronfin, president of Hearst Interactive. He adds that there is an interest in media investing throughout private equity. He also says that the news from Silver Lake Partners, which saw founding partner Roger McNamee decide to launch a separate fund for media investment, is a sign of media investment interest.