Steamboat chugs forward, plans $200M fund

Steamboat Ventures, a venture capital firm that counts The Walt Disney Co. as its sole limited partner, is raising $200 million for its third fund, founder John Ball told PE Week. It will likely start investing from this new pool of cash in the third quarter.

The firm is also planning to raise a European-focused fund from Disney within the next 12 months, Ball says. The fund size of that vehicle is not yet determined.

The Burbank, Calif.-based firm makes investments of $2 million to $15 million in startups that may provide both a financial return as well as a strategic advantage for Disney. The firm is not, however, a corporate VC arm in the traditional sense. Its general partners receive carried interest from their investments and the group stands outside direct corporate overview.

Ball says Steamboat isn’t looking to sell its portfolio companies to Disney, either, despite the obvious synergies. “Does Disney need to own a lot of technology companies? Probably not, but they do certainly need to partner with our portfolio companies,” he says.

The firm’s newest fund is larger than its previous U.S.-focused fund, a $125 million vehicle raised in 2006 that is now about 60% committed. The firm’s first fund, a $75 million vintage 2000 fund is now in “full harvest mode,” according to Ball. The firm has focused on digital media since its founding.

“We saw it coming like a freight train how technology and innovation was going to fundamentally change the media business,” Ball says. “The Napsters and the TiVos were based on technology and almost overnight, in the scheme of things, you had the music industry turned upside down and the TV industry seriously scratching its head.”

Steamboat did well when AOL bought online advertising company Quigo, banking nearly $44 million on its $6 million initial investment.

Steamboat was also an investor in advertising network Fastclick, which launched an IPO and was soon after bought by ValueClick for $214 million in 2005, according to venture data from Thomson Reuters (publisher of PE Week). Fastclick had raised $75 million in venture funding, including $5 million from Steamboat and $35 million each from Highland Capital Partners and Oak Investment Partners.

Among its other exits, Steamboat sold mobile display company Iridigm Display, which had raised $46 million from investors, to Qualcomm for $200 million in 2004.

These positive results have helped the firm expand beyond the United States. Steamboat raised a $175 million Asia-focused fund in 2006, which is between 40% and 50% committed, according to Ball. To invest in Asia, the firm hired five investment professionals in Hong Kong and Shanghai. To date, it has made five investments in China, backing such companies as online video sharing site and peer-to-peer video broadcast company UUSee.

Digital content distribution technology companies are particularly interesting to Steamboat because of the opportunity to use their creations inside Disney. Consider its investment in Move Networks.

Motive, based in American Fork, Utah, makes video content distribution software optimized for streaming video and commercials. It has raised $97 million from Steamboat, Benchmark Capital, Hummer Winblad Venture Partners, Cisco Systems and other investors.

Broadcaster ABC, a Disney subsidiary, became an early and marquee customer of Move Networks in 2007. The television station now uses Move’s technologies to broadcast in near high-definition to Internet users.

Quigo was another beneficiary of the Steamboat-Disney connection, Ball says. The company sells a service that optimizes the online advertising inventory of content sites. Ball introduced the company to the appropriate people at Disney-owned and

“They ended up signing some large contracts,” Ball says. “Those were probably company-making deals.”