Heavy hitters invade dot-com boardrooms
Despite all of their smarts, infectious self-confidence and seemingly instant successes, even entertainment dot-comers, the new celebs of the digital economy, can get a little star struck.
Nowhere is that more true than in Hollywood, where the industry’s most influential powerful players, past or present, are being worshipped by every new enterprise ending in dot com — not only for who they know, but for how much money they have in the bank.
Former HBO and Universal topper Frank Biondi, NBC exec Warren Littlefield, AMG’s Michael Ovitz, USA’s Barry Diller, William Morris’ Arnold Rifkin, Warner Bros.’ ex-tag team of Bob Daly and Terry Semel, Motion Picture Assn. of America prexy Jack Valenti — all have become the best friends of the e-trepreneur more interested in shooting a digital film about microchips than creating the chips.
But with all the hype and name dropping, what does a Hollywood power broker actually bring to a dot-com’s boardroom table?
- Money is usually a guarantee. And lots of it. A company’s board is usually filled with the company’s biggest investors. If not, they help locate the venture capital dollars necessary to run the ventures they’re lending their names to;
- Forget the company’s founders, big backers respected by members of a community bring instant validity to a company just starting out. It’s an immediate image booster;
- Doors begin to open to potential dealmakers in the space the dot-com is targeting, aided by a board member’s connections and expertise, which can also lead to a more immediate closing of strategic deals before they would have normally occurred;
- Job positions need to be filled. An experience executive can help land the top talent.
“A board of directors is always a valuable sounding board as you build your company,” says Kevin Wendle, CEO of iFilm.com, which, itself, boasts ICM’s Jeff Berg, Casey Wasserman, helmer Nora Ephron and music producer Quincy Jones on its board. “Different board members bring different skills. Companies that are in the online entertainment space often need help getting meetings and thinking through entertainment business models. Many of these high-profile names are extremely helpful. Certainly they’re representing their own money, but these high-profile members are placed on a board to provide a perspective.”
Take Biondi, for example.
Already considered the sugar daddy to the dot-com world, Biondi has spent the last year and a half investing millions in the technology space through his Waterview Advisors investment venture.
At 55, the former studio boss has started, together with partners Rick Reiss and Gus Oliver, what he calls a new career as senior managing director of the firm, a venture capital fund fueled by $250 million from an army of 150 separate investors, for whom writing a $1 million check comes very easily.
“It’s very different from what I used to do,” Biondi says of the move. “Now I’m more like a coach.”
The basic idea: To use other people’s money to invest in media-friendly technologies — wireless, satellite, cable — and especially Web companies with a focus on entertainment. In a wired world that’s becoming obsessed with creating communities online, playing the venture capital game doesn’t get more interactive.
It’s the dollar signs that have helped pay Biondi’s way into the dot-com boardrooms.
Already Waterview has poured funds — from $3 million to $30 million — into 40 to 50 different companies (see chart), including dot-coms such as Netcaster AtomFilms, film and television venture Creative Planet, as well as Broadband Sports, a company founded by Richard Nanula, once considered an heir to Eisner at Disney. E-tailer WhatsHotNow was its first investment.
Waterview is rarely the lead investor behind a company’s round of financing, Biondi says, but it may end up the lead investor with more experience in the media space.
“You look for a good concept, good management, good evaluation,” he says. “After that, you help grease the way for these folks. You try to optimize the performance of the company, help them raise money, structure deals. I don’t think it’s a question of being on the boards because they’re technology companies. You’re on the boards because you’re an investor. It’s probably the most effective way to monitor the progress of a company into which you’ve put your money.
“We don’t pretend to know the direction of the Web. We place our bets modestly with a lot of people. What we’ve said is that what we know is the media business and we know that the Internet’s going to play a significant role with media. That’s why a percentage of what we do should always be in new media.
Biondi isn’t alone. Former Creative Artists Agency exec Sandy Climan found Entertainment Media Ventures, a $120 million fund. Michael Ovitz has Lynx Technology Group with which to fund his own startups.
Others also plan to follow suit. But what many might consider a new career move, is actually turning into a new high-tech hobby for Hollywood’s industryites. If the companies they invest in become successful, great. If not, it was fun. It’s only money.
Not every investment leads to a board position. Some of Creative Planet’s investors include Steven Spielberg, former MGM topper Frank Mancuso, Sid Sheinberg, Michael Fuchs and former CAA exec Sandy Climan, yet the respected industryites are seen as advisers.
It can be cheaper for the dot-com that way.
As a board member of Oracle Corp., ICM’s Jeff Berg receives $30,000 a year, plus $1,500 per regular board meeting attended, $3,000 for each meeting of the finance and audit committee meetings attended and $2,000 per day for each special meeting or committee meeting attended, according to a Securities and Exchange Commission filing. He also sits on ReplayTV and Excite’s boards.
“Advisory boards have a stake in a company and they help us but a board of directors is all about being a corporation,” says Mika Salmi, chairman and CEO of Seattle-based AtomFilms.com. “There are laws that govern how a board of directors acts.”
Says Wendle, “When you bring someone on as a board member, you have to realize that the person will have a tremendous amount of power. You may think, ‘let me put a bunch of big names on my board’ but that’s a bad idea.
“There’s a tendency among new CEOs to put together a board of directors on day one. This is a really common mistake. New companies should start with two or three board members and be extremely selective about adding additional board members. There is no reason to have an eight-person board at the start of a company. It’s much more helpful to have the governess of three people and add more as it becomes essential. It makes it much easier to run a company.”
There’s also the question of access. The more famous the face, the more difficult it might be for a startup’s CEO to talk to the board member. “I’ve seen situations where board members are on the phone three times a week with a CEO,” Wendle says. “Other times you have to plead with a board to even talk to you.”
Says Salmi, “Board members are only good if they contribute. Name value can be good for a press release, but if we’re compensating them, they better have a pretty strong interest in helping the business.”
Biondi welcomes the calls, but says that the level of his involvement with any particular company comes in cycles. “When a company is out raising money, it tends to get very active,” Biondi says. “People want to talk to you. They want a candid appraisal of the management and the problems. I tell them use me as much as you want. Some people don’t need quite as much hand-holding as others, but if it strengthens the company, I’m all for it.”
In an industry that has long looked down upon anything technology related, why is it that Hollywood execs are suddenly choosing to make the leap into a tech play’s boardroom, especially when they have little experience using even a Web site? The same could be asked about Silicon Valley’s movers and shakers, who could have trouble naming the director of “Jurassic Park,” moving to Hollywood.
“The Internet is a brand new sandbox to play in,” Warren Littlefield has said. He is a board member of Web music company Launch Media and member of the AtomFilms’ advisory board.
Yet a famous name doesn’t necessarily guarantee success.
Fresh out of the Warner Bros. gates, Terry Semel’s first investment and board member outing ended in disaster. The well-respected exec invested $2 million in Gen-Y Netcaster Digital Entertainment Network only to see the site shuttered by money woes, management mishandlings and even worse, a PR nightmare of sexual abuse charges filed against executives by its young employees.
Semel is now forming Windsor Media to try his hand once more at the Web investment game, although he plans to steer clear of online entertainment. His first move: To support the yet-to-be-revealed startup being formed by former Entertaindom.com execs Jim Moloshok, Jim Banister and Jeff Weiner.
Like most investors or A-list board members, Biondi did not guarantee instant success to a company with him on the board. He also doesn’t guarantee major hits for himself. Biondi has yet to see any return on his investments. The dot-com space, especially in terms of entertainment, is still in its fledgling stages. It’s still too early to declare hit or miss.
“We’re new at this,” Biondi says. “If companies are trying to seriously interface with the traditional media companies out there, they pretty much need someone who can at least guide them and tell them who are the people who get it. It can be a big help. Whether in the end it changes the fortunes of the companies, is another matter. I can get you in the door. After that, you’re on your own. We can only take you so far.”