Former Mouse House topper funds start-up

Michael Eisner is jumping into the online video space.

Former Mouse House topper is taking part, along with Time Warner, in a $12.5 million financing round for start-up Veoh Networks through his new investment vehicle The Tornante Company.

He’s also joining the board of the Netco, which is differentiating itself from competitors like YouTube and Google Video by not limiting the length of videos, letting content providers choose whether to charge or integrate ads, and allowing viewers to use preferences to create their own virtual channels.

It’s the first business deal for Eisner since he left Disney in October. With his new shingle Tornante, he is following the path of other media moguls who invested in technology start-ups post-retirement, such as Bob Pittman and, of course, Mike Ovitz, who invested in sites such as scour.net, Gamespy, and Talk City.

With the exception of hosting his interview show on CNBC, it’s the only public move Eisner has made since ankling the Mouse House.

Between the conglom and Eisner, Veoh will now have connections to many of Hollywood’s most powerful content companies, giving it a big leg up as it attempts to become a distributor of high quality content via the Web.

Netco hopes to eventually offer a broad mix of professional and amateur video content.

While Veoh didn’t break down exact investments, both Eisner and TW are believed to be making multi-million dollar contributions, along with VC firm Spark Capital.

“Veoh revolutionizes television … by leveraging the Internet to expand broadcast capacity to the point that every single user, whether an individual or a media company, can create their own ‘channel’ and every ‘channel’ can be supported by its own business model,” Eisner said of the investment.

While Time Warner hasn’t outlined specific plans to work with Veoh, integrating it into America Online or using it to distribute Warner Bros. content would both be natural moves. “Veoh’s unique combination of technologies creates a strategic content distribution platform as well as the opportunity to greatly enhance the consumer’s experience with Internet-delivered video,” said Time Warner Investments group managing director Rachel Lam. “We’re excited to be a part of that.”

Eisner heard about Veoh through his contacts and approached the start-up about making it his first investment.

“We’re fortunate to have the visibility Michael gives us, along with his connections and incredible experience,” said Veoh CEO Dmitry Shapiro.

Rather than focusing on shorts made to be watched on a PC like YouTube, Veoh is hoping to take advantage of home networking to deliver Internet video to televisions and portable devices.

Viewers can create their own channels based on their interests or watch channels programmed by content providers for the Net.

Video is delivered via a proprietary peer-to-peer technology.

San Diego-based Veoh launched March 1 and is now serving around one million videos per month. It previously received a $2.25 million first round of financing from Shelter Capital Partners.

Start-up hasn’t yet launched its advertising capability, but soon hopes to begin integrating video ads targeted by both content type and individual viewer demographics. Programmers will have the option to either take a cut of ad revenue or do pay-per-view, giving a commission to Veoh.

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