By ADAM GIFFORD
When Philadelphia-based venture capitalist Jay Snider puts his firm's money down, he is looking for four things: some "revenue traction," unique technology or intellectual property, "first-mover advantage" and key strategic relationships to be in place.
"This deal has elements of all those factors," he said after announcing Snider Capital was spending $2.5 million on a 15 per cent stake in internet animator Virtual Spectator.
The company, a partnership between Dunedin innovators Animation Research and Auckland multimedia company Terabyte, says it will make an operating profit on its broadcasting of the America's Cup races over the internet - even with the price of its race viewer (now downloadable over the internet) coming down to $US9.95.
More than 7000 Italians have bought copies in the past few weeks, and there are also fees from television use.
Mr Snider said that while other companies were talking about delivering real-time animation over the internet, Virtual Spectator was the only one now delivering.
As for the advantages of moving first, a Snider family company, Spectacor, bought Philadelphia radio station WIP-AM in the early 1980s and converted it to an all-sports format. "We sold it for a handsome profit several years later to Infinity Broadcasting, which is now part of CBS, and to this day no one else has succeeded in producing an all-sports format in Philadelphia."
Mr Snider said Virtual Spectator had established important relationships with television broadcasters, including US giant ESPN, and with Quokka, which had allowed it to piggy-back on its rights to internet coverage of the America's Cup.
"Quokka has put up a lot of money for rights, including for the America's Cup, but it doesn't have the capability or know-how to do what Virtual Spectator has done. It has led to further discussions on producing similar technology for other events Quokka has rights to."
Venture capital is a recent move for the Snider family. Mr Snider's father, Ed, made his start in the management of the Philadelphia Eagles football team, then developed a range of others sports and entertainment businesses.
These include the Philadelphia Flyers ice hockey team and Philadelphia 76ers basketball team, two major arenas, two cable television channels and SMG, the world's largest public assembly facilities management company.
Jay Snider, aged 42, has worked with his father in founding SpectaGuard, which he built into the ninth-largest security and electronic protection systems company in the US.
In recent years the Sniders have sold a number of assets. "That left us with a lot of liquidity, and a year ago we decided to go into the venture capital business with a sports focus, so it is in line with our experience and know-how," said Mr Snider, who still plays tennis, cycles and has "played a lot of [ice] hockey."
Investments include:
* FrontLine Solutions, which develops enterprise and web-based software solutions for ice and in-line skating facilities and for the multi-sports arena market. It runs the hockey portal USARinks.com.
* PowerSchool, which makes a web-based student information system, including a customisable portal schools can use to allow students to access education resources and parents can use to check grades and attendance records.
* Legend Eyeware, an Australian sunglasses brand for which it is US licensee.
* IT Capital, in which Snider Capital invested $US2 million for about 6 per cent of the shares and set aside $US3 million more for co-investment.
Mr Snider said that about four months ago a mutual acquaintance introduced him to the New Zealand company's American CEO, Jeff Dittus, who also was from Pennsylvania. Snider Capital had already determined it wanted to operate internationally.
"The valuations for businesses in Australasia and Europe are two to three years behind the US market but the technology isn't necessarily two to three years behind. It's probably equal, and in some cases better, as in the case of Virtual Spectator.
"A lot of companies are starting to invest in venture capital operations in Europe. We don't see many focused on New Zealand and Australia, so it's an opportunity for us to get in early."
Mr Snider said the $6.5 million invested in Virtual Spectator so far this year by Snider Capital, IT Capital and Virtual Spectator chairman Lindsay Fergusson was "a reasonable round even by US standards. For a company at this stage it's the right place to be.
"What you want at this stage is an idea which is proven to work. You now build an infrastructure so you can develop a business plan, financial models and more applications for several new sports. Then you make the next big capital infusion."
It is at Mr Snider's insistence as lead investor that Mr Fergusson is taking a more hands-on role.
His confidence was also a critical factor in Animation Research's decision to fold its staff and intellectual property into the new company for a 27 per cent shareholding - the potential existed for the company to develop similar projects elsewhere.
Mr Snider is also behind the decision to put 15 per cent of shares aside for staff, bringing the company in line with US start-up practices.
Snider Capital does not invest in seed capital or "angel capital" for initial development of the idea. That's what friends, family and sweat are for. It considers itself a first-round investor, but has the reserves to participate in the second round as well.
Mr Snider said he was giving time to IT Capital and Virtual Spectator as a board member, but would not visit New Zealand often. "I can help them to some degree in the US as they expand. IT Capital's goal is to build a major US presence in order to import their investments from Australasia into there."
While New Zealand's isolation made it hard to develop and export manufacturing and heavy-industry products, "when it comes to technology and intellectual capital it's a whole new ball game."
"The only thing missing here is a developed capital market for the first-stage market," he said.
"Bringing our capital and know-how to a sophisticated market which is not isolated when it comes to technology transfer presents tremendous opportunities for people here."
US venture capitalist finds drawcards in Virtual Spectator
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