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Four L.A. start-ups hunting for online video stars raise a combined $56 million

Paresh Dave for Los Angeles Times ,

In the eyes of start-up investors, MTV’s “True Life,” HGTV’s “Rehab Addict” and Comedy Central’s “Roast” specials are so yesterday.

Today’s hot productions are young, edgier and tend to premiere online. They carry the names “Human,” “Overhaul” and “All Def Comedy Roast.”

And the companies who make those video series say they’re just getting started. Last week, four online media start-ups across the Los Angeles region announced a combined $56 million in fresh funds to expand internationally and into new topics.

All Def Digital, Thoughtful Media Group, Kin Community and Woven Digital are exploiting consumers’ transition to digital video subscriptions from traditional pay-TV. They say their shows resonate better with their target group, whether it be millennial men, young women interested in arts and crafts, or “urban youth.”

Financiers include the world’s largest ad agency conglomerate, one of the top officials at media giant Viacom and many other major players in entertainment worldwide. The investors predict bright horizons for the video-centric companies because they’re suppliers in what stands to be a seller’s market for a while.

Facebook, YouTube, Verizon and Vessel are just some of the entities dangling millions of dollars to jumpstart video productions – and offering more for exclusives. Meanwhile, decades-old media companies trying to survive as entertainment moves online have become potential buyers for the videos, too. That means licensing rights, merchandise sales, events and other offerings have joined online ads as major revenue sources for the start-ups.

“The market has lost faith in advertising alone driving revenue, but they haven’t lost faith in compelling content in a digital-first world,” said Peter Csathy, founder of investment and consulting firm Creatv Media. “Those who are market leaders in certain verticals – like males, women and pop culture – are positioned well.”

Woven Digital grabbed an $18.5-million Series B investment led by ad agency WPP’s venture arm. Also investing were Institutional Venture Partners and Viacom Vice Chair Shari Redstone’s Advancit Capital.

Primarily an operator of pop culture websites that sell banner ads, Woven has been moving to the higher-profit video ad business through shows aimed at young men, such as “Human,” which spotlights artisans. The cash should fuel a global expansion for those series.

Kin Community received a $13.5-million Series D investment led by Emil Capital Partners, an investment firm tied to German supermarket company Tengelmann Group. Also investing were TV and radio companies in Canada and Australia that are helping Kin expand in those countries. The funding buys more ad sales representatives and production capabilities, including putting together home makeover show “Overhaul.”

All Def Digital’s $10-million Series B financing came from investment group Third Wave Digital Partners, the venture capital arm of ad giant WPP, Silicon Valley venture capital firm Andreessen Horowitz and Redstone’s Advancit Capital.

The money should bankroll shows and movies that will live on entities as varied as HBO and Seeso, a comedy video app from NBCUniversal. Among the newest franchises from the start-up, co-founded by hip-hop music producer Russell Simmons, is “All Def Comedy Roast,” featuring rap singer Snoop Dogg as the first victim.

Thoughtful Media Group added $14.3 million, including $7 million raised through an earlier convertible debt offering, as it ramps up a Series B financing. Investors include Iowa media company Gazette and wealthy families in California, Europe and Asia.

Founded by a team that worked on reality TV series such as “Treasure Hunters,” Thoughtful Media’s ambition is to guide advertisers to the most useful online video creators in every emerging market, given the advertiser’s goal. The San Fernando Valley company, with more than 100 employees, already has large operations in Shanghai; Ho Chi Minh City, Vietnam; and Bangkok, Thailand.

The company’s primary expertise is leading advertisers to the right videos so that they can place their skippable ads before the videos play. 

“We can tell you a lot based on creators’ audiences,” said Jak Severson, the start-up’s chief executive. “The bulk of our efforts are in justifying advertisers to spend more on our channels because of the visibility and output on them.”

Thoughtful’s involvement sends a video star’s monthly income soaring to $30,000 from $250 in an extreme, but actual, scenario. That means Thai-language personalities Softpomz and Dek Jew have more incentive to make videos.

Thoughtful faces local and foreign competition across Asia, but the huge growth in online video-making gives it confidence that there’s room for many. Severson estimated that 3,500 online video stars in China each had more than 500 fans and more than 10,000 views at the start of the year. By December, he predicted there will be 300,000 stars.

“That’s a wild, wild rise,” he said.

Severson expects Thoughtful to separately sell its foreign entities to local companies over time. It’s an exit path – being acquired by old-school media giants searching for sales growth – that Csathy predicts for the many other media start-ups as well.

“When they get to a certain scale of mass and strategic importance, they will get scooped up because they’re needed by the traditional media companies,” Csathy said.