Warren Lee of Canaan Partners Talks Associated Content and Blip.tv

Warren Lee, a venture partner with Canaan Partners, this week is doing the portfolio board two-step. He’s moving off the board of Associated Content, due to its acquisition by Yahoo, and moved onto the board of Bit.tv, following Canaan’s role as lead investor on a new $10.1 million funding round.

I spent a few minutes on the phone with Lee yesterday, just after he touched down at SFO. Here’s an edited transcript:

Why sell Associated Content now?

Canaan’s been an investor in the company for three years, and people have constantly been talking about wanting to acquire it. It was kind of annoying — in a good way — and we kept having to fend people off.

The company continued to grow and some of us wanted to keep building it as a stand-alone, but we decided to take a look at the bunch of strategic acquirers who were buzzing around…

Yahoo’s financial offer was attractive to both employees and investors. Probably just as important was that we wanted the company to go to a place where it would be well taken care of.

Why do you think Yahoo will take good care of Associated Content? There are more than a few VC-backed companies that Yahoo acquired and that we never heard from again.

That’s true, but I think Yahoo is on its way back. It’s got a relatively new management team, is re-engineering its overall business and has lots of cash.

Plus, Yahoo had a methodical process that gave us comfort – it was kind of unusual for a strategic player. There were lots of interactions between the two companies about what Yahoo’s strategy would be, and they left all of us believing that Associated Content would be a critical part of Yahoo’s plans going forward.

There have been lots of stupid acquisitions not only by Yahoo, but also by Google and AOL and others. But most of those happened in 2007 and 2007, and today I think acquirers are much more methodical and disciplined in how these companies will fit.

Let’s move onto Blip.tv. Why do this deal?

We’ve been looking at the video space for a long time, and has some things in common with both Associated Content and Tremor Media, which also is one of our portfolio companies.

Like Associated Content, Blip has a large community of content creators who use Blip to create, upload and manage video content. We’ve also noticed that the quality of content has improved dramatically over the last couple of years.

Like with Tremor Media, we’ve seen a major increase in video advertising. Two years ago it was mostly experimental buys. Today we’re seeing six-figure deals with some upfront deals at seven-figures. There’s evidence of that happening at Blip.

A third thing with Blip is that, a year and a half ago, the most viewed time period on Blip was around lunch time… Today peak viewing is prime-time, and the average length of visitor views has doubled. Advertising agencies already have shown they’re willing to spend for online video, and they’ll spend more if the audience is more targeted and more engaged.