Billionaire Haim Saban Now Betting on VC, Too

Self-made Israeli billionaire and media mogul Haim Saban quietly entered the business of venture capital a few months ago, adding an early-stage digital media practice to his seven-year-old, L.A.-based investment company, Saban Capital Group.

For the uninitiated, Saban is a former television producer whose Saban Entertainment company gave the world, for better or worse, “Mighty Morphin Power Rangers” in the ‘90s. Since opening Saban Capital, Saban’s 10-person buyouts team has been focusing their efforts on media properties, too. Saban is part owner of Spanish-language media company Univision, for example, which a consortium bought for $12.3 billion last year. Israeli television network Keshet Broadcasting, is also in its portfolio.

Now, to get a piece of some early-stage media action, Saban has brought aboard native New Zealander Craig Cooper, most recently a venture partner at VantagePoint Venture Partners and before that, a founding partner in Softbank Capital Technology III. Cooper, a big surfer, also cofounded Boost Mobile. The teen-focused wireless startup sold to NexTel in 2003 for an undisclosed amount.

Cooper hasn’t pulled the trigger on any investments yet. But in a short phone conversation, we talked a bit about Richard Yen, who joined Cooper in June from Blueprint Ventures; we discussed his focus on digital media and consumer wireless startups; and he explained why he’s cut back on his daily dose of TechCrunch.

First, how did you meet Haim Saban?

I was a partner in the Softbank Tech Fund when we were first raising it in 2004, and Haim was an investor, and I got to know him very well. We started talking in the middle of 2007 about his position in LA and his capital.

Was that a long conversation? Fortune magazine estimates his net worth is more than $2 billion. How much is he giving you to invest?

We have an allocation that we don’t publicly disclose, but we have a lot of dry powder.

What’s your role within the broader firm?

Well, we’re investing in companies on a standalone basis, but also looking across all of Saban’s investments in the context of how what we do might drive larger private equity deals. Facebook was a tiny startup just a few years ago, if you remember. So it’s very much a cross-platform intelligence-based platform that we’re trying to build.

What amounts are you looking to put to work?

I was Israel last month looking at early-stage deals in the range of $100,000 to $500,000; we’ll also look at deals that are between $10 million and $20 million. Because we don’t have any LPs telling us what to invest, we have a lot of flexibility.

Who’s “we”? Will Saban himself need approve every deal you want to do?

It’s effectively a group decision. We have an investment committee that includes Haim, [Saban Capital Group COO] Adam Chesnoff, and myself, and we run the practice like a traditional investment firm. We have weekly meetings and the whole team contributes into deals. So the private equity guys tells us what they’re seeing and we tell them what we’re seeing; we think that approach gives us a better overview of what’s happening across the spectrum.

Are you primarily targeting the LA area as you look to invest in digital media and wireless startups?

Our initial focus is on the San Francisco-San Diego corridor. But we’re going to be looking internationally. The U.K. and European markets are big for the rest of Saban Capital, and we have strong links into Israel as well. In fact, we’re hosting a tour of 15 Israeli companies that are coming through LA this fall, and some of our strategic partners will come and meet those companies. There’s a lot incubation over there — and some very unique ideas.

There are two of you and 10 guys on the private equity side. Will that even out over time?

We’ll certainly look to scale the group as we scale our invsestments. Hopefully we’ll have enough deals that we’ll need to bring on additional resources, but we haven’t contemplated that yet.

Where are you getting your deal flow? Who do you see most down in LA?

I’m doing a lot with [former AOL CEO] Jon Miller, but I was also here in LA for Softbank. And historically, because of my wireless background, I’ve had big deal flow through that channel. There are only a few people in terms of digital media in LA who see most of the deals and I’m probably one of them. That said, if someone is raising money, that’s a flag for me. I’m looking for independent opportunities that I can develop.

You don’t want to see entrepreneurs who are raising money?

I want to invest in companies that I find, whether they are raising money or not. There’s so much clutter in our economy. Everyone is jumping on digital media. Look at our principal news sources: mocoNews, TechCrunch. There’s no competitive advantage anymore except to break out of the pack and actively identify deals that you think are promising. Otherwise, I’m just reading TechCrunch and calling the same guys that everyone else is.

How are you finding these companies that aren’t soliciting funding?
I read 50 to 100 magazines a week. I’m continually hunting for information about new opportunities. I just pride myself on finding things that no one else has identified. I cold call a lot of people.

Are you particularly leery about any subsector within digital media?

Anything with “social” in it is a flag at the moment. I think the widget market is challenging, given the ridiculous valuations of widget companies recently. Much more interesting to me is the desegregation of bundled handsets and applications, which used to be fixed. I’m very interested in content that’s becoming more independent.

What else do you favor?

I like the health and lifestyle space a lot — consumer wellness — though we’re just broadly looking at sector at the moment. Many related companies have Web platforms but adoption is very low. For example, I think [anonymous online support group site] Daily Strength and companies like it are very cool and I’d love them to be successful, but none has really taken off.

We’re also looking at the direct-response market. I like location-based services a lot. I’m looking at the iPhone as a platform and what it will drive.

I thought you said that you don’t like widgets.

Well, Facebook, which a lot of developers have in mind, is a little like a nightclub. This week it’s cool but next week, the cool crowd may move on. It’s a sticky platform, but that doesn’t mean people aren’t free to close accounts and move on. Communities are very mobile. I’d be concerned by any company deriving 80 percent of its revenue from Facebook. The iPhone is different.

You haven’t made any investments. Are you close to announcing anything?

We were to a deal last month but we didn’t close on it. We just didn’t complete the term sheet. I’m not going to get into why publicly, but we’re interested in about five companies right now, and if Richard and I can do a deal once every few months, that’s a pretty good pace for us.