Fullscreen raises a big Series A to prove that YouTube’s a viable platform

By Michael Carney , written on June 17, 2013

From The News Desk

People can’t seem to make up their minds about the health of the YouTube ecosystem. Earlier this month, Jason Calacanis said very publicly and decisively what I’ve heard countless others say privately over the last year, questioning the sustainability of the current model for content creators and networks in his blog post, “I ain't gonna work on YouTube's farm no more.” Over the weekend, Plus Capital founder Adam Lilling published a quasi-rebuttal, offering “A case for saying yes to YouTube funding.” In a way, they’re both right.

Today, the ecosystem got another big vote of confidence, as Fullscreen, a massive multi-channel network with prominent Hollywood content partnerships announced a Series A round of funding led by existing Seed investor The Chernin Group with participation from Comcast Ventures and WPP Digital.

The company did not disclose the size or terms of the funding, but those close to the transaction say it was approximately $30 million a $110 million pre-money valuation. Sources tell me that the high pre-money valuation was offset by a 1X participating-preferred liquidation preference, increasing the potential for investor return in the event of an profitable exit.

Fullscreen, to my knowledge, is the only large MCN to reach profitability, doing so through a combination of favorable content licensing arrangements and a technology-centric model that focuses helping creators find and build audience, monetization, community collaboration and cross-promote, and back-office, according to founder and CEO George Strompolos, a former YouTube strategic partnership development executive. The two and a half year company plans to use the new capital to continue building out its technology platform and to expand internationally, adding on the ground staff in Brazil, Mexico, and Russia initially.

Fullscreen now has more than 10,000-plus YouTube channels generating over 2.5 billion monthly video views – 2 percent of all those on YouTube – and reaching over 150 million subscribers. The network reaches all demographics across YouTube, but Strompolos calls the 13 to 25 year old segment the focus, and “where the real engagement happens.“ The CEO say he plans to move beyond the network-model eventually and transition to more of a studio that produces original content. Fullscreen already employs a full production, post-production, and creative development team, but Strompolos admits that the company needs to be more risk tolerant.

The company gained a ton of strategic value with the addition of Comcast and WPP as backers and through deepening it relationship with The Chernin Group. The latter is headed by former News Corp COO Peter Chernin, who has a wealth of relationships and experience in the old media world. Comcast offers Fullscreen distribution power, including through its ownership of NBCUniversal. As the company’s content finds success on YouTube, the natural next step is extend that IP to other platforms, such as cable, and now it has a friend in the business. Lastly, WPP is one of the leading advertising and marketing agencies among premium brands, making it massively valuable as Fullscreen looks to sell advertising alongside its premium content.

We are still in the early days of YouTube as a business platform and as a home of premium content. Fullscreen has done as much as anyone to demonstrate that it’s a viable platform when content licences are negotiated wisely. Nonetheless, there is a ton left to prove, including how to best monetize an audience in the hundreds of millions once you’ve built it. Strompolos is betting that the answer lays in technology tools and original content. Judging by the makeup of this latest round, having friends in high places is equally central to the Fullscreen strategy.