Has the counter-migration of Hollywood executives turned Internet investment gurus begun? Maybe. Lynda Keeler, who handled new media investments in L.A. for Saratoga, N.Y.-based Redleaf Group, has re-joined her previous employer, Sony Corp.
Keeler, who was a managing director of Redleaf’s L.A. office, was let go along with about half of the VC firm’s employees in June. She joined Sony earlier this month. Before Redleaf, Keeler worked at Sony Pictures Entertainment as vice president and general manager of Columbia TriStar Interactive.
In her new position as vice president of interactive services at Sony, Keeler will oversee an alliance between Yahoo Inc. and Sony, which are working together to develop what Keeler said will be a co-branded Web site serving as “a gateway into the world of Sony.”
“I was always in some ways an accidental VC,” she said. “It was an amazing opportunity to learn about finance and early stage technology companies.”
It was also getting tricky, as firms like Redleaf began steering away from consumer-oriented entertainment plays and focusing more complicated and harder-to-find core technologies.
“Ultimately, I realized that I wanted to get back into media and entertainment, but venture funds are not pursuing those,” Keeler said. “I remember sitting in meetings about optical networking and I would be lost in a few minutes.”
Will other entertainment executives who jumped on the Internet bandwagon follow in her footsteps?
“I think that bright, shiny, anything-is-possible era is over,” Keeler said. “A lot of people that came into new media fields that wanted to get rich quick are realizing that it’s a lot harder than it looked.”
Insight Into Banking
Just after Digital Insight Corp. announced its second quarter results late last month, the stock was downgraded by two different securities firms. Deutsche Banc Alex. Brown cut Digital’s rating to “market perform” from “buy” and J.P. Morgan downgraded the company to “long-term buy” from “buy.” That’s surprising, given that the online banking services provider more than doubled its revenues and narrowed its net losses.
So what gives? According to DB’s Richard Zandi, the good news about the company’s revenues has been substantially priced into the stock. He set a price target of $14.
One other concern, he said, is that most banks that are going to adopt Internet banking already have selected another kind of solution.
If that’s true, Digital Insight will have to enter what Zandi called “the replacement cycle,” in which the company goes aggressively after potential customers with existing Internet services.
The banking industry’s frenetic mergers and acquisition activity is another potential weakness. Almost every time a bank gets acquired, Digital Insight loses a customer, Zandi said.
But Digital Insight is one of the few business-to-business plays in L.A. that enjoys strong revenue growth. As of June 30,it had contracts with 1,336 financial institutions.
Chief Executive John Dorman dismissed Zandi’s comments. Most regional and community banks, he said, are thriving and multiplying, taking customers from top-tier banks.
“When Bank of America or Wells Fargo merges and become bigger, they become more difficult to deal with for customers,” Dorman said. “So customers switch to smaller banks.”
As for those smaller banks already having Internet services, Dorman said “roughly 50 percent” have the services. “There’s a huge untapped market out there,” he said.
Dorman also took Zandi to task for writing in a recent report that Digital Insight has not been spending enough on research and development.
“He says we’re under-investing in R & D; and I passionately disagree,” Dorman said. “We’re spending more on R & D; than our next five competitors combined. We’re investing $20 million this year in R & D.;”
Creative Retrenchment
The business-to-business sector has not been as fruitful for Creative Planet Inc. It was only last December that the L.A.-based supplier of technology resources to the entertainment industry scored $30 million from U.K based United Business Media PLC. Now, in what appears to be an act of desperation, the company said it is attempting to raise a fifth round of $6 million from previous investors.
In four rounds of financing, Creative Planet has raised more than $100 million, not enough to keep its workforce intact. The company pink-slipped about 25 percent of its 106 workers a few weeks ago. It was the third round of layoffs since December.
It has also put up 40,000 square feet of its 87,000 square feet of office space for sublease.
Many of the recent changes coincide with the company’s hiring in January of Kelyn Brannon as chief financial officer. She has since been appointed president.
Company representatives did not return calls last week.
Staff reporter Hans Ibold can be reached at [email protected] or (323) 549-5225 ext. 230.
