Index Ventures, Europe's best-known high-tech venture capital firm, has bought a small stake in technology online publisher Bestofmedia for 22.5 million euros ($35.4 million) to help it fund acquisitions. Bestofmedia is the world's third-biggest specialist technology online publisher after CNET, which was bought by broadcaster CBS last month for $1.8 billion, and privately owned International Data Group.
Index partner Dom Vidal told Reuters that Bestofmedia, known for its hardcore technology website Tom's Hardware and more consumer-oriented review site Tom's Guide, offered a valuable combination of quality editorial and user-generated content.
"Technology is probably one of the most valuable categories because it is something you touch every day in your life," he said in a telephone interview, naming personal finances, travel, cars and health as other attractive areas. Index said in a statement on July 10 that nearly 80 percent of the world's Internet users surfed websites relating to high-tech information at least once a month.
"This online publishing sector offers strong growth potential both in terms of traffic and advertising investments, as is proven by the recent acquisition of CNET by CBS," it said. Vidal said Index planned to help Bestofmedia expand but would keep its focus on technology, and said Index would likely keep its stake for its usual three to five years. He declined to name the size of the stake, saying only that it was a minority.
Vidal, who ran Yahoo's European operations until last year, said consumers with a keen interest in technology were worth significantly more to advertisers than the average consumer, but declined to quantify to what extent. Index also said it was investing $27 million in Danish video surveillance software company Milestone Systems.
Index, based in London and Geneva, has backed more than 100 start-up companies in Europe and the United States including Skype, which brought Internet telephony to the masses, and open-source database company MySQL. Skype was later bought by eBay for $4.3 billion, while Sun Microsystems bought MySQL this year for about $1 billion.
Vidal said venture capital firms such as Index could benefit from the current slump in financial markets, which was making it more difficult for ambitious privately held companies to raise money by other means such as public listings.
He acknowledged that those same conditions would put pressure on advertising budgets, but said that was not changing Index's view of attractive sectors, which also included e-commerce, social networks, software and so-called cleantech - "a no-brainer".
Bestofmedia, which boasts about 25 million unique visitors per month - compared with CNET's 145 million and IDG's 80 million - makes almost all its revenues from advertising, including generating leads. Like all the companies that Index backs, it is profitable. Vidal declined to say how much Bestofmedia makes in sales but said Index had become interested in the company when it crossed a threshold of about 5 million euros per quarter.