Armed with a $500 million war chest, Advance Publications, owned by the billionaire Newhouse family, has been quietly looking outside the Condé Nast tower to place bets on startups in the digital and tech world.
It’s a radical departure for the company that made its money the old fashioned way, in glossy magazines, monopoly newspapers and cableTVholdings.
The investments have given Advance small stakes in a wide variety of operations, from pieces of other magazines to online gaming and Web based shopping sites.
It clearly isamajor departure for the company, which in the past made acquisitions of the all or nothing variety and rarely kept founders around after paying full prices for entire corporations.
Said one exec commenting on the recent dealmaking by Advance, “Nothing’s connected and they don’t have operating control.”
The digital investment fund, which has probably spent less than 20 percent of its capital so far, came fromthe $500 million divestment of Advance’s preferred stock in the cable channel Discovery Holdings in late 2010 and has been gathering steam since Andrew Siegel was hired fromYahoo! in January.
Siegel has an odd portfolio, not reporting to anyone in particular, but rather answering to family patriarchs Condé Nast Chairman S.I. Newhouse, Jr. and his brother and Advance President, Donald Newhouse.
And while Siegel consults closely with Advance Net Chairman Steven Newhouse—Donald’s son and the company’spresumptive heir apparent — he doesn’t report directly to Steve. He also works with various operating heads such as Bob Sauerberg, president of Condé Nast, who had been pushing a digital diversification along more traditional reporting lines within the company that publishes Vanity Fair, Vogue and TheNew Yorker.
“We’re looking to find new ways to leverage the Condé Nast brand in video, ecommerce and consumer events,” said Sauerberg. The new Advance ventures are taking a step beyond that traditional approach, however.
Yesterday, in the latest bet, Advance revealed it was a secondary investor in Visible Measures, a Boston-based social video analytics firm that closed on a $13 million round of funding led by DAG Ventures. Advance made an investment believed to be in the seven figure range.
Visible was founded in 2005 by Brian Shin, now 36, as a graduate student and has revenues in the eight figures. It supplies information on video ad traffic tocustomers from ESPN and You Tube to Unilever and Ford and tracks ads that have gone viral.
Sometime in the next week, the Condé Nast unit of Advance is expected to announce that ithas taken amajor stake inModa Operandi, described as an “online trunk show” that will mesh well with Web sites Vogue.comand Style.com.
NEA Ventures was the lead investor in Moda.
In the past, Condé made a total acquisition at a full price—and witnessed the immediate exit of founders invirtuallyall its deals.
Now, Newhouse seems content to be a minority partner on deals that others have scouted. One executive speculated that Condé might be hedging its bets, waiting to see what clicks, with deals that give it rights of first refusal downthe road.
“We’re looking at the way commerce is changing,” said Siegel. “We’remaking investments on how technology is changing advertising and how consumer habits are changing.”
One of the biggest moves in recent months on that front involved spinning off Reddit, the social media site acquired by Advance and put under the Condé Nast umbrella, into a separate standalone entity. One reason for the change is that Reddit is said to be searching for a new CEO now that the founders have severed all ties. In the high tech venture world, most CEOs demand equity in operations. Granting that interest, however, had been very much out of character forCondé Nast and parent Advance.
Siegel said he’s making deals “anywhere from $100,000 for seed ideas all the way up to multiple tens of millions for startups that are a little further along.”
One of the biggest investments from the war chest was believed to be somewhere around $30 million for part of the action in Raine Partners, founded last year by former investment bankers Jeff Sine,onetime vice chairman of UBS, and Joe Ravitch, an ex-managing director of Goldman Sachs.
‘It gives us insight on deals, allows us to participate in deals with smart people and to potentially gain some equity,” said Siegel. Among the “smart people” in the $390 million Raine Partners fund is Middle East money from Dubai Mubadala Development, which has a 9 percent stake.
Others who have committed to Raine include MTV founder Tom Freston, Ari Emanuel and his William Morris Endeavor talent agency, and Ted Forstmann, head of sports marketing group IMG.
So far, Raine’s invested in Jagex, an online game developer, and Open Sky, an online shopping service.
Advance has also popped into the seed-stage investor fund, Trigger Media, headed by Andy Russell, a former partner of Bob Pitman’s Pilot Group, an early investor in the fashion site Daily Candy and online game developer Zynga.
Last week, Fortune said Trigger raised about $23 million; Media Ink learned that Siegel directed another sevenfigure investment from Advance into the fund.
kkelly@nypost.com