Man bites dog: Small VOD technology firm gets financing

It’s a 21st century man-bites-dog story. A small start-up video-on-demand (VOD) servers and solutions developer in Bellevue, Wash., has nailed down $26 million in financing from a series of investors that include round leader Canaan Venture Partners, Frazier Technology Ventures and ProVen Private Equity.

MidStream Technologies will use the funding--which comes on top of previous rounds from Polaris Venture Partners, ARCH Venture Partners, Xilink and Fluke Ventures--to support ongoing development of its VOD servers and expand its business development, sales and marketing efforts.

As a corollary to the new funding, Mark Mangiola, a venture partner with Canaan, joins MidStream’s board of directors.

Just getting the funding was an event.

“The environment is difficult,” said Edward Huguez, MidStream’s president and CEO. “They look at everything, and they want to make sure that everything is turned over before they make a commitment.”

In this case, they even added cable industry veteran Mangiola to the board.

“I’m excited. [Mangiola] knows the cable business and has been a general manager of cable systems,” said Huguez, noting his past experience with Cablecom, before that MSO was sold to Time Warner, and his stint as president of @Home Solutions before the merger with Excite.

MidStream currently is in six trials and has two more commitments from top-10 cable operators next month, Huguez said. Additionally, it has been heavily tested by both cable and telecom operators with the telcos doing the most extensive work.

“They are more staffed to take on new technologies, so early on, when we were beginning to test our server, we had great success with telephone operators really having a desire to test it … to help us get to the state where it was a product that can be sold on a wider scale,” he said.

Testing is one thing, but telcos can test to death and drain companies of money without ever committing to a purchase. MidStream’s testing must bring purchase orders “otherwise it doesn’t make sense,” said Huguez.

The tests and trials, he said, will confirm what the company believes – and what the investors are banking on: MidStream has a workable technology to deliver video-on-demand services for both cable and telephone companies.

“We have the lowest cost-per-stream for delivering on-demand video. We have the most reliable box. And, it’s the smallest form factor, which translates into the lowest cost of ownership when you roll out in a large way,” said Huguez. “That’s why our investors came on board.”