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SnagFilms snags $7M investment to continue expansion

By Steven Overly,February 05, 2012

SnagFilms chief executive Rick Allen at his District office. The companys… (Jeffrey MacMillan/Capital…)

SnagFilms, the digital distributor of independent films and documentaries, closed on $7 million in venture capital and debt financing last week, the last money executives said they should need before the company turns a profit.

The infusion of cash, which comes largely from existing investors, will continue to fuel an expansion that began last year, said chief executive Rick Allen. SnagFilms has added to its list of movie titles in recent months and can now be found on a broad slate of Web sites and electronic devices.

That distribution has been key to the District-based firm’s growth strategy. SnagFilms has built applications for most tablet computers, smartphones and connected TVs. It’s also developed rental agreements with online video purveyors, such as YouTube, Amazon and Hulu.

“Right now, we have what I believe to be the broadest footprint for independent films,” Allen said. “All of these devices, all of these platforms, we can put films anywhere that there is an audience.”

Unlike its mainstream counterpart Netflix, which is funded largely through membership fees, SnagFilms has two separate revenue streams: viewers who rent films online or advertisers who subsidize free versions.

More modes of distribution increases the opportunity for revenue — but at a cost. Development across so many platforms has not been a cheap undertaking for the company, which got its start in 2008. It raised $10 million from Comcast Ventures and New Enterprise Associates last year.

Allen said the latest money is “our last anticipated private round for purely operational and internal investment purposes.” He predicts the firm will post a profit by the end of 2013.

The deal also adds two new investors. Terry Semel, a former executive at Yahoo and Warner Bros., has joined as both a financier and board member. David Fialkow, co-founder and managing director of General Catalyst Partners, also invested.

SnagFilms’ existing backers include company founder and Chairman Ted Leonsis, former AOL chief executive Steve Case and his wife Jean Case, the John S. and James L. Knight Foundation, NEA and Comcast.