Smoothing Out Jittery Internet Video, Elemental Technologies Looks to Reinvent How You Watch

If you’re like most people, you’re viewing a lot more videos on your computer or mobile device these days. But say you want to watch CNN’s live coverage of the U.S. presidential inauguration next week on your BlackBerry, iPhone, or laptop. You might not be able to—or you might get a jittery, unclear picture—because of mismatches in Internet video formats. Wouldn’t it be better if you could just watch any video on any device, across any network? That’s the idea behind Elemental Technologies, a Portland, OR-based startup backed by top investors in New England and the Northwest.

Back in July, I wrote a piece about Elemental’s $7.1 million Series A funding round, co-led by Seattle’s Voyager Capital and Cambridge, MA-based General Catalyst Partners. But the story of Elemental deserves a closer look, and although it’s still early, the company makes for a compelling case study. The tale involves a key strategy shift, cutting-edge technology, and a formative meeting with an investor on a sunny Portland day (hard to imagine now).

The story begins with Sam Blackman, Elemental’s co-founder and CEO (and a Portland native). After graduating from Brown University and the University of California, Berkeley, in electrical engineering, Blackman went to work for Pixelworks (NASDAQ: PXLW), a semiconductor technology company and Portland institution, in 2000. There, he helped build a display processor for new media, while the company grew to $174 million in revenue. The basic strategy was to take chip technologies used in projectors and apply them to monitors and digital TVs. But after a few years, low-cost manufacturing overseas was making it hard to compete in the mass market.

So Blackman looked to start something new. In 2006, he co-founded Elemental, together with chief technology officer Jesse Rosenzweig and Pixelworks co-founder Mike West, who was Elemental’s first CEO. They got a $200,000 seed investment from Pixelworks to get started. Their initial idea was to build a digital-media company around a specialized chip—one that could do video processing and conversion many times faster than existing methods, and do it reliably.

After a few months of studying the market, however, Blackman and Rosenzweig decided to make a radical switch. A specialized chip would be too expensive and didn’t make financial sense, they thought. Instead, they would harness the power of the graphics processing units (GPUs) already found in many computers and mobile devices, and couple that with specialized software to handle video encoding and transcoding—the methods by which streams of video data are processed into a form your computer can read and play back. Fortunately, the talent pool around Portland was rich with software developers from the struggling chip industry looking for new homes. “All these semiconductor companies had really strong software engineers,” says Blackman.

Elemental’s software approach to video consumption is “pretty revolutionary,” says Erik Benson, a managing director of Voyager Capital and a member of Elemental’s board. “Sam was visionary enough to see that there’s already hardware out there in GPUs for gaming, so let’s apply that to video and image processing…It’s a big idea.”

In 2007, the company amicably parted ways with West, and Blackman became the new chief executive. By mid-year, he was looking to raise more funds. In September 2007, Elemental presented to the Alliance of Angels, and ended up scoring an investment from the Seattle organization, as well as … Next Page »

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