Elemental Technologies Grabs $13M to Expand in Video Processing

For your average digital consumer, Internet-connected video is no longer a revolutionary thing. It’s now simply a staple of the modern media diet, and one that will get even more ubiquitous as consumers gobble up the latest generations of smartphones and tablets.

Things are a little different, however, for companies that built their video expertise in the TV era. From the studios that produce content to the cable and satellite providers who send it around the globe, there’s still a lot of reliance on older technology to pump those shows into your high-definition flatscreen.

“There’s multiple billions of dollars a year spent today on legacy video equipment,” says Sam Blackman, CEO of Portland, OR-based Elemental Technologies. But it’s clear that the future is tied to delivering video over the Internet—the kind of delivery that Elemental’s products help to supercharge.

And as of today, the company officially has another bundle of cash to help it compete in that arena: a $13 million Series C round led by Palo Alto, CA-based Norwest Venture Partners. Previous Elemental investors General Catalyst, Voyager Capital, and Steamboat Ventures also participated in the round.

Elemental last raised venture financing two years ago, and still had most of that money on its balance sheet, Blackman says. While the company wasn’t out looking for another round of VC, Blackman says the money will help Elemental speed up its plans to open more overseas offices and expand its product lineup.

The company, founded in 2006, crossed the $10 million mark in annual revenue last year, Blackman says—triple the sales of 2010. Elemental isn’t cash-flow positive quite yet, but “we could stop hiring 20 people a quarter and very quickly be there,” he says.

Elemental’s core offering is software that allows video companies to quickly customize their content for all of the various devices that a consumer might use to watch video. A customer like HBO, for instance, can get its shows and movies all lined up at the server, ready to stream through its app to a viewer, no matter if they’re on an iPad, laptop, or some other device.

Traditionally, Elemental’s service has come bundled in a custom piece of server hardware, which scored innovation points for using high-powered graphics chips like the kind used in higher-end video games. Those Elemental boxes can be installed in data centers to speed video down the line to viewers. Elemental also offers its software as a standalone product that can be installed in a customer’s server hardware, or as a cloud-based software service.

Blackman says the new round of venture financing will allow Elemental to add new products that help video providers customize their content even further, adding anti-copying software or specializing for the different types of video player software used by competing operating systems.

This piece of the video-delivery network, known as “stream processing,” speeds up online distribution by doing the last bits of software customization further along in the network. If those pieces of the puzzle can be added at an “edge” server rather than at the core, where the original video starts its journey, then distributors can make their networks more efficient.

“It allows them to use Elemental as essentially a one-stop shop for all their IP [Internet protocol] video delivery needs,” Blackman says.

That’s important for Elemental to stay competitive, since other companies tackling the video-distribution market have started to offer or work on stream-processing services. And Elemental does face some big competition, including public companies Envivio and Harmonic, and tech giant Cisco, which bought another small competitor last year.

“The beauty of IP-based technology is, the best product wins. It’s not your sales force, it’s not who you know. You get a product in the lab, and you can shoot it out against the competition,” Blackman says. “As long as we ensure that we’ve got a best-in-class product … we should be able to compete very effectively with these much larger organizations.”

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