Limelight Networks and Panther Express Each Announce Major Funding Rounds

Six million dollars here. $130 million there. What’s a few bucks among venture capitalists? While we might not be seeing a repeat of the money-throwing days that preceded the dot-com bust (and thank goodness for that), two announcements this week should serve as proof that digital video is now fulfilling the promise that so many of us have seen in it for years.

"This is good news for the sector, and a validation that there is a serious transformation underway," says Limelight Networks co-founder and chief strategy officer Michael Gordon of the $130 million equity financing round it just completed with Goldman Sachs Capital Partners. That's one of the largest venture capital investments in any sector during 2006, according to PricewaterhouseCoopers' MoneyTree Report. Limelight has posted 11 straight quarters of profitablity, and its revenue for the first half of 2006 was more than $25 million.

Also announced this week was the completion of a $6 million round of private equity financing by Greylock Partners in Panther Express, a relative upstart in the CDN world. The company was founded in 2005 by Kevin Ryan and Dwight Merriman, former CEO and CTO of DoubleClick, respectively.

"This is a very big market, and most CEOs will tell you there aren’t enough CDNs" says Ryan. "The fundamental thing we’re selling is bandwidth, and as bandwidth demands have gone way up, the number of CDNs has gone down."

While Gordon says that he’s seeing promising growth across all content sectors, he point to video, gaming, and social media sites as the strongest growers right now. Limelight’s customer roster reads like a who’s who of today’s hot online content, including MySpace, YouTube, and Microsoft Xbox Live. "Gaming doesn’t get the same kind of press that video does, because it’s not something that people can relate to the way they can to video on their televisions. But it’s huge."

Ryan says Panther Express has added 20 new clients in the last three months, and will announce many of them in September. According to its website, Panther Express’ current customers include fotolog.com and blip.tv. "We’re aiming at smaller customers, many of whom want more than one provider," says Ryan, who adds that running Panther Express isn’t so far afield from running DoubleClick, which he called "a CDN for ads. We’re very close to the market and technology, and we’re thrilled that Greylock was interested in us again." (Greylock also funded DoubleClick.)

As for Goldman Sachs, one of the top 25 in the S&P Index, Gordon says that the firm conducted extensive due diligence leading up to the funding. "Goldman do careful checks with customers and technology experts, and we’re pleased we liked what they saw in Limelight," he says.

Goldman Sachs’ investment in Limelight may come as a surprise to industry naysayers who thought that Limelight’s fundraising potential might have been dampened by the news in late June that the Limelight was being sued by rival CDN Akamai (AKAM) and the Massachusetts Institute of Technology accusing Limelight of patent infringement. "Limelight in no way infringes upon any intellectual property claims," says Gordon. Representatives for Akamai did not respond to requests for comment on the lawsuit.