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SAIF Partners backed Online video portal iStream.com has called it quits, after failing to raise its Series B round of funding. Last week, there had been rumors that a VC backed mobile video service was in talks with iStream for an acquisition, but both Ramachandran and representatives of the other company had denied any deal when MediaNama had checked with them.

A notice has been put up on the site by its Founder and CEO Radhakrishnan Ramachandran, informing users that iStream is shutting down. The company claimed that it had advertising traction and 6.1 million uniques and 12 million video views in April 2013, but due to issues of insufficient capital, had to shut shop. Ramachandran writes that “While one could debate the best business model for a digital media product like ours – whether India is an ad driven digital economy; or whether the market is ripe for experimenting with a subscription model, the fact remains that online video is a capital intensive business, requiring patience and cash flows. This is not unique to us or India, that is how it has been everywhere.” iStream had raised $5 million from SAIF Partners in November 2011.

It appears that Ramachandran plans to start up again. The notice asks his team whether they are ready to start all over again, and there’s more to follow “One leg of our journey may be over before we reached the destination. Rest assured, the second leg of that journey begins, and this will be one that will home into its destination.”

This week has seen two fledgling content businesses call it quits – Flipkart pulled the plug on Flyte, its paid music download service, a couple of day ago (although from what we’ve heard, they didn’t back it adequately), and now iStream, a free, advertising supported video business has called it quits. This begs the question – can a content business in India be profitable if it isn’t on YouTube, with Google taking on a bulk of the costs?

Notice on iStream.com

“We can’t believe this is happening! How many teams have cracked the ‘Video on Demand’ space and built a premium online product like ours. Everyone we meet says “iStream rocks”. Then why are we shutting down?”.

My team was heartbroken. They just couldn’t rationalise the situation. Neither could I.

We were by far the undisputed leader in the premium online video space in India.. Our numbers were soaring – in March we crossed 6 million unique users; and over 12 million video views. We had marquee brands advertising with us. And more!

All this, in just over a year.

And now we are forced to shut istream.com down – something we built with so much passion, emotion and honest sweat.

I don’t have all the answers as to why it had to end this way.

We had built a great technology and product team backed by a solid digital media team. We had millions of passionate users coming in every month, and rising by the hour. We had top brands endorsing our product –giving us premium ad dollars.

While one could debate the best business model for a digital media product like ours – whether India is an ad driven digital economy; or whether the market is ripe for experimenting with a subscription model, the fact remains that online video is a capital intensive business, requiring patience and cash flows. This is not unique to us or India, that is how it has been everywhere.

Hulu, one of the global leaders, could reach where it is today only after 6 years (against little more than a year for iStream) and after raising over a 100 million dollars (against 5 million dollars for iStream) in funding.

In that sense, the journey to build a great video destination had, just begun. We did so many things right. We also knew there is so much that could have been done to build iStream to the levels we dreamt of. And we were on that long and winding road.

So, to all my content partners, to all the brands which came on board, and more than any one else – to my users, millions of them who came looking for their favorite TV shows, that old classic movie or the latest news, day in and day out, and found it -a heartfelt thank you; but also an apology!

And to my team – the best I have worked in all my life. It was an honor and a pleasure. Thank you for being an integral part of the dream. Thank you for reposing your faith in me and Dhanu.

Guys – are you ready for starting all over again?

One leg of our journey may be over before we reached the destination. Rest assured, the second leg of that journey begins, and this will be one that will home into its destination.

The dream continues….

Cheers,

Radhakrishnan Ramachandran

Founder & CEO