YouTube raising VC funds?

Rumor has it that YouTube -- the popular, Napster-like, video-sharing startup -- is raising funds. I typically wouldn't write about such a rumor, but since YouTube co-founder Chad Hurley has twice cancelled a video interview with me in the last week, it sure seems that something is in the works.

It's not surprising that YouTube would be seeking funds given the traffic this site is receiving.  If activity accelerates, it'll be no time before YouTube burns through its $3.5 million in venture financing. To be sure, YouTube may not be spending as much as some think. Mike Gordon, co-founder of LimeLight, a smaller version of Akamai, says that because YouTube streams short clips, it may be spending between $50,000 and $200,000 to deliver its video. How does Gordon know? LimeLight helps to stream YouTube's video. Media companies would be interested in owning YouTube, but Sequoia Capital's venture partner Mike Moritz won't sell for less than a few billion, so I heard.

Some bloggers have said that Facebook should have taken the $750 million offer. ( I heard from someone very close to the deal that the offer was from Viacom.) Compared to what iVillage went for, it does seem that the prices are getting out of hand. But Facebook is a trusted source, with a very targeted pool of users in specific areas - colleges. That makes Facebook an easy sell to advertisers.