'There are more opportunities based on the number of trends'
We last surveyed VCs about their advertising and marketing investment strategies back in January — which is to say, in a completely different world, before the coronavirus pandemic began to wreak havoc on the global economy.
While there don’t appear to be any comprehensive numbers yet about the effect on digital advertising (which is, after all, still playing out), early data and anecdotes suggest a rapid decline, with some categories of ad spend disappearing entirely.
And as we noted in our previous survey, Crunch base data shows that adtech had already fallen at a roughly 10% compounded annual growth rate over the last five years.
So what does the landscape look like now, and where are the remaining opportunities? To find out, we’ve compiled updated answers from two investors who participated in the previous survey and brought in three new perspectives:
Eric Franchi, operating partner, MathCapital
Christine Tsai, CEO and founding partner, 500 Startups
John Elton, partner, Greycroft
Pär-Jörgen (PJ) Pärson, general partner, Northzone
Michael Brown, founder and managing partner, Bowery Capital
For the most part, they acknowledged the landscape’s challenges — not just the pandemic, but the general maturity of the industry — while also pointing to opportunities in areas like machine learning. As Elton put it succinctly, “Marketing and advertising are not going away.”
Eric Franchi, MathCapital
How much time are you spending looking at marketing tech or adtech startups right now? Are you more focused on one or the other?
Adtech and martech are our main categories as a fund. We selectively invest in categories that might benefit from it (think DTC brands or media) or be of benefit to it (think next-generation CRM or HR tech). But 90%+ of our focus is adtech and martech.
What are you looking for in your next investment?
As always — team first. We look for founding teams with talent, vision and grit. We keep a fairly wide berth in terms of products and categories but we are spending much of our time focused on two themes: the post-privacy era in marketing (i.e. new, cookieless, compliant forms of identity and infrastructure) and future of digital media (i.e. video, OTT, audio, etc.).
How has COVID-19 impacted the adtech and martech investing landscape? Are there still opportunities?
Deal flow is down somewhat, but we are still seeing great opportunities. We have several investments in the pipeline for Q2. The challenges right now are similar to other sectors: spending time getting to know teams and calibrating expectations for growth in a Zoom-only (for now) world.
What kind of advice are you giving to your portfolio companies?
Right now, two months post-lockdown, most adjustments have been made to budgets and plans, teams (and customers) are adjusted to being fully remote and things have somewhat stabilized. Now is the time to get teams focused on sales and marketing. It’s a unique and rare time to outflank larger, slower-moving competitors and adapt to the market.