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July 14, 2014
The U.S. venture capital funding market has been on a tear. But what is going on specifically in the Marketing Technology & Services sector?
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Editor’s Note: One of the major sources of insight into thinking about the future of any industry is watching capital markets. It’s easy to get tunnel vision when our heads are down working to complete the tasks in front of us, but that is a dubious luxury during times of rapid change. Where money is flowing in and around our industry should be something all leaders in our space are cognizant of on a regular basis.
Following what investors are betting on (especially large VC firms) as well as M&A activity is a powerful tool for foresight. In the MR space there are only a handful of firms that pay attention to this: Cambiar Consulting (their Capital Funding Index is required reading), Forrester, and investment bankers England & Company. I also pay attention to Outsell and their work around market sizing and segmentation to help look at total size of MR and closely aligned or overlapping industries. There may be a few more, but these are the folks I am aware of and pay attention to.
At IIeX in Atlanta we invited Simon Chadwick from Cambiar, Harry Henry of Outsell and the author of today’s article, Corey Luskin of England & Company, to present on their views of the marketplace and where it is going. THey were amazing sessions and chock full of great information for everyone in the MR value chain, especially entrepreneurs and investors. I asked Corey to build on the themes he presented on in Atlanta in what I hope will be the first of a series of posts exploring this macro view of trends from an investment perspective. The result is today’s post: it is an important one and I think you’ll enjoy it.
By Corey Luskin, England & Company
The U.S. venture capital funding market has been on a tear. The first quarter saw roughly $10 billion in VC investments across all sectors, making it the busiest quarter in several years. The second quarter shattered this level with almost $14 billion invested. It’s fair to say that the early-stage investing scene is brisk.
But what is going on specifically in the Marketing Technology & Services sector? At England & Company, we track this activity. It can give advertisers and marketers a feel for the pace of new innovation in the industry. This directly impacts how these professionals will do their jobs in the future. The data also provides new technology and services companies (who might be seeking investment or acquisition) with an understanding of where the commitments are being made.
New venture investment into Marketing Technology and Services companies has mirrored the overall acceleration. In 2014 so far, more than $1.7 billion in new venture capital has been invested into early-stage companies that, one way or another, are trying to transform the practice of marketing.
This $1.7 billion practically matches the total level in all of 2013 and we’re only halfway through the year. This year will inevitably cap off a growth trend that has been underway since the markets began their recovery in 2010.
Who received all this capital? It went to almost 120 companies ranging from seed-stage startups through later-stage, pre-IPO success stories. Common sense tells us that there is no practical way for marketers to interact with this many tech and service companies, particularly since the incumbents are also innovating. Many of these 120 will fail, some will be acquired and consolidated, and a few will emerge as new leaders in their respective marketing niches.
But what sorts of of new companies, specifically, are we seeing in this mix? It’s an assortment that we can broadly drill down into. It’s impossible to delineate categories that will neatly separate every company, but we have been grouping them as follows:
Anyone that hasn’t been living under a rock will expect that these categories are not all getting equal treatment and, in fact, this is exactly what the numbers show:
A few things emerge from this segmentation:
This divergence between “old” and “new” is also evident the market when you look at M&A activity, Private Equity activity and public company valuations. We covered these topics at the IIEX Conference in Atlanta a few weeks ago and can come back to them for an update another day.
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The views, opinions, data, and methodologies expressed above are those of the contributor(s) and do not necessarily reflect or represent the official policies, positions, or beliefs of Greenbook.
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