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A Guide To Smarter Ad Tech Investing; Last Chance To Invest In Fund 1; And Female Investor Group Launch
Your 10-Point Guide To Savvy Ad Tech Investing
It’s been a busy few weeks for FPC. We hosted our MadTechMoney event at the end of October.
Over 200 founders and investors congregated in central London to discuss all things ad tech and money. It was a top-class afternoon of in-the-weeds discussion.
We will be posting videos on our soon-to-be-launched YouTube channel. Stay tuned for those video updates.
It would be a herculean task to even attempt a synthesis of the world-class content that came out of the recent MTM conference.
FPC has nevertheless taken it upon itself to distill this incredible hulk of peerless MadTech thinking into a handy digestible 10-point investment listicle - a sort of guide to how to invest sensibly in our wonderfully messy sector (outlined in full below).
$1 trillion makes ad tech a good place to put money to work: The global advertising market is set to hit $1 trillion in 2024. Even if the vampire squids (Meta, Amazon, Google, and Apple) leech off a few hundred billion, it still leaves a huge addressable market. And let’s not discount the other $4 trillion in the marketing segment. Those numbers speak for themselves.
$9 billion European M&A, an investment signal: M&A might be a little off this year, but there are deals still being done. Over the past 3 years, our M&A tracker has identified nearly $9 billion in European MadTech transactions. It’s an incredible data point. There is money to be made in this industry. You just need to work with trusted experts like FirstPartyCapital to see where the opportunities and outcomes are sitting.
PE hungry for ad tech deals: PE accounted for 33% of the deals over the past 3 years. But this segment of acquirers wants to do more deals. FPC is actively engaging PE firms across Europe and the US. We are not only educating on trends but also bringing them deal flow. Someone needs to buy our companies. PE has never been a better buyer.
You cannot scale without managed service: There are some exceptions to this generalist rule. Like it or not, the reality is that media spending greases the wheels for growth and scale. Those plowing that lonely SaaS furrow are in a tough spot. You can always get creative around how you identify revenue. TRR (transactional recurring revenue) is always a good accounting euphemism for SaaS revenue. Remember, readers: it’s not quite media and not quite SaaS - but ultimately TRR might get a decent multiple on top-line revenue.
Always the buy-side: This is a fundamental rule outside the US. The buy side has all the money and the scale. Publishers are not flush with cash - nor have they any meaningful scale. They cannot afford SaaS-based products. Their preference is to get a fat cheque at the end of the quarter. How do you think chum-box ad tech still prospers? There are some rare exceptions to this rule. Ultimately, invest in the buy-side.
Love utility ad tech: Some parts of ad tech get overlooked because they are just boring. But FPC loves boring areas of our business because it makes money. We are heavily invested in utility. And you will be seeing a lot of that in 2024. Boring FTW.
ROW, an opportunity not a headache: Americans often refer to the 7.7 billion people living outside the US as ROW. When you feast on the fat of the land - that is the US - a fragmented global market just isn’t that appealing. It’s just too hard of a problem for many US firms. That leaves the door ajar for more nuanced models. Ad networks and sales houses are strong in non-US markets. Instead of trying to put boots on the ground, think of enabling those sellers. Companies building with this strategy in mind will win.
Beware the AI hype: It’s difficult not to get sucked into a zeitgeist when it gets going. AI is the latest meme in investing. The business media can’t stop talking about it. The parlor trickery of ChatGPT has dazzled the general public, fuelling the hype cycle. Investors are piling in. There is no doubt AI will have some impact - but it’s more iterative than transformational. It will be additive in ad tech also, enhancing existing offerings rather than causing outright disruption. Where will the value be captured? Most of the LLM will become commodity. The only winners here will be the data providers (powering LLMs), server providers, and chip makers. Basically, big tech wins. Investors beware.
A cookie/ID depreciation hedge: The industry foolishly over-indexed on Chrome for data-driven buying, tying itself inexorably to the fate of 3rd party cookies. And as Google kills off that id signal, we now find ourselves once again at its mercy. FPC opted not to invest in IDs, ID graphs, or solutions dependent on the goodwill of Google et al. We invested in attention, context, and future-proofed targeting and measurement solutions.
Invest in FirstPartyCaptial: Can you believe this is rule number 10 instead of rule number 1? Neither can we. The third principle of stoicism is: know thyself. FPC is focused on non-US ad tech investment. We invest in technology, ad networks, and utility ad tech powering a $1 trillion business. We understand the game. We know the economics of media. We have the network and the tools to affect outcomes. We are here to make money. In short, we are the go-to for smart capital allocation in ad tech.
Fund 1 Closing In Early Q1
And now the end is near. We are about to bring the shutters on fund 1. We have already raised $12 million, and we aim to close at $15 M. We have our sights on the remaining 3-4 million. We expect to close at the end of January
This is a call to investors looking to get in on this fund. Click the link below if there is any interest in putting money to work. Our latest fund update is available here: https://docsend.com/view/526ihqyche23kq36.
Launching Female Investor Group
There is still a dearth of female investors in ad tech. Our fund has a lot of senior and talented female LPs but it is still not representative of the gender mix.
As a first step in addressing this underrepresentation, we have launched a networking group for female investors in the ad tech & martech industry.
The focus of the group is on investing, how to get started, and tips from insiders. The WhatsApp group is available here - https://chat.whatsapp.com/IMnNPrrtIb59QBqvlcEyC3.
We will be hosting a networking event in London in the new year.
We encourage you to invite relevant industry contacts to join the WhatsApp group. This could be women who are already active investors or those who would like to learn more about the fundamentals of VC and angel investing.
FPC will have more on the initiative in the next newsletter edition.
Have a great weekend readers.