Welcome, reader, to Fund 2 launch day - or FTLD, as we christened it internally. We are officially kicking off our £50 million fundraise, and we have some big news already…
We are delighted to announce that Index Exchange is becoming a cornerstone investor in Fund 2 and is making a multi-million-pound investment.
You can read our coverage in Digiday here: https://digiday.com/media-buying/inside-index-exchanges-multimillion-dollar-start-up-investment-pact-with-firstpartycapital/.
This is a calculated and astute bet on independent ad tech's future and what we are building at FPC. And what better partner than Index Exchange?
Andrew Casale, Index CEO, is on the latest edition of The FPC Podcast (embedded). He outlines why Index Exchange is investing in FPC and the opportunity for ad tech going forward..
Index Exchange has evolved from ad net to SSP, becoming one of the most important ad tech infrastructure companies.
If infrastructure seems like a vague term, it’s not meant to be. There is huge amounts of invoation in ad tech right now. You need “enabler” tech to provide the tools and platform for new entrants to build and innovate. Index has become that type of company. And its substantial investment in FPC further underlines that evolution.
Strategic investing is a trend we are seeing more of: both public and private ad tech companies are increasingly looking to get earlier access to our companies and understand trends outside the US.
Why is this happening now? To answer that question FPC has collated a list of 7 key reasons why strategic ad tech companies are looking to invest in FirstPartyCapital Fund 2:
Investing in companies reshaping ad tech: From AI to the Google breakup to supply chain evolution to shifting industry economics to (radically) changing consumer behaviour, ad tech is experiencing an epoch-defining upheaval. FPC is investing in companies that are building for the new landscape. We are at the bleeding edge of it all. Strategics are increasingly looking to be part of that,
Knowledge is power: The advertising market outside the US and China represents about 45% ($450 billion) of the total global ad spend. It’s a pretty big chunk of change. But how much do you know about it? How does it work? What trends do you see? What new ad tech companies are emerging? How could FPC portfolio companies help scale your business outside the US? These are all tough questions to answer. Investing in FirstPartyCapital will give you exclusive insight into the RoW market that you are unlikely to find anywhere else. We have already been doing this with some strategic LPs in Fund 1. With Fund 2 we will step it up, producing more regular reports for all strategic investors - informed by or own team and external partners.
Understanding a $450 billion market: The ad tech world is primarily viewed and understood through an Americanised lens. Privacy and regulatory compliance are not at the front of anyone's mind in the US. Scaling across this fragmented market is doable but challenging to the majority. It's insanely hard to make ad tech investment work outside the US when you don’t understand the market. This complexity will only be exacerbated by challenging macro economic trends. That's why you need investors living it day-in day-out to ensure you are plugged into the best and brightest in this part of the world. Diversification has never been more important.
Seeing all the deal flow: FPC always gets asked about deal flow. The answer is that we see everything. People are coming to us, having said no to PE and generalist VC approaches. These are always ad tech people. That’s because we are ad tech people, to the bone. We love this industry. All its TLAs. All its economic quirks. Many in “venture capital” miss the fundamental importance of ad tech. Even in the frothy age of AI, LLMs, and ChatGPT, ads will still be required to monetise. Everything leads back to ad tech. That’s what we love being the beating heart of ad tech investment outside the US - so much opportunity and whitespace.
Fund 2, an evolution of our thesis: In Fund 1, we focused on data and the picks-and-shovel thesis. That thinking will continue into Fund 2. However, our approach is evolving to attack MASSIVE opportunities in CTV, pharma, measurement, retail media, OOH, audio, retail/commerce media, data distribution, data signals, and platform-based tech. We will continue investing in some of the great companies in Fund 1, as there are only a few companies worth investing in and scaling.
A game of skill, not chance: It’s probably worth noting that we are not a generalist VC, throwing cash around hoping for something to stick. We think about outcomes before we invest. Why build this? What problem does it solve? Who buys this? These are questions we ask ourselves before investing. From early on in the life of Fund 1, we have been the lead investor in investment rounds. We tend to own 10%-30% of a company. We sit on the boards of most of our portfolio cos. We are shaping the company's early years. This has informed a lot of our own internal strategy. The launch of FirstPartyStudio, for instance, allows us to help existing companies with product development. Our soon-to-be-launched FirstPartyFinance will help our portfolio companies with the necessary cash flow (non-dilutive debt finance) as they grow. For us, we want to breed winners, not luck out on some AI zeitgeist trend. The three pillars - fund, studio and finance - allow us to “moneyball” the s*** out of ad tech. And it is working.
Partner to scale or buy: More and more strategic companies are seeing the value of early access to our companies. Bedrock Platform, for instance, is filling the void of Beeswax, IPONWEB, and Appnexus. It’s about to win a big piece of business, and its pipeline is disgustingly fat. Bedrock offers the opportunity to distribute to a global client base. For instance, a data company or SSA (Super Signal Aggregator) could use Bedrock to distribute its product to a broader audience. The opportunity to scale and productise with our companies is unique. And if you like them, you can buy them. Try before you buy. Only via Fund 2, naturally.
If you are working in corporate development at a strategic ad tech company, get in touch - it's time to get in the game. If you are not making a strategic bet now, you are probably losing out in the long run.
We will get to do this all again on Friday, with another strategic LP announcement. Have a great ad tech day.
