Lessons From The MediaMath Collapse; MadTechMoney London Returns On October 31; Timelines On Fund 1 Close
What We Can Learn From The MediaMath Collapse
MediaMath filed for bankruptcy last Friday after it failed to find a buyer. Lara O’Reilly has written a piece on “the last days of MediaMath”, an excellent overview on the company’s desperate attempts to save itself.
It’s a really sad end to a great ad tech brand. Good people have lost their jobs. Ad tech vendors and publishers are owed the guts of $130 million that might never be paid. Value has evaporated for founders and shareholders. And nobody is happy about this. It’s a shit show all round.
But there are lessons to be learnt here for everyone in ad tech.
Before we outline them in full let’s just clarify one thing: this listicle is not an exercise in some crass posthumous schadenfreude (because nobody needs that nonsense ever); it’s more a high-level FPC reflection on what we as investors and the industry at large can learn from this sorry episode.
Here are a few takeaways that stood out after the announcement last week:
Know when to hold them, know when to fold them: Hindsight is a great thing: you always have the luxury of thinking you know better after the fact. Anyone can look like a genius. However, if someone offers you a billion dollars in ad tech, you should never turn it down. Remember once you cash out, you can always go again if you choose to.
Taking too much money on: This is probably a lesson for most ad tech companies. How much money do you really need to scale? MediaMath had raised $600 million in funding (debt and equity). At some stage the numbers just don’t add up. Our thesis is to raise up to series A, and then look for that trade sale. Everyone wins in that situation: founders and investors.
There is only one TTD: This should be plastered over the walls of every ad tech startup and tattooed on the foreheads of every founder. The Trade Desk is an anomaly. It has a lopsided growth stock valuation that CANNOT be used as a valuation benchmark or north star. TTD has a once-in-a-generation CEO that can not only build amazing products but also sweet talk Wall Street. TTD is an outlier. So, let’s all stop chasing ad tech rainbows.
Era of cheap money is over: Scaling your business on cheap debt is finished. MediaMath’s credit line with Goldman Sachs was a huge drag on the company’s financial well being. Profitability (not scale at any cost) is now the thinking that everyone wants to hear.
PE money can be good and bad: It’s easy to blame faceless PE when things go wrong at ad tech firms. PE is now a key acquirer. But you want to make sure that your PE firm understands your ad tech business, and you enter into a deal in a position of strength. Otherwise, it can go sideways very quickly.
Never go round the agencies: One of MediaMath’s biggest failings was trying to go around agencies. Sure, it had the Havas partnership, but it probably went too early on its brand direct strategy. TTD capitalised, giving them a beach head into the hold cos and big indies. FPC advice to portfolio companies: never try to disintermediate agencies on the buy-side.
Not a disaster for ad tech: While the MediaMath bankruptcy is a sad event for the industry, it is not existential. While MediaMath was once a trailblazing programmatic leader, it was at the end a faded star. Ari Paparo (an investor in FirstPartyCapital) made a stab at calculating the media flowing through the MediaMath platform, settling on a number around the sub $500 million mark. That will likely get mopped up by Google, Yahoo and The Trade Desk. There is debt owed to the sell-side - a number that the industry can digest over a period of time.
MadTechMoney London Returns On October 31
MadTechMoney London is returning on October 31 to the Conway Hall in Holborn.
It is the only conference in the world that brings together ad tech/martech founders and the investment community (private equity, venture capital, corporate development and strategic investors).
Last year we had over 200 attendees, and we are expecting an even bigger crowd this year.
Why attend MadTechMoney?
From seed to series A to growth rounds to exit, MadTechMoney examines the opportunities for start-ups to scale tech solutions in the soon-to-be $5 trillion dollar marketing sector.
Learn from the industry’s smartest and most influential capital allocators as they share their insights on the current investment landscape.
Who attends MadTechMoney?
Ad tech/martech founders
We will be announcing speakers and a detailed agenda over the coming weeks.
MadTechMoney is very much an ecosystem event for the industry: it is open to all investors and startup companies in ad tech and martech (even companies that haven’t taken investment from FirstPartyCapital).
You do need to be invited to come along - so sign up using the link below to get on our invite list.
Timelines On Fund 1 Close
As we reported in last week’s newsletter, we have raised $10 million through fund and syndicate. Our aim for the fund is $15-$20 million.
If you are one of our 3000+ newsletter subscribers, and want to invest, there is still time.
We intend to close Fund 1 at the end of year - with the view of investing in 20 companies in total.
Investing now would allow you to benefit from 3-4 significant mark-ups that will happen over the coming six months. It is an exciting time to be in this industry. Despite the naysayers, there has never been a better opportunity to invest in world class startups and make money in the process.
To find out more about investing in the FPC fund, send us an email on: firstname.lastname@example.org. Look forward to hearing from you.
That’s it for this week. Have a great weekend.