idcee 2013: emerging themes and trends in technology and digital media - alan patricof (founder...
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http://idcee.org/p/alanpatricof-greycroft-partners/ Alan Patricof, a venture capital pioneer, founded Greycroft, LLC in 2006. Greycroft is a venture capital firm, with offices in New York and Los Angeles, focused on the digital media sector. The firm has three funds – Greycroft I, II and III – with combined committed capital of $375 million. Prior to founding Greycroft, Mr. Patricof was the founder and chairman of Apax Partners, Inc. (formerly Patricof & Co. Ventures, Inc.), the U.S. arm of Apax Partners, Worldwide, LP, now one of the world’s leading private equity firms operating in 12 countries with $41 billion under management or advice. During the past 40-plus years, Mr. Patricof has participated in the financing and development of a large number of public and private companies. Companies with which he has been involved at the initial stages are Apple Computer, America Online, Cadence Systems, Office Depot, FORE Systems, Cellular Communications, Inc., IntraLinks, Audible, Inc. and The Huffington Post. He currently serves on the board of Boston Properties and on the Board of Overseers of The Columbia School of Business. Mr. Patricof is a frequent speaker on entrepreneurship, venture capital and social impact investing. Pic's are here: http://www.flickr.com/photos/idcee/sets/ More @ http://idcee.org Follow us on: YouTube: http://www.youtube.com/user/OfficialIDCEEChannel Facebook: https://www.facebook.com/IDCEE Linkedin: http://www.linkedin.com/groups/IDCEE-3940138 Twitter: https://twitter.com/idcee_eu Google+: http://gplus.to/idcee Flickr: http://www.flickr.com/photos/idcee/collections/TRANSCRIPT
Emerging Themes and Trends in Technology and Digital Media
October 10, 2013
2NYC 131010 - IDCEE presentation vf
Agenda
• Greycroft overview
• Investment thesis
• Areas of focus today-Mobile
-Mobile payments
-Video
-Native Advertising
-Connected devices
3NYC 131010 - IDCEE presentation vf
Fund I(April 2006)
•Greycroft I - $75MM•34 investments
Fund I themes:•Adtech, primarily paidmedia
•Social media (B2B, B2C)•Analytics•Online Publishing
Fund II(April 2010)
•Greycroft II - $131MM•56 investments
Fund II themes:•Adtech, primarily owned media
•eCommerce (B2B, B2C)•Gaming•Online Video•Small seed portfolio
Quick history of Greycroft
2006 2007 2008 2009 2010 2011 2012 2013
Twitter iPhone iPadFacebook hits 100M users
Facebook hits 800M users
PinterestInstagram
Fund I Annex(Feb 2012)
•Greycroft I Annex - $12MM
•4 investments to date
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And our newest fund
2013
iPhone iPadFacebook hits 100M users
Facebook hits 800M users
PinterestInstagram
Fund III(January 2013)
•Greycroft III - $175MM•6 investments to date
Fund III themes:•Marketing SaaS•Cloud enablement•Small seed portfolio
5NYC 131010 - IDCEE presentation vf
Agenda
• Greycroft overview
• Investment thesis
• Areas of focus today-Mobile
-Mobile payments
-Video
-Native Advertising
-Connected devices
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Investment thesis
•Offices in LA and NYC – both emerging tech leaders
•Small Funds – $400 Million under management -Investments range from $100,000 - $5 Million
•Recent addition of a Seed Fund
•Focus on early stage digital media and Internet startups
•Investing in Teams-Repeat entrepreneurs-Repeat experts in the space
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0
200
400
600
198519
8619
8719
8819
8919
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
0620
0720
0820
0920
1020
1120
12
Venture-backed M&A dealsVenture-backed IPOs
More than 90% of reported VC exits have been M&A
Note: IPO totals include all companies with at least one U.S. VC investor that trade on U.S. exchanges; regardless of domicile M&A totals only accounts for VC backed deals with disclosed values
Source: Thompson Reuters; 2012 NVCA Yearbook
Venture-Backed Liquidity Events – Total number of exits
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0
100
200
300
400
$500M
198519
8619
8719
8819
8919
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
0620
0720
0820
0920
1020
1120
12
Average M&A dealsize
Average transaction value has held steady
Note: M&A totals only accounts for VC backed deals with disclosed valuesSource: Thompson Reuters; 2012 NVCA Yearbook; BLS
Average exit size for venture backed M&A transactions
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The Greycroft approach to investing is different
Lead every deal
Board seats
$1B expectations
Largest possible fund
No syndication
20% ownership
$5M minimum
IPO expectations
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Agenda
• Greycroft overview
• Investment thesis
• Areas of focus today-Mobile
-Mobile payments
-Video
-Native Advertising
-Connected devices
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Mobile
•Shift to mobile is accelerating-Last year, nearly 12% of time spent with media by an adult was consumed via a mobile device
•Digital ad-spend is going to migrate rapidly onto mobile-$8.8B in 2012 is forecast to become nearly $63B in 2017
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0
1,000
2,000
3,000M
2006 2007 2008 2009 2010 2011 2012 2013F 2014F 2015F
Tablet
Sm
artp
hon
e
PC 8%
51%
N/A
(06-12)CAGR
6%
27%
50%
(12-15)CAGR
Mobile and tablet sales have grown rapidly
Global internet device sales (M)
Source: Gartner, IDC, Strategy Analytics, company filings, BI Intelligence
26.2% 24.3%
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0
10
20
30
40%
2011
4.6
2012
8.5
2013
14.2
2014
19.8
2015
25.6
2016
31.0
2017
36.3
482 503Total ad spend ($B)
104Digital ad spend ($B)
16.7 26.3 37.5 49.6 62.8Mobile ad spend ($B)
517 543 567 593 616
86 118 133 146 160 173
4.0 8.8
Globally, more than one third of digital ad spend will be on mobile by 2017
Note: Excludes SMS, MMS and P2P messaging based advertisingSource: eMarketer
Mobile ad spending shareof total digital ad spend worldwide
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The shift to mobile media is accelerating – growing at 53% p.a.
Share of media time spent per day on mobile (US adults)
Note: Time spent multi-tasking is counted for each mediumSource: eMarketer; Needham & Co.
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Agenda
• Greycroft overview
• Investment thesis
• Areas of focus today-Mobile
-Mobile payments
-Video
-Native Advertising
-Connected devices
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Highlighted trends in payments
•Though early, mobile payments represent strong area of growth, with ~40% CAGR expected in transaction value through 2017-The majority of this growth is being driven by mobile commerce and money transfers
•Consumers are increasingly seeking convenience and a simplified and unified mode of both online and offline payments -Google, Facebook, Apple, payment platforms, and retailers are all working to provide solutions that help to bridge the “digital divide”
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0
200
400
600
$800B
2011
106
2012
163
2013P
235
2017F
721
161 201 246 450Mobile paymentusers (MM)
Mobile payments expected to grow dramatically
’11-’17F CAGR = 38%
Global mobile payments ($B)
Note: Includes bill payments, merchandise purchases, money transfers, and NFC transactionsSource: Gartner
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0
20
40
60%
NFC/Mobile Wallet
1115
43 3
Barcode/QR Scanning
24
38
18
1214
MobileShopping
30
43
26
1517
MobileBanking
38
51
33
22
28
ItalyUKRussiaUSSouth Korea
Global smartphone users’ mCommerce activities
mComm activities of smartphone users, 2012 (% resp)
Note: Select ‘developed’ countries selectedSource: Nielsen; Gartner
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Companies innovating in online and mobile payments
P2P payments
Payment platforms
Retailer closed apps
Mobile Wallets
Mobile POS
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Key takeaways on mobile commerce
•Mobile banking and commerce increasingly common among smartphone users
•NFC growth expected to be limited over next few years, with challenges on both the consumer and merchant adoption front-There is no incentive for consumer to tap rather than swipe a credit card and the interface can be less reliable
•Banking and payment networks are established. There is room for innovation in ancillary services surrounding the payments infrastructure
21NYC 131010 - IDCEE presentation vf
Agenda
• Greycroft overview
• Investment thesis
• Areas of focus today-Mobile
-Mobile payments
-Video
-Native Advertising
-Connected devices
22NYC 131010 - IDCEE presentation vf
Strong Trends•60% of US network traffic is devoted to online video streaming•50% of all mobile traffic is video•89 million people in the US are going to watch 1.2 billion online videos today•YouTube attracts 1 billion unique visitors who watch over 6 billion hours of video each month - this is estimated to be 1/3 of all online video traffic and grows to almost 60% when you exclude porn
-Maker Studios is responsible for 4B video views per month
Imbalance with advertising dollars•Online advertising only accounts for less than $100B of the $800B in total global ad spend (<12%)
-Of which, online video advertising is only 7-10% of all online ad spend
•24% of US brands are advertising against online video today (of approximately 4,300 national brands)
Video
23NYC 131010 - IDCEE presentation vf
0
2
4
6
8
$10B
2011
2.0
2012
2.9
2013
4.1
2014
5.8
2015
7.0
2016
8.0
2017
9.1
Digital video ad spend forecast to grow rapidly
Note: Includes advertising that appears on desktop and laptop computers as well as mobile phones and tabletsSource: eMarketer; IAB; PWC
US Digital Video Ad Spending
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0
10
20
30
2010
10
2011
17
2012
24
Consumer behavior shows increased time allocated
Note: Ages 13-64Source: eMarketer; IAB; GfK; One Productions
Online video – daily minutes spent
Average YouTube video is 4:21 minutes
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0
100
200
300M
2012
172
2013
183
2014
191
2015
197
2016
201
2017
205
72.2 75.0 76.6 77.3 77.8 78.1% of internetusers
Nearly three quarters of US internet users view video
Online video viewers (US)
Source: eMarketer; comScore; Nielsen
26NYC 131010 - IDCEE presentation vf
Agenda
• Greycroft overview
• Investment thesis
• Areas of focus today-Mobile
-Mobile payments
-Video
-Native Advertising
-Connected devices
27NYC 131010 - IDCEE presentation vf
Native Advertising
•The concept of Native advertising isn’t new, -it’s just being ‘discovered’ in the online business and advertisers are finding clever new uses
•73% of online publishers offer native advertising•Over half of all display ads are never in view (below the fold)•Native advertising in the context of social media alone was $1.63B -> expected to climb to $4.57B in 2017
•41% of Facebook’s Ad Revenue came from native mobile ads in 2013 Q2
•Twitter ads (all native) are projected to generate nearly $1B next year
•Native advertising can be controversial or risky because it allows advertising to appear in the same format as editorial content
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0
3
5
8
10
$13B
2012
4.6
2013
6.1
2014
7.2
2015
8.4
2016
9.7
2017
11.0
35.2% 38.9% 39.9% 40.5% 41.1% 41.7%Native as a %of total spend
DisplayNative
Native advertising is becoming increasingly important
Note: Native defined as branded content integrated directly within social network experienceSource: eMarketer; BIA/Kelsey
US Social media ad spend
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0
1
2
3
$4B
2011
1.1
2012
1.5
2013
1.9
2014
2.3
2015
2.6
2016
2.9
2017
3.1
Sponsorship dollars are flowing into native advertising
Note: Includes advertising that appears on desktop and laptop computers as well as mobile phones and tabletsSource: eMarketer
US Digital sponsorship ad spending
30NYC 131010 - IDCEE presentation vf
Agenda
• Greycroft overview
• Investment thesis
• Areas of focus today-Mobile
-Mobile payments
-Video
-Native Advertising
-Connected devices
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Connected devices
•Connected devices and the Internet of Things is a rapidly emerging sector with nearly 25B new devices coming online over the next five years-These include your phone, embedded and wearable health devices, smart watches, new control interfaces, smart appliances, tracking tags for your possessions, and even your car
•The volume of data these devices will create unrivaled volumes of data and that data presents opportunities for entrepreneurs
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0
20
40
60B
2012
8.7
2013
11.2
2014
14.4
2015
18.2
2016
22.9
2017
28.4
2018
34.8
2019
42.1
2020
50.1
0.60 0.72 0.87 1.05 1.27 1.54 1.85 2.24 2.70Penetration ofconnecteddevices (%)
Connected devices expected to grow rapidly, but will not become ubiquitous over the next 5-7 years
Connected devices, worldwide
Source: Cisco
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0
200
400
600PB
2012
24
2013
45
2014
85
2015
159
2016
300
2017
563
Internet of things data traffic expected to grow 89% p.a. over the next five years
Volume of data created byconnected devices (monthly)
Source: Cisco
1PB = 1,073,741,824 MB
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•Offline data gathering/analytics-Tremendous amounts of data are being created through the connected device revolution – harness it
•Quantified self-We are moving to a world where every part of ones self can be studied and quantified – find solutions to our biggest health problems
•Over the top TV-Content is everywhere and at low cost – disrupt incumbents in the delivery market
•Sharing economies-Bike shares, home shares, car shares, even private jet shares – make our society more efficient in our use of resources
•Prize driven innovation-Competition for prizes is helping to solve some of our toughest problems and driving innovation – these are more important than creating the next social network
A few big ideas to consider