Archive for February, 2013


Winner Circle: The Social Business VCs Who Achieved Material Events

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Kentucky Speedway winners circle

The purpose of this post is to identify investors who have had a material event (IPO or acquisition) in the Social Business Software space. Read my other posts in this series tagged VC.

Our continued research over VCs and investors in the market continues, yesterday, I presented highlights at the Corporate Venturing Innovation conference, and showed the highlights to LPs and Corporate Bankers of who’s making bets –and who’s winning. The following data was also covered in PEHub, and generating interest from entrepreneurs seeking funding. As an Industry Analyst, it’s key that we understand consumer behaviors, business adoption, and startups, but also funding patterns as they influence startup growth or stagnation.

Scope of Research and Methods

  • Definition of Social Business Software: SaaS based software companies that provide social software to corporations to use. Popular names include Jive, Buddy Media, Radian6, Lithium, Hootsuite. This does not include consumer social networks like Facebook and Twitter, a report I’ll publish in near future.
  • VC, Investor, Angel: These are all investors in the Social Business Software spaces. They often receive money from LPs (Limited Partners) who charge them for investing in markets. On average, VC firms have a 1-3% management fee of overall fund they manage, and have a carry of 10-30% of total take of return from a fund.
  • Altimeter conducted analysis of a data set of 55 Social Business Software companies (see list here) in Dec, and has not updated data set to reflect recent funding events, including Sprinklr, Spredfast this week.
  • One caveat that applies to all the following data, we cannot determine specific amount of which VC firm or investor has put into each round of investment. Even within the financial S-1 docs there’s cloudy wording on which firm put in what amount.

VCs are a key component of startups, they provide council, open doors, and can even help with auxiliary functions like recruiting, conferences, and biz dev relationships. Savvy VCs are doing value add beyond the check, and are starting to couple their portfolio together to build larger networks. Knowing which investor has blessed a startup is key, as it demonstrates confidence in the business model, executive team, and product roadmap. Buyers of social business should ask five key questions of startups about their investors. With that said, having investors is not a requirement, as one-third of startups did not take in investment as they can often go it alone.


Winner Circle: Social Business VCs Achieving Material Events
The following lists the startups with exit, and we listed each round of funding and who’s the investors:

Buddy Media (Acquisition)
Buddy Media acquired for an estimated $689M (source), raised a total of

  • $5M WPP Digital
  • $1.5M Roger Ehrenberg, James Altucher, Howard Lindzon, Peter Thiel, Mark Pincus
  • $6.5M SoftBank Capital, Greycroft Partners, European Founders Fund, Ron Conway
  • $23M SoftBank Capital, Greycroft Partners, Institutional Ventures, Bay Partners
  • $54M Institutional Ventures, Bay Partners, GGV Capital, Insight Ventures

CoTweet (Acquisition)
Acquired for apparently $8.1m (source)

  • $1.1M Founders Fund, Baseline Ventures, First Round Capital, Freestyle Capital, SV Angel, Floodgate Fund

Vitrue (Acquisition)
Acquired for an estimated $300M (source)

  • $2.2M General Catalyst Partners
  • $3.8M General Catalyst Partners, Comcast Ventures, Turner Broadcasting,
  • $10M General Catalyst Partners, Comcast Ventures, Dace Ventures
  • $17M General Catalyst Partners, Dace Ventures, Scale Venture Partners, Advent Venture Partners

Wildfire (Acquisition)
WildFire acquired for an estimated $350M, with $100m retention bonus (source)

  • $100K fbFund
  • $4M Summit Partners, Jeff Clavier, Gary Vaynerchuk, 500 Startups, Felicis Ventures
  • $10M Summit Partners

Radian6 (Acquisition)
Acquired for an estimated $326m (source)

  • $4M BDC Venture Capital, Brightspark Ventures, Summerhill Venture Partners
  • $5M BDC Venture Capital, Brightspark Ventures, Summerhill Venture Partners

Jive (IPO)
Market Cap. at $161M; currently at market cap of $994.91M and $15.47 share price as of 2/1/2013

  • $15M Sequoia Capital
  • $12M Sequoia Capital
  • $30M Sequoia Capital, Kleiner Perkins Caufield & Byers

BazaarVoice (IPO)
Market Cap. at $114M; currently at market cap of $560.19M and $7.84 share price as of 2/1/2013

  • $4M Austin Ventures, Constantin Partners, First Round Capital
  • $8.8M Austin Ventures, Constantin Partners, First Round Capital, Battery Ventures
  • $7.1M Austin Ventures, Constantin Partners, Battery Ventures

Summary:
First Round Capital (coincidentally, not from CA, although with SF offices) leads the pack with 2 material events, including investing two rounds in BazaarVoice with a double down. Sequoia bet hard on Jive, and yielded a strong IPO, and Jive posted a strong year with over $104 million in billings for 2011, Austin Ventures continues to be the leader in frequency of bets in social business, but also was involved in BazaarVoice IPO  The following firms had one material event, and invested in one startup, in two rounds:  Austin Ventures, Battery Ventures, Bay Partners, BDC Venture Capital, Brightspark Capital, Comcast Ventures, Constantin Partners, General Catalyst Partners, Greycroft Partners, Institutional Partners, Sequoia, SoftBank, Sommerhill Venture Partners, Summit Partners.  

There’s 20 other folks listed above, including angels that are too numerous to list, but I’ve segmented funding frequency by round on a prior report.  There doesn’t appear to be any clear lucky streak among this investment class, although First Round has also heavily invested in Gigya in later stage rounds, so it would be key to watch their movements as they continue to grow.  This is just a snapshot in time, and while IPO market is unfavorable now, expect most exits to closely tie to M&A this spring, before the large software companies go on their conference tour of a larger suite.  Expect additional M&A to happen this year, although IPOs will be fewer and far between in 2013 in social business software.

Stay tuned for future analysis on VC impacts on consumer social networks.

 
Photo used under Flickr Creative Commons by Haglundc

Open Research: How Complex Companies Scale Social Business

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Altimeter’s latest Open Research Report (download at will, share with attribution) is embedded below. This report features how large companies have scaled social business across their enterprise. Specific case studies include:

  • Whole Foods puts local social engagement into the hands of store managers.
  • General Motors organizes for social business internally, then supports regions.
  • Amway empowers distributors yet maintains brand consistency
  • PUMA scales limited headcount for worldwide engagement

I co-authored this report with my colleague Senior Researcher, Andrew Jones, who’s been involved in several reports with me and knows the market which we cover in a detailed way, and provides unique insights. His deep understanding of the space, tireless research, and pattern analysis was key to this report being published. Please keep us both updated in your industry updates.

Scalable Social Business Tension Dynamics
The interesting thing about this research is that corporations are beyond the ‘why’ social but are now focusing on integration and tying together with all customer interactions.  We often see tension dynamics in companies across the following opposing forces:


Six Common Tension Dynamics as Companies Scale Social

Corporate vs Business Unit
Global vs Local
Consistent messaging vs Varied content
Comprehensive Software Suites vs Specialized Point Software
Individual disruptors vs Established program managers
Enterprise Deployment vs Organic social growth

Companies seeking to scale, should read this report on how advanced companies are scaling, and glean insights. Altimeter has published a number of reports from industry trends, vendor segmentations, market definition and more, and are pleased to bring a more detailed case study on how integration at scale is starting to blossom, find all my reports on the research tab. The report is embedded below:



Related Links
I’ll cross link to all coverage of this report

Meet the Investors of Social Business

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The purpose of this post is to identify which investors are most active in Social Business, and segment them from early to late stage funding.

I frequently provide due diligence calls to VCs, and also advise startups on their growth startup in highly saturated growth markets.  To hone my industry interactions, I’m publishing data on my continued research on funding in the Social Business space (read other posts on the state of funding in social business, and rate of material event or click the VC category to see all posts).  The investors are a key factor in the success of a startup, they advise, provide resources for rapid growth, influence a sale or IPO, or can cause a startup to be stymied by innovation through interfering with the executive team.  To best understand how investors have influenced the Social Business Software space, we’ve conducted analysis to derive patterns of investors.

[Austin Ventures, Benchmark, and First Round Capital lead the Social Business Software Funding in Frequency of Investments]

Summary
Funding in the Social Business Software space spurred market traction over the last 5 years, often creating a set of clones with limited feature differentiation.  Across all stage investments, Austin Ventures showed dominance in frequency of investing in funds, although their total amount of funding is not public record.  As expected, there was a plethora of Angel Investors as companies were just getting out of the garage (sub $1m investment).  In early stage funds ($1-5M), Austin Ventures, First Round, Floodgate, were the most active.  In mid-stage ($5-10m) Battery and First Round showed increased frequency over other investors, in late-stage ($10-20m), Benchmark Capital was frequently involved, and at mature stage (over $20m), Bay Partners and Institutional Ventures were most frequently involved.  Entrepreneurs should use these tables to identify ideal investors per startup maturity to reduce time in seeking institutional funding.

Scope and Method of Research 

  • Definition of Social Business Software:  SaaS based software companies that provide social software to corporations to use.  Popular names include Jive, Buddy Media, Radian6, Lithium, Hootsuite.  This does not include consumer social networks like Facebook and Twitter, a report I’ll publish in near future.
  • Definition of VC, Investor, Angel: These are all investors in the Social Business Software spaces.  They often receive money from LPs (Limited Partners) who charge them for investing in markets.  On average, VC firms have a 1-3% management fee of overall fund they manage, and have a carry of 10-30% of total take of return from a fund.
  • Altimeter conducted analysis of a data set of 55 Social Business Software companies (see list here) in Dec, and has not updated data set to reflect recent funding events, including Sprinklr, Spredfast this week.
  • One caveat that applies to all the following data, we cannot determine specific amount of which VC firm or investor has put into each round of investment.  Even within the financial S-1 docs there’s cloudy wording on which firm put in what amount.


Frequency of VC funding in Social Business Software
(Figure 1:) Overall Highest Frequency Investors: Austin Ventures, Benchmark, and First Round have invested most frequently
The following VC firms have invested in the most rounds of Social Business Software vendors, as stated in above caveat, this does include total amount invested, only frequency.  Austin, Benchmark and First Round have invested the most frequently, across all stages of funding.

VC Firm Total Rounds Involved In
Austin Ventures 7
Benchmark 7
First Round Capital 7
Battery Ventures 5
New Enterprise Associates 5
Norwest Venture Partners 5
Novak Biddle Venture Partners 5
Sequoia Capital 5
DAG Ventures 4
Emergence Capital Partners 4
General Catalyst Partners 4
Mayfield Fund 4
Shasta Ventures 4
Trident Capital 4

(Figure 2)  Angel Investors: VCs that invested in rounds under $1M in Social Business Software
We found 18 investors that invested in Social Business Software cateogry under 1 million, while many are individual angel investors, there are a few firms involved, and even Facebook’s fund which invested in early startups to grow the application platform.  I often have observed that some of these CEOs have self-invested in their own companies.  These investors often provide key advice to helping entrepreneurs launch their company. None of them invested more than once in under a 1 milion round, per public records.  


VC Firm or Individual Rounds involved in under $1M
Colin Evans 1
Diego Canoso 1
Eden Ventures 1
fbFund 1
ff Venture Capital 1
Hillsven Capital 1
Joe Lonsdale 1
John Levinson 1
Joshua Stylman 1
Lightbank 1
Mayynard Webb 1
Paige Craig 1
Peter Hershberg 1
Seedcamp 1
Shane Spitzer 1
Travis Kalanick 1
Vince Broady 1
Zelkova Ventures 1

(Figure 3)  Early Stage Investors: VCs that invested multiple times in $1-5m rounds in Social Business Software

These early stage, post-seed/angel helps companies to get their proof of concept to the market by hiring additional engineers, operations, sales, and account teams.  Austin Ventures, First Round, Floodgate, was involved in a number of early stage investments.  Often these rounds involved multiple VC firms in each round for a startup.
VC Firm Rounds involved in $1M – $5M
Austin Ventures 4
First Round Capital 3
Floodgate 3
Adobe Ventures 2
Anthem Venture Partners 2
Battery Ventures 2
BDC Venture Capital 2
Brightspark Ventures 2
DFJ Esprit 2
DFJ Frontier 2
General Catalyst Partners 2
Granite Ventures 2
Metamorphic Ventures 2
Novak Biddle Venture Partners 2
RPM Ventures 2
Summerhill Venture Partners 2
TEF3 2

(Figure 4) Mid-Stage Betters: VCs that invested multiple times in $5-10m rounds in Social Business Software

Often referenced to me as A-B rounds, these early stage rounds are for a company to expand operations, sales, or hire developer teams beyond initial product proof of concept. Battery and First Round were most involved in rounds in the mid-stage, which often involved multiple VC firms in each round for a startup.

VC Firm Rounds involved in $5M – $10M
Battery Ventures 3
First Round Capital 3
Austin Ventures 2
Benchmark 2
Constantin Partners 2
Mayfield Fund 2
Norwest Venture Partners 2
Redpoint Ventures 2
Shasta Ventures 2
Trident Capital 2

(Figure 5) Late Stage Investors: VCs that invested in $10-20m rounds in Social Business Software

I hear this referred to as B-C rounds, and often touted as growth stage money, these companies often have hit an elbow in revenue or user growth rates.  Benchmark Capital was involved in the most late stage investments, followed by a series of other players.  I’ve found that I most often interact with investors in this category, as they’re tracking a crowded market and seek analyst input in due diligence meetings. Often, these rounds involved multiple investors.

VC Firm or Individual Rounds involved in $10M – $20M
Benchmark 4
DAG Ventures 3
Emergence Capital Partners 3
New Enterprise Associates 3
Sequoia Capital 3
Mayfield Fund 2
Novak Biddle Venture Partners 2
Scale Venture Partners 2
Shasta Ventures 2
Advance Publication 1
Advent Venture Partners 1
Austin Ventures 1
Credit Suisse 1
Dace Ventures 1
El Dorado 1
First Round Capital 1
FTV Capital 1
General Catalyst Partners 1
Institutional Ventures 1
Intel Capital 1
InterWest Partners 1
JK&B Capital 1
Nigel Morris 1
Norwest Venture Partners 1
OMERS Ventures 1
Ron Conway 1
Steve Case 1
Sutter Hill Ventures 1
Ted Leonsis 1
Tenaya Capital 1
Trinity 1

(Figure 6) Mature Stage Investors : VCs that invested in rounds over $20m in Social Business Software

Often called the valuation stage or ‘pump’ stage investments at this round often are designed to increase an already successful startup’s valuation by raising capital, in prep for a material event or for acquiring competitors.  At this stage, most companies are showing 200-400% growth rates, and it’s often a sure bet for investors to see a return.  These investors often have ties to bankers, brokers, and can help see a material event though, due to experience. Bay Partners and Institutional Ventures, which are not common in earlier rounds, show being involved in two rounds.
VC Firm Rounds involved in $20+M
Bay Partners 2
Institutional Ventures 2
ABS Capital Partners 1
El Dorado 1
GGV Capital 1
Greycroft Partners 1
Insight Ventures 1
InterWest Partners 1
Kleiner Perkins Caufield & Byers 1
Michael Scissons 1
New Enterprise Associates 1
Norwest Venture Partners 1
SAP Ventures 1
Sequoia Capital 1
SoftBank Capital 1
Syncapse 1
Trident Capital 1
Trinity 1
Val Katayev 1

 

Conclusion
While not all startups took funding, the venture community is a key component of the social business software category, accelerating growth, jobs, and innovation. Startups should identify which VCs are best fits for their investment strategy, based on maturity and needs.  Most VCs are segmented by different stages of investing, with different value propositions to startups beyond money.  Buyers who’re purchasing social business software should understand the deeper relationship of investors and the startups in which they’re purchasing.

2013 Superbowl Ads Favor URLs, Hashtags –Not Facebook

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For the last few years (see 2012 data). This analysis is a bellwether on how brands will spend on an integrated experience for the year. Overall, we saw brands still hold onto corporate websites, although a big jump in hashtag usage, and decline in Facebook integration.

Majority of 2013 Superbowl Ads Integrated URLs, Hashtags –Few use Facebook
2012-2013 Superbowl Ad Tech Integration

Tech Integration Type 2012 2013 Percent Change
Corporate URL/Microsite 58% 46% -12%
Facebook 11% 7% -4%
Hashtag 7% 38% +31%
Shazam 6% 2% -4%
Total Ads with Integration 68% 75% +7%

 

Integration to reach the Dynamic Customer a top priorty for brands.
Brands know they must integrate their brand experience on multiple experiences and apply real time interaction, Altimeter’s research theme the Dynamic Customer Journey explores this challenging trend.. Adobe shared with me that: “Visits and page views to companies that advertise on TV during the Super Bowl show a 20% increase in visits on the day of the game and maintain higher than average traffic for a week following the game.” This integrated approaches means longer adoption over the 30 seconds. Top findings include:

  • 75% of Brands integrate second screen experience, up 7%. Overall, 75% of brand ads integrated social, mobile, hashtags, or apps in their $4m, 30 second spot (that’s $133k per second), this is up from 68% integration in 2012. This second screen promotion extends engagement to their websites and social sites, fostering a further integrated experience. Of note, Oreo was able to quickly create ads on social channels that tapped into the unexpected blackout, showing their advertising and marketing prowess, cross-screen. Expect this growth rate to only continue in 2014, as ads should cross the 80-90% integration rate.
  • Hashtags, presumably aimed for Twitter, dominate over Facebook. Hashtag integration in ads dominated the airtime, with 38% of ads including Hashtags in visual display on ads, up 31% out of a total of 64 ads. Twitter, a media-centric, network serves better for real time interactions of live events, rather than Facebook, which may spur deeper engagement through interactive media, social interactions, and applications.  Brand advertisers chose to integrate Facebook URLs or Icons a mere 7% down 4% from 11% in the prior year.   Facebook’s limited hashtag search restricts how brands can identify and engage in trends beyond a specific page. We observed that Calvin Klein trended on Twitter, at US level.
  • Niche Players Come and Go: Shazam down, Instagram Enters. The social media space is littered with startups that come and go. And while Shazam showed some promise in last years 2012 superbowl, their brand adoption rate decreased significantly. For the first time, Instagram made an entry with Oreo, and attracts thousands of followers. While Shazam fell in adoption, QR codes and SMS messages were not present at all in 2013, despite a few experiments in prior years.

Summary: Expect Hashtags to Overake Corporate Websites in 2014
Brands prefer deeper integration on their own website and leverage over-arching hashtags for events –beyond pointing to Facebook. Isolated Facebook falls in favor for these real time events, but likely provide a deeper brand engagement beyond the immediate event. While individual URLs to microsites and corporate accounts maintain dominance, Hashtags, which can be used in a variety of social networks, are permeable to multiple networks, extending broader engagement. Expect that the 2014 Superbowl favors hashtags over corporate URL usage.

Methods:  Altimeter tallied integration in Ads from kickoff to end of game, of major ads on TV.  We did not include ads involved in specific CBS promotions, instead brands that had paid airtime to reach this network. And yes, this means we maintained sobriety in the name of research.

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