Transcript
Page 1: Transmedia Capital Summary

Confidential

Seed stage venture fund investing in new technologies that impact the traditional media and entertainment industries

March 2009

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The Landscape

The New York Times, February 9th 2009

• “I believe that the paradigm has changed for the venture business…”

• “Exits are now mergers or acquisitions at a sale price of $20 million to $100 million “

• “…this suggests that a true venture capital firm should be reverting to smaller-scale funds invested in early-stage companies”

-Alan Patricof-The “Grandfather of Venture Capital”, Founder GreyCroft Ventures, Patricof & Company/Apax Partners

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• Accelerate over the next 5 years

• Be driven by technology innovation and entrepreneurial companies

• Create extraordinary investment opportunities

Traditional media and entertainment industries are witnessing

unprecedented levelsof change that will:

A Rapidly Changing Landscape

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• Traditional media and entertainment has been the sector most impacted by innovation in new technology

• Technology innovation is forcing traditional media and entertainment incumbents to “outsource” innovation through acquisition at rapid pace

Why Online Media and Entertainment

Distribution MonetizationContent

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Disruption of traditional media & entertainment Industries

Evolution of traditional venture capital economics

New realities for online media start-ups

Investment Thesis

Transmedia Capital

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• 2,700 record stores closed in the last 4 years

• 5,000 record industry employees laid off since 2000

The Decline of Traditional Media

The Music Industry

decline over 25% since 2000

Source: Rolling Stone Magazine

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• 20 year trend of declining sales and circulation

• Core revenue model (subscription/classifieds) rapidly being displaced

• Print media losses accelerate

The Decline of Traditional Media

Q4 2008 newspaper revenues

$1Billion less

than same quarter previous year, and lowest since 1996

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• Erosion of upfront buys and dilution of ad rates

• $80B domestic TV ad market re-allocating budgets online rapidly

• “On demand” viewing changing engagement models

The Decline of Traditional Media

18-24 year olds spend

more time online than watching TV

Source: Nielsen Media Research

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• Massive one-time shift of ad dollars to online in-process

• 30% of media consumption is online, but online ad spending still less than 10% of marketing budgets

• Online ad budgets on track to surpass traditional media

• Radio by 2008

• Print by 2010

Online advertising market expected to double in 5 years

$50.1B predicted by 2012*

While Online Growth Surges

Source: Yankee Group

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1.9 4.6 8.0 7.1 6.0 7.2 9.6 12.5 16.8 20.1 25.9 30.0 35.0 41.0 51.0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Online Advertising Growth in $Billions

Source: pwc/iab

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Disruption of traditional media & entertainment Industries

Evolution of traditional venture capital economics

New realities for online media start-ups

Investment Thesis

Transmedia Capital

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• “On-demand” global workforce increases productivity

• Lower costs for equipment, connectivity, storage

• Open source platforms reduce software costs/complexity

• Social media pipeline powers massive viral adoption

• Average angel round of investment $250K*

• Exits are occurring sooner and with more frequency

Time and cost to

Develop-Launch-Grow-Exitshrinking fast

New Reality for Startups

* Center for Venture Research

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Disruption of traditional media & entertainment Industries

Evolution of traditional venture capital economics

New realities for online media start-ups

Investment Thesis

Transmedia Capital

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• Declining demand for large initial financing

• Avg. VC investment size in 2007 - $7.7M*

• Experienced, deal savvy entrepreneurs don’t need it

• Limited domain expertise and relevant value-add

• Exit requirements pre-defined by aggressive multiples

•Increasingly larger VC funds

require big investment rounds

Current VC Dilemma

* Center for Venture Research

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$3

M -

$1

0M

$1

0K

- $

10

0K

$

10

0K

- $

3M

The Venture Capital Gap

Year 1 Year 2 Year 3

Friends & Family

TraditionalVenture Capital

Transmedia Capital

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• 872 media acquisitions in 2007

• 32% higher than in 2006

• Total value hits $104 billion

• Volume of exits holding strong regardless of softer economy

Media Markets Continue to Grow

Online media & marketing services set

record acquisition volume

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M&A Activity Across Online Media Landscape

Value (Billions)

Acquisitions

2004 2005 2006 2007 2008

Nu

mb

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of

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itio

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0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

2004 2005 2006 2007 2008

Value (Billions) 12.4 22.5 26.4 104 34

Acquisitions 153 216 322 872 758

Record Acquisition Activity Continues, even in the Face of Global Financial Crisis

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Sampling of the 834 Acquisitions in 2007, all online media start-ups

Company Deal Raised ROI Value Prop Acquirer Yrs

Adify $300M $27M 11x Vertical Ad network Cox 3

Photobucket $300M $13.5M 22x Personal media hosting Fox 4

Feedburner $100M $8M 12x RSS feed subscription and distribution Google 3

Stumbleupon $75M $1.5M 50x Website discovery Yahoo 2

Rupture $30M $3M 10x MMO social networking site Electronic Arts 1

Sphere $25M $3.5M 7x Feed module distribution AOL 3

MyBlogLog $10M $1M 10x User data acquisition and tracking Yahoo 1

Jumpcut $10M $1M 10x Video creation Yahoo 1

Reddit $10M $100K 100x Social News Conde Nast 1

eCrush $10M $1M 10x Matchmaking, social networking Hearst 5

Disruption Creates Opportunity

Average ROI = 24x

Avg. Total Funding = $6M

Avg. Time to Exit = 2.4 years

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Investment Themes

Video On Demand

Social Commerce

Media Affinity Ad Models

Vertical ad networks

Product engagement

Advanced web analytics

Place shifting

NewCurrent

Youtube, Sling Media, Tivo

Netflix, Joost, Facebook

Craigslist, Digg, Glam

Last.fm, iTunes, MySpace

Legacy

TV

Film

Print

Music

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• Network of active industry entrepreneurs/engineers/domain experts provide “mentor capital” to portfolio companies

• Source of significant deal flow and due diligence resources

• 12 month commitment to each portfolio company to help accelerate growth

• Paid a stipend and participate in the General Partner carry

• Dedicated relationship with Transmedia Capital

Venture Partners provide

Mentor Capital to each and every portfolio company

Unique Venture Partner Structure

Sampling of Venture Partner current or previous company affiliations:

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Fund Allocation Strategy

•Establish early foothold

•Mentor network increases success rate

•Support performers vigorously

•Maintain ~15% position

•Side Car provides additional LP upside

•Deliver 4X – 6X multiple over life of fund

Seed Stage

Investment Level$150K-$1M

Pre-Money$2.5M-$6M

StagePartial team, Alpha product

Volume 8-10 per year

Growth

Investment level$1M-$3M

Pre-Money$30M - $100M+

StageMajor growth, rapid adoption amongst customers, revenue trajectory

Volume 1-3 per year

Follow-On

Investment Level$400K - $2.5M

Pre-Money$8M- $20M

StageLive product, customers, initial revenues

Volume 4-6 per year

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• Seasoned management team of industry insiders

• Highly sector-specific approach (media/advertising)

• Unparalleled “under-the-radar” access to deal flow

• Extended mentor network increases success rate, deal-flow and enhances due-diligence of prospects

• No comparable existing investment group

Why Transmedia

Abundant

exit opportunities

over next 5 years


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