Pointing To The Future – Significant Investments Under $10 Million In Q3

This is an excerpt from an article by Strategy Eye 

Blockbuster, multimillion-dollar funding rounds may grab the headlines, but it’s the smaller, sub-USD10m investments that are driving overall investment in digital media. Globally, 68% or 476 of the 698 deals during Q3 2013 were either undisclosed or rounds of less than USD10m, indicating that investors are making a lot of early-stage bets on new startups. This is a trend that is set to continue. We look at the opportunity and future prospects of the most significant startups to receive under USD10m in investment in Q3.

Base79

The Opportunity:

As the web becomes more visual, online video is becoming even more prominent – from advertising to news sites to entertainment. Yet, with the rapid growth video content, comes the increased potential for piracy. Base79 helps manage these rights and provide IP protection for its partners. The company also helps up their viewer number and navigate the tricky issue of video monetisation through advertising and commercial sponsorships. Base 79 has grown its network to 1400 YouTube channels that generate more than 700m monthly views. Founded in 2007, the UK company now manages rights for more than 800 copyright holders, including The Football Association, the Ministry of Sound and Guinness World Records as well as a host of original YouTube creators.

Chances:

With a recent investment  an impressive roster of UK clients under its belt, the company is now setting its sights overseas with a newly-opened Los Angeles office. The US represents a big opportunity for the company, with founder Ashley MacKenzie citing the huge demand for Spanish-language video content as a significant new revenue stream for the company. However, the company needs to ensure it does not become reliant on YouTube and needs to continue seeking clients across other platforms as it pursues future growth.

Songza

The Opportunity:

Subscriptions, ads, per-download charges – just how does a company turn a profit from digital music? It’s a question that’s still not being adequately answered. Spotify and Deezer illustrate that not even user numbers guarantees financial success, with the costs of running a digital music service prohibitive. With artists and labels also unhappy with their royalties in a market where digital cents are replacing physical dollars, it is looking increasingly tough for businesses starting out.

Chances:

But Songza thinks it has it licked. The music recommendation service creates branded playlists, combining music with native advertising. Songza also offers a premium tier and attracted USD4.7m in September to help it develop new branding tie-ups with companies. But the firm has a long way to go. It is not available outside the US and Canada due to licensing constraints, a problem shared by both Pandora and social DJ app Turntable.fm. The startup is keeping its financial performance under wraps, but CEO Elias Roman hinted earlier this year that the firm could looks to expand its curated content lists beyond music into verticals like news. Such an expansion away from relying solely on the perilous financials of music could prove fruitful – and necessary.

Upworthy

The Opportunity:

If Buzzfeed taught us one thing (aside from which hungover owl we are) it is the power of viral content marketing. Having made a name for itself for providing image-led content and pioneering ‘listicle’-style articles, Buzzfeed just became profitable four years after its launch. In that time the company has gone from zero revenue to profitability and 300 employees on its books. That’s purely on the back of social content marketing and native ads that let companies sponsor content for Buzzfeed to make viral among its fast-sharing young user base. It’s the future of revenues for online publishing.

Chances:

That’s why things are looking good for viral content firm Upworthy, which is looking to do the same sort of thing. The firm picked up USD8m this year and now counts 22m visitors per month. That’s still less than a quarter of Buzzfeed’s 85m, but it’s not bad. Although Buzzfeed creates a lot of noise in the space, investment in companies like Upworthy suggests that investors see room for multiple players to emerge. As the line between publishers and ad networks continues to blur there’s a big opportunity.

This is an excerpt. Click here to read the full article (subscription required).