For several years, MarTech has been out of favor. AdTech in particular has become a waste land. And then out of the blue, there have been 3 significant martech acquisitions:
In addition, the TradeDesk is now valued at $ 4 B+ in the public markets. Is MarTech rising from the dead akin to a phoenix ? Or did we give it up for dead too soon ?
The reality is mixed. Customer spend on Martech (and even AdTech) continues to be robust, and marketers continue to favor best of breed solutions. M&A activity is also more healthy than most other SaaS segments. The challenges are two fold:
- The Google-FaceBook duopoly has eviscerated the AdTech landscape. Pinterest, Snap and Amazon all offer rays of hope, but are yet to pose a serious threat to the Google-FaceBook cartel.
- Start-ups haven’t gotten the memo! With the 2018 MarTech landscape having 6000 + vendors, the noise level is deafening for both customers and investors.
So what does this mean for entrepreneurs looking to start MarTech companies ? My one word answer is “stay away”. You are better off looking for greener pastures like DevOps automation or vertical SaaS where there is much less noise.
That said, if you are a glutton for punishment and still want to do a Martech startup, here are a few approaches that might work.
- Find and ride a wave. 10 years ago, when I started in venture, I bet on video advertising with early investments in FreeWheel, TubeMogul, Conviva and Tubi.tv. Freewheel and Tubemogul were great acquisitions, and both Conviva and Tubi.tv are continuing scale nicely More broadly, almost all video ad tech start-ups that were formed in 2005–2008 time frame ended up doing well because they were riding on the wave of a new ad format. Amazon is a ripple…AR/VR will probably end up being a wave.
- Build a profitable business from day 1. AppLovin and Vungle raised very little money and scaled their business on cash flow. That discipline also taught them how to dance with the elephants (Google-FaceBook) without getting crushed. There continue to be many such opportunities especially with a “tech enabled services” or an “out-come” based business model. Another related approach is to build a vertical specific company where you trade-off market size for capital efficiency.
- Build a platform. Sounds trite, right ? After all, every other start-up wants to build a platform. And conventional wisdom has it that to build a platform, you have to start with an app. That said, very few start-ups evert end up investing in building an ecosystem around them.
So why a new MarTech platform ? Other than Google, the marketing clouds (Adobe, Salesforce, Oracle, IBM, SAP) are all roll-ups and lack a common data model. Salesforce is trying to fix this by buying Mulesoft for $6.5 B. But Mulesoft is an IT focussed tool, and we all know how much marketers like IT! There is an opportunity for start-ups that can build an unifying data platform and can rally the thousands of other MarTech start-ups around them. There is an opportunity in MarTech to build a Windows like platform that the next generation of entrepreneurs can build on.
As I said earlier, stay away from MarTech! But if you are a glutton for punishment, ping me; especially if you have a dream to build a MarTech platform.