Advice and insights from VC funded AdTech companies
It’s never easy raising money but it’s especially hard if you fall into the category of AdTech, why? Let’s hear some seasoned founders speaking at this years Cannes Lions festival discuss the common themes and challenges they’ve faced and how they overcame them.
This panel was hosted by Beeswax at the @uandmrjones Pavilion and aptly named “Not Dead Yet 😵: Recently-funded AdTech companies buck the trend”.
1. AdTech is not an easy language to understand
CPM, DSP, CTR, errr what?! 🤯All common terminology in the AdTech universe but takes quite some getting your head around if you’re not familiar with the domain. If you’re in the early stage look to get established AdTech CEO’s onboard as angels as this can help avoid getting stumped out of the gate and build validation for more traditional VCs when you’re ready.
2. The typical advertising and AdTech model is not so appealing
Advertising is campaign driven, this means that Q1 revenues are often vastly different from Q4. Therefore looking at a quarterly growth metrics for AdTech is misleading, often it’s best to look at annual revenue. For an early stage startup this can be a problem if you’ve not been operational for that long. Add to that, a common business model is payments for media buying where you as a vendor take a cut. This is far less attractive than the safety of recurring revenue investors are drooling over, most common with SaaS based businesses. How to get around that? Is there a way to introduce a SaaS model? If so lean into that hard! 🤓
3. Google and Facebook can just eat your lunch
Ahh we come to the question on every VC’s lips —how to beat or compete with the duopoly. “But they can just copy you right?” 😜 In this doomsday scenario we “would have greater problems to deal” with highlights Ari. No matter, very often even though these companies certainly could allocate resources to develop something, they unlikely will. Will Luttrel of Amino payments says that he had to defend this question at every single round. “If you have a novel idea, and novel approach there’s still a lot of money to be made as an independent in the space”.
4. Getting customers to move from pilot to paid is tricky
Not so much about funding but more customer traction. VCs of course want to see revenue, and as we saw earlier — ideally recurring. Getting cynical and busy folks from the advertising industry to try new products is a challenge in itself and often its fraught with pitfalls such as ghosting, refusal to convert to paid, or too many cooks to convince. Whatever your method “try to get the customer to have some kind of skin in the game” was advice from JT Batson of Hudson MX. Others like Will Luttrel said as they were defining a whole new category it wasn’t possible to get paying customers out of the gate, but once they had folks go on record as working with them, and have case studies, they simply set a cut off date for doing any more pilots. Edwin Fu. of Placements.io said they had a clause in their contracts which worked for them, converting any customer to a paid account after a period of time, that being said, this method completely failed for Beeswax; Ari Paparo said companies just simply ignored it 😬
If you’d like to follow these inspiring folks and their firms here’s their online handles and site URLs:
Ari Paparo of beeswax.io
