transmedia capital summary
DESCRIPTION
Summary presentation on positioning of Transmedia CapitalTRANSCRIPT
Confidential
Seed stage venture fund investing in new technologies that impact the traditional media and entertainment industries
March 2009
2
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
3
• 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
4
• 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
5
Disruption of traditional media & entertainment Industries
Evolution of traditional venture capital economics
New realities for online media start-ups
Investment Thesis
Transmedia Capital
6
• 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
7
• 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
8
• 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
9
• 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
12
• “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
14
• 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
er
of
Acq
uis
itio
ns
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
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