The ‘Venture Capital’ Category
Ken Allen is Senior Vice President, Blackstone Advisory Partners L.P., an advisory and investment firm.
AdExchanger.com: First, can you give a quick background on you, Blackstone and your responsibilities today?
KA: Blackstone is one of the world’s leading advisory and investment firms. The firm was originally founded in 1985 as a boutique M&A advisory firm by Steve Schwarzman and Pete Peterson and advisory has remained core to the firm’s activities for over 25 years. Our firm has advised on some of the most important and complex transactions worldwide, including advising AIG and Ford in their restructuring during the recent financial crisis, Reuters in its sale to Thomson Corporation, Microsoft in its search negotiations and partnership with Yahoo!, and Xerox in its purchase of Affiliated Computer Services.
I have led the advisory group’s efforts in the Digital Media and Internet sectors since coming to Blackstone from Deutsche Bank in 2007. I have spent 10 years covering the media and technology sectors and have advised on over $10 billion in transaction value during that period. In addition to the Yahoo! search partnership, Blackstone has been extremely active in the digital space, having advised on numerous recent high-profile deals such as Publicis in its acquisition of Razorfish from Microsoft, Sapient in its acquisition of The Nitro Group, and BuyVIP in its sale to Amazon.com.
Our philosophy for 25+ years has been to provide thoughtful, objective, and realistic advice to companies and entrepreneurs throughout all stages of a company’s lifecycle, whether during the start-up phase or as a large corporation. Within the digital media sector and with respect to high-growth emerging businesses, in particular, we find there to be a serious lack of impartial, trusted advisory services. Many of the small boutiques are simply pushing product to buyers’ corporate development departments and do not have the depth or breadth of relationships with buyers, the long-term strategic perspective, the global reach, or the M&A expertise necessary to provide best-in-class service. Conversely, the larger bulge bracket firms are not able to deliver the same senior-level attention, the objectivity, or the depth of sector-knowledge that we do. Finally, our relationship with the private equity side of the business enables us to have a principal mindset and truly put ourselves in the shoes of the companies we advise with an eye toward creating long-term shareholder value.
What's your view of the digital ad technology landscape today? Are there too many companies?
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Investment banking firm LUMA Partners - led by Terence Kawaja - announced that Brian Andersen, who recently headed corp development at Omniture, is joining LUMA Partners and opening the company's Palo Alto office.
Andersen discussed his new role and his view of the advertising landscape.
AdExchanger.com: Why get into the investment banking business now?
BA: Good question. I’m not sure that I would in the conventional sense. I was in investment banking earlier in my career (M&A group at Robertson Stephens) though for the past ten years I have been working within software companies (Interwoven which was acquired by Autonomy and Omniture which was acquired by Adobe). When I left Omniture/Adobe two months ago, it actually was not my intent to switch back to investment banking, but when I learned of the LUMA Partner’s more strategic approach to corporate development, I saw a good fit. Terry and I started talking and felt that teaming up would create a truly differentiated platform in the market – Terence has extensive investment banking/deal experience and an incredible network, I have significant experience from the “buy-side” perspective, and we both have deep expertise in the digital media / advertising technology space. It was a “no brainer”. I am incredibly excited about this move!
How's your sense of humor?
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Terence Kawaja of LUMA Partners has provided a revised version of his ubiquitous display ad tech landscape chart. Download it here.
Kawaja will be discussing how this landscape might evolve going forward at several conferences in NYC including IAB MIXX at 10:30 am on Monday 9/27 and at OMMA Global at 9:45 am on Tuesday 9/28.
AdExchanger.com: Tell us about this latest update to your ecosystem map. Is this the "final-final"?
TK: By definition the chart will never be final since the space is so dynamic. I am still discovering companies.
A few things to bear in mind. This chart is far from perfect. Organization of such a fragmented and dynamic industry is flawed by its very nature. Many companies operate across several categories and there are distinctions within categories. This chart does not include many of the search players which are increasingly overlapping with display nor does it reflect whole categories such as lead generation and ecommerce which likewise utilize display advertising in their funnel, not to mention international companies which are barely reflected. At some point in the future I may construct an uber landscape which captures these and other players.
How can companies listed, or not, suggest changes to the map?
I plan to post this to the LUMA Partners website and will collect feedback from everyone to crowdsource future iterations. In the meantime, please excuse any placements you believe to be inaccurate.
I believe we are in for some interesting times as the space rationalizes and consolidates along with the advent of new strategic entrants.
By John Ebbert
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From his recent "Ignite" presentation at a Google Zeitgeist event, investment banker Terence Kawaja of LUMA Partners breaks down the key levers driving the digital media industry (data, data, data) as well as the types of companies which will be involved in this ecosystem going forward.
For those deep in the industry, you may know most of this, but for those who are new or ramping up, Kawaja provides a concise, high-level overview of what's ahead.
Note: The "Ignite" format allows for 5 minutes of presentation with a max of 20 slides - slides are auto-advanced every 15 seconds.
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Seth Levine is a co-founder and managing director of Foundry Group, an early stage technology venture firm based in Boulder, Colorado.
AdExchanger.com: Why get into the venture capital side of the business? Do you ever get the entrepreneurial "itch"?
SL: I first got into venture capital about 10 years ago and I love my job. I was running a few business units for a small public company and while I enjoyed the operational side of my job, I was also responsible for M&A and partnerships and had a particular affinity for the transactional side of my job. While I consistently have the entrepreneurial itch, I actually think this makes me better at investing - it reminds me of why I'm in business (to support entrepreneurs who are the real stars of the show). I've also co-founded a few companies (including Trada which is a company in the Foundry portfolio that helps advertisers better execute paid search campaigns; I wrote about that experience recently on my blog and I'm very close to many of our portfolio companies at an operational level which helps to satisfy the entrepreneur in me.
What is Foundry Group's investment philosophy?
Unlike many venture capital firms that invest in certain geographic regions or specific technologies and sectors, Foundry Group's investing activity is largely driven by a thematic approach. The themes we pursue tend to be horizontal in nature and are often driven by underlying technology protocols and standards or emerging market trends and customer needs. Rather than looking for short-term hits, we focus on themes that have the ability to drive a cycle of innovation (and hence provide multiple investment opportunities) over a period of five to ten years or more. My partners and I have written extensively about this thematic approach on the Foundry Group blog.
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Dan Boberg is President of Tallwave, a digital business accelerator.
AdExchanger.com: Where do you see Tallwave fitting in the venture capital, angel and seed investing world? Is it competitive to these silos? Is it similar to Betaworks, for example?
DB: Tallwave is a digital business accelerator that combines traditional consulting practices and start-up incubation services with a focus on cutting edge digital marketing strategy and delivery. We support a portfolio of emerging companies and also provide digital consulting and media services. On the portfolio side we focus on marketing technology and media companies. Our consulting practice has a broader scope which includes ecommerce, web applications companies and more. We plan on raising our first venture fund in 2011. Tallwave is already working with a set of portfolio companies and our fee-based consulting practice is exceeding goals in this first year of operation.
In forming Tallwave, we brought together partners with strong line level as well as executive experience from Google, Yahoo!, Microsoft and iCrossing. Our partners bring diverse backgrounds including channel sales, digital advertising, product design, product marketing, and finance. We have a CFO with experience as the CFO of two public companies which is another strength in helping develop early stage companies. We support these companies through capital formation, business planning and strategy, product design, financial planning, marketing strategy, marketing delivery and shared services / outsourcing.
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Terence Kawaja recently announced that he will be leaving investment banking firm GCA Savvian to start his own firm, LUMA Partners.
Kawaja discussed the new firm and his strategy with AdExchanger.com.
AdExchanger.com: You have suggested investment banking needs disruption? Why?
TK: Fundamentally, I think some aspects of the banking model are broken. Most bankers effectively act like real estate agents – they sign up a client and then take them out to market. In other words, they obtain inventory and then try to sell it. That model works fine for mature companies or divestitures but not so well for emerging technology businesses. Think about it – if you have a great company in a growing sector with a bright future, why would you proactively sell? There is absolute adverse selection at play here: the weaker companies are SOLD and the better companies are BOUGHT. The “banker” that calls up the potential strategic acquirer is hardly unbiased – they're selling inventory.
LUMA Partners acts as a “strategic advisor” representing companies that are BOUGHT. We spend a tremendous amount of time with the large strategic buyers – with both development executives as well as business and product leaders – to understand their strategic goals. We use our deep knowledge of the business models, markets, companies and executives in the space to help inform and identify the best possible acquisition candidates that can deliver the capability necessary to fulfill those strategic goals. We do this on an objective basis and then try to make the deal happen once the target is identified. Ultimately we represent and get paid by the company being bought but we start with an objective value add to the strategic. It’s a real win-win approach.
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Andrew Weissman is founder and COO at Betaworks, which invests in and operates Internet and digital media companies.
AdExchanger.com: There's been a lot of good buzz about Betaworks recently. Why do you think that's the case?
AW: Luck? Right time at the right place? Our companies speak for themselves; to the extent there is attention on betaworks I think it's because the companies in our network are doing interesting things. Maybe it's also because we do things a little differently and people are intrigued - we not only invest but we also build and acquire businesses.
What is Betaworks investment philosophy? Is there a Betaworks-type company?
There is a big gap between and idea and how that idea gets effectuated in the form of a real product. So, we like to play with applications, we believe "betas work" so we want to see a prototype of a product before we consider investing. Aside from that, if its real time and/or social, we are interested.
You wrote in an April post on your personal blog about the impact of the open Web on traditional content models: "Innovation didn't die - instead it flourished into new, related and unrelated, spaces." What are the new spaces being created today?
Real time streams of information and applications (things like Twitter, or gdgt, DailyBooth, Kickstarter, Tumblr).
Do you buy into the idea that advertising will - to some degree - become like the financial markets? Does content become like the financial markets?
Advertising and content are becoming more and more fragmented. I'm not sure it becomes more like the financial markets, but clearly a different way to deliver advertising into content online is needed.
Looking forward, what's your view on M&A momentum in the digital media technology space?
More momentum in 2011 and 2012 because the pace of innovation is increasing steadily.
Do you think opportunities in the mobile advertising space are finally hitting their stride? Or, when does mobile "hit"?
What's new is that there is no longer any separate thing called "mobile" - just as there is no old media or new media - it's all Internet media now. Devices are now powerful enough that delivery can go anywhere.
If you're an entrepreneur, what are your suggestions on the best way to pitch an investment firm such as Betaworks?
Show us a prototype!
Follow Andrew Weissman (@aweissman), Betaworks (@betaworks) and AdExchanger.com (@adexchanger) on Twitter.
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Gil Beyda leads early-stage investment group Genacast Ventures, a part of Comcast Interactive Capital. Genacast Ventures invested in demand-side platform Invite Media prior to being acquired by Google as announced earlier this month.
Beyda spoke to AdExchanger.com about the deal as well as momentum in the space.
AdExchanger.com: Were you surprised that Invite Media sold so quickly? -and to Google?
GB: I wasn't surprised that others saw and appreciated the value that the Invite Media team was creating. I was, however, surprised that it happened so quickly. We invested in Invite Media in May of 2008 and from the beginning we were not building to exit. We saw a market opportunity and set our sights on building a solution to fill that need. The rest, we figured, would take care of itself.
We are happy it was Google. We have a lot of respect for what they have built and felt it was a good home for the technology, a good fit for the team and a good cultural fit. The response from employees, partners and customers has been very positive.
How did your investment help lead to Google's acquisition of Invite Media?
Remember, when Invite started nearly all traffic was going through a single ad exchange. Also, few agencies knew how to maximize the opportunity presented by exchanges. We believed from the beginning these would change but needed time. Invite Media was a very capital efficient business. That efficiency enabled us to continue to build product and wait for the market to develop.
Where does this rank in terms of Genacast investments to-date?
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For last week's Digital Media Summit, GCA Savvian's Terence Kawaja (maker of "A Few Good DSPs") mashed up a music video version of Nickelback's "Rockstar" with a range of technology and media "stars" in a sunnier update to his video from last year called Mad Avenue Blues. Do you recognize all the faces of "Tech Star"?
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