Is the hype surrounding multibillion-dollar tech unicorns distorting the real world for growth tech start-ups in the media, entertainment and creative (MEC) sectors, areas touted as drivers of the global economy’s future?
It raises the question of whether private and government investors are doing enough to support the future entrepreneurs serving the MEC businesses.
Interviews for TechMutiny Insight, a new TechMutiny research report, indicate investors are failing to notice growth-stage chasms where cash is truly needed to support viable start-ups that could otherwise struggle and then disappear.
The hyper publicity surrounding digital tech behemoths like Facebook, Snapchat, Uber and start-up “unicorns” with their multibillion valuations is widespread.
But there is an element of the narrative that is rarely talked about: the successful and enterprising start-up in danger of running out of money and facing potential ruin for a rarely analyzed reason. It is stuck between initial angel or government seed funding and the multimillion finance from institutional venture capital (VC) and MEC corporate investors.
This worrying scenario is usually unforeseen because few start-ups are advised about how to find backers just as their ventures are ready to scale.
The start-ups’ challenges
Night Zookeeper, a UK-based international venture that inspires school kids to learn by using technology to meld games with reading, writing and creativity, has embarked on a campaign for a Series A round of VC funding.
Despite winning numerous tech pitch contests and being invited to speak about its rapid growth, Night Zookeeper has had to use its own resources to self-publish a related children’s book that is being read internationally.
“We’re now used on five continents. We have 60 kids per school buying this although we’re not experts in book publishing,” says Joshua Davidson (pictured), Night Zookeeper’s Founder/Managing Director. “We see a high level of enthusiasm for our brand. But I don’t think many senior media and entertainment executives that we’ve spoken to have necessarily understood the full potential. So we’re still looking for a publisher for the book because we would prefer to work with the experts.”
From Stockholm, Henrik Eklund is constantly globetrotting to promote Newstag, an ad-funded personalized international video news service that he founded.
The app allows subscribers to curate their own network from news supplied by global agencies that Newstag has significant distribution deals with, including Reuters, AFP and AP.
It reaches users in 200-plus countries accessing more than 5 million streams (from 2 million last August) weekly on the platform. Additionally, subscribers have the option to donate their share of the ad revenues to a worthy cause of their choice.
When initial traffic metrics indicated Newstag was recording 18 million streams weekly, investors were never off Eklund’s phone. Yet, it wasn’t the response he needed.
He says: “The market, including myself, gets swept away by high numbers even though they are not relevant. That leads to a situation where you can have amazing numbers in the billions, which in the old media model would correlate to billions in dollars, but in reality is just an output that will continuously fall in value as the supply is endless.”
Old versus new models
He argues that investors need to reevaluate how they measure success because they tend to lose interest when the Big Data figures start to fall,even though the numbers are then more credible and hence viable.
“The old model was based on scarcity and if you have a scarce resource that many want, the price will go up, hence the hunt for high volumes,” Eklund says. “But in a world where abundance is the norm, the personal experience becomes the scarcity. In this context, it is more valuable to have 1,000 people having a personalized experience than exposing your brand, message, value to 18 million eyeballs.”
To continue reading this exclusive in-depth analysis on the most challenging phase in raising funds for media and entertainment tech start-ups’ and what investors have to say about it, download TechMutiny Issue No.12.
TVBeat, Innovate UK, Holition, Barclays Bank, Appticle.com, Everfeel and Sweden’s Industrifonden are among the several in-the-know companies interviewed for this report.
The data compiled from the research will also be published online shortly.