Levine recently discussed his firm and ad tech trends with AdExchanger.
AdExchanger: I realize there's still time, but how are we doing with your prediction for 2012: "the year of programatic guaranteed"?
SETH LEVINE: There's no question that we're seeing a lot of progress on this front. From a handful of start-ups starting to gain real traction in this area to Google opening up better API access through DFx for "programmatic guaranteed" buying, I think we'll look back at 2012 as a key year where programmatic guaranteed really began to take hold.
Overall, I think programmatic buying and selling has increased at a pace higher than most people expected. Add into that Facebook opening up its traffic to real-time bidding (RTB) and in the course of just a few years we've gone from RTB traffic volumes representing a few percentage points of overall display inventory to it covering potentially over half of all display impressions - "potentially" because it remains to be seen how much of Facebook's impression base gets filled through RTB.
Is Foundry Group still considering new ad tech investment or have you shut off the spigot? And, do you consider content marketing and LinkSmart as "ad tech", for example?
While our pace of ad tech investing (what we call Adhesive) has definitely slowed, we're still in the market for quality companies tackling broad digital advertising challenges. Our Adhesive theme includes investments in 8 companies. I'm glad you brought up LinkSmart as I'm really excited about what they're doing. They're really more content control more than content marketing (although there is no question that their Total Link Management solution can be used as part of a content marketing strategy).
I think a good analogy for LinkSmart and Link Management is SEO. Every website implements SEO techniques to maximize their inbound organic search reach. But these same publishers aren't deploying any meaningful strategies around circulating this hard earned traffic around their properties or to partner sites. I think a few years from now Link Management will be as ubiquitous as SEO. And yes - I do think of LinkSmart as part of our Adhesive theme.
You've already written about this to a degree, but what do you think will be the impact of the JOBS Act on venture capital and angel investment? How will it effect Foundry Group in particular, if at all?
Overall I continue to believe that the JOBS act will be net positive on venture and angel investment activity. However I think far more impactful will be what happens to tax policy over the next several years. Specifically - what happens to the cap gains rate, which is set to increase in 2013, and also to overlay tax proposals such as the so-called Buffet tax which will have a back-door effect of increasing cap gains on the expected return profile for angel investing, which I think will significantly negatively impact investing at the angel level.
What lesson(s) did you learn from Admeld's acquisition by Google? Admeld was a Foundry Group investment, of course.
Google is a great buyer. I wish they'd buy all of the companies in which we have an investment!
Seriously, though, I've been a part of literally hundreds of M&A transactions and I have to say that Google is among the best buyers I work with. They (correctly) understand that having a smooth process is a strategic advantage to their business.
On a higher level, I think it's critical to consider the overall buyer landscape in ad tech. The truth is that there are relatively few buyers of ad tech at scale at the moment and Google is at the top of everyone's list. It appears to me that Google buys based on a few criteria: 1) the quality of the technology - in Admeld's case it was clear that they highly valued the tech that Admeld had built and the tech team that implemented it; and 2) the quality of the brand - in Admeld's case represented by the size and quality of Admeld's publisher relationships. I think that latter point is well-demonstrated by their recent acquisitions in the travel and entertainment space - both Frommers and Zagats are premium brands, clearly what Google was going after.
How has Foundry Group's investment thesis changed from, say, two or three years ago?
We like to think of our Themes as always evolving. While they're based on long term technology trends in which we see the ability to invest over a substantial period of time (10-20 years), we're always learning from the investments we make. In ad tech that lead us from our initial investment in Admeld, to bets on the demand side (Triggit), search (Trada), mobile (Medialets) to publisher tools that had an advertising twist (Lijit, now owned by Federated Media which also falls into that category, and LinkSmart) and most recently brand engagement (CrowdTap).
What common mistake are entrepreneurs making when approaching you for investment today? Any tips?
At Foundry, we try to be very open about what we're interested in and why. Both through writing extensively about our Themes, which guide much of our investing activity, but also through our personal blogs. It's a great way for people approaching us to understand where we're spending our time and energy (and money) and to craft their pitch accordingly. And while I think this openness is true of many investors, I continue to be amazed at how many emails I receive that are completely generic and show no attempt to understand either where they might fit into our existing portfolio or how they may relate to an active investment theme.
As part of Foundry Group's new website design, each partner is depicted as a bobblehead - at least, I think it's a bobblehead. Which partner bobblehead is the least accurate and why?
For a gift this year for our CEOs and Limited Partners my partner Ryan (along with Matt Gallagan from SimpleGeo) brewed up Foundry Equinox Ale (which we called "Foundry's Liquidation Preference"). I'm not sure how the bobble head idea came about but they ended up created for the beer label, which then became the website. Unfortunately I think mine is least accurate. For starters, I'm about 5 inches shorter than Brad (which you wouldn't know from the bobbles). I also have a beard now and bobble-Seth is clean shaven. I should point out that those aren't drawings - we had actual bobble heads made of each of us. Clearly we don't take ourselves too seriously.
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