Norwest Venture Partners' Jeff Crowe doesn't believe the shakeout of mergers and consolidation is over for ad technology. He should know as Admeld (acquired by Google) and Brand.net (acquired by Valassis) were NVP companies, and he and his venture firm remain significantly in the game with ad platform Turn.
Even though M&A has slowed in 2012, Crowe says, "Every ad tech sector is still chock-full of companies - just look at any LUMAscape. You need a magnifying glass to read all of the logos. These logos are appearing on the maps just as fast as or faster than they are leaving them. The M&A levels in ad tech are going to continue to be elevated for some years to come, and the perceived shakeout will continue."
AdExchanger interviewed Crowe on a range of topics recently, including ad tech and venture capital trends.
AdExchanger: Is Norwest making new investments in advertising technology today?
JEFF CROWE: Yes, we are looking at potential investments in ad tech all the time. We don’t believe that the investment opportunities in ad tech have played out, as the overall sector continues to enjoy healthy growth and there are innovative teams pursuing new ideas on a regular basis in ad tech. The result is an ongoing, robust level of new company formation and opportunities for venture firms.
Now, as we just mentioned, each LUMAscape in the ad tech arena is extremely crowded – so crowded that it is really hard for any one firm in a sector to have breakout success and scale to a large outcome. So, for us as investors, that puts a premium on us backing teams that not only have a strong product/market vision, but can also out-execute the competition. Turn is one such example of a team in ad tech that we backed – Turn operates in a crowded space with a lot of DSP and DMP competitors, but the company is executing well and is scaling rapidly.
Has Norwest Venture Partners evolved its investment thesis in the past year?
At its core, our investment thesis does not change over time. We are always looking for exceptional teams with a disruptive business/technology approach to a large market. That said, we are pursuing investment opportunities around the consumer internet, e-commerce, ad tech, financial tech and information services sectors.
Here are a few examples:
- We like e-commerce companies that offer superior content/products to their customers because they actively involve their user communities in the creation of the very content/products that they offer. Examples of these companies are the online coupon company WhaleShark/RetailMeNot, the online retailer of customer-designed fine jewelry Gemvara, the innovative online retailer of vintage-inspired fashion and décor Modcloth, and the collaborative invention company Quirky. We made all of these investments in the last 12 to 24 months. Stay tuned here – we’ll be announcing shortly another investment in a company which leverages community generated content.
- We like companies that apply big data in novel business approaches that disrupt existing online markets or create new online markets. We are certainly seeing big data being heavily applied for audience segmentation, real time bidding and dynamic marketing purposes. We have looked hard at some neat companies in this arena. We are also seeing the use of big data disrupting new markets. One such example is music. We invested this year in The Echo Nest, a company with a massive big data platform of songs and artists that enables app developers to build super smart music apps.
- There are still major advertising dollars continuing to shift toward video, social and mobile advertising. We continue to meet with a lot of companies in these sectors - particularly mobile and video. We invested in a company called SundaySky which is the creator of “SmartVideo,” a newer, better, smarter way of using video to communicate with prospects and customers.
Brand.net, an ad network in which NVP was invested, recently sold to Valassis. Why was it the right time for Brand.net to sell? When is it the right time for any company to sell for that matter?
In the case of Brand.net, it was a really great fit with Valassis and the right time for the company to partner. It is hard to pin down a general “right time” for a company to sell — it really depends on many factors, including what is going on for the company, the market, the competition, etc.
What has surprised you about Facebook - especially as it relates to ads lately?
I thought that Facebook launching the Facebook Ad Exchange (FBX) made a lot of sense for its ad strategy. Facebook had placed pretty tight constraints on advertisers prior to FBX, and it is important for advertisers to be able to use their own data when buying ads on Facebook and to be able to target consumers more precisely, programmatically and at scale. FBX now allows that. I hear in the marketplace and from my own portfolio companies that ads on FBX are performing well, perhaps even better than expectations. Launching FBX was a surprise only in that Facebook had publicly resisted doing something like this for so long.
When you look at an executive team for a potential investment, any trends you're seeing with "teams"?
The trend with teams depends somewhat on the sectors in which the teams operate. In much of the ad tech world, we are now seeing teams that are more experienced than they were, say, five years ago. That is probably because the entire ad tech sector has been maturing over the last decade, and experienced executives have been moving between companies. There are exceptions, however -- in social advertising, the teams have been younger and moving quickly over the last couple years to exploit the burgeoning opportunities in social.
Another trend is that the most successful new teams we are seeing in ad tech, e-commerce and consumer internet overall have gotten the right product/market fit from the beginning and then executed their initial go-to-market strategy very well. Obviously it remains important for teams to be flexible and to be able to pivot, and we have seen some very good companies that found traction and accelerated after one or even two major pivots. However, the best teams usually have a strong product visionary whose core world view leads them to develop a disruptive and attractive product offering out of the box. They then evolve that product offering rapidly and also have some sales and marketing execs that can run like hell.
Finally, we have done a lot of work at Norwest studying our successful CEOs in our consumer, ad tech and e-commerce portfolio companies and have identified key characteristics that cut across all of our successful CEOs – and some of those characteristics were surprises to us. Whenever we look at a potential investment now, we spend a lot of time with the CEO to understand his or her make-up and how the characteristics we identified do or do not fit with that CEO.
You are on a few boards, of course. Have boardrooms evolved?
Boardrooms have remained consistent in recent years in that private company boards continue to focus on the same issues of company strategy, company performance, CEO performance, organizational growth and development, and fundraising, along with the standard fiduciary responsibilities associated with board oversight. Not much has changed in the interactions between board members and management teams or between board members themselves—other than perhaps more frequent communication due to emails flying around 24/7.
What has changed markedly in recent years is that a number of venture firms have gotten much more proactive in trying to help their portfolio companies with specific activities such as business development, marketing and recruiting. Some of this activity happens inside the boardroom, but most of it happens outside the boardroom. More venture firms are now dedicating full-time people inside their shops who work primarily or even exclusively with portfolio companies assisting them in specific areas. Our firm employs executives like this -- we’ve been taking this value add approach for a while.
Given the amount of capital which Norwest has at its disposal, is there pressure from your investors to invest? Or, are you able to "pick your spots” adequately?
No, there is no pressure for us to invest a fund within any specific timeframe. Nor do we try to “pick our spots,” if by that you mean that we try to time the market. It is, of course, very hard for anyone to consistently time the market. Instead, we remain focused on our investment themes and on finding great companies in which to invest. It usually works out that we maintain a relatively steady pace of investments over time, as we tend to find great companies during both up and down cycles in the economy and financial markets.
Finally - when you vacation, are you able to totally unplug and go "off the grid" so to speak?
No - it is a running joke with my family! Although they are not always laughing….
Actually, it is somewhat of a problem for a lot of people taking vacations nowadays. Think back 20 years ago before email became so prevalent – you could go on vacation for a week, stay largely off the grid with the exception of a few phone calls, and then come back to work feeling refreshed. In today’s world, if you go off the grid for a week, you return to a deluge of unanswered emails so vast that you are digging out for days. So you avoid drowning upon re-entry by doing emails on vacation. Of course, the solution to all this is to simply go on vacation where there is no cell service and no internet – and then you feel totally freed from email because there is absolutely nothing you can do about it!
Read more from our Venture Capital investor series...Venture Capital | featured | norwest venture capital