MarTech experienced an unprecedented level of venture capital funding and multi-billion dollar acquisitions this quarter, showing the strength of the fundamental drivers for continued fundraising and consolidation in the sector
It’s 2016 Q2, and the martech growth continues unabated. What characterized this quarter was the huge investor buzz with some monster funding deals for Snapchat, Groupon and Slack, and of course, the mother of all martech deals – Microsoft buying LinkedIn.
With close to over $5.05 billion funding being seen, this has been a massive Q2, well over the halfway mark to the total $7 billion that martech companies netted in 2015, with a large chunk of these investments ($3514.86 million) coming about in May.
Internet and Infrastructure came out on top as the most heavily invested categories at $2052 million and $1325.8 million respectively, thanks to the huge Snapchat deal. However, in keeping with general martech trend, the number of companies that received funding continued to be the highest in Experiences (64), followed by Operations (28) with startups in these categories being the most popular for investors. Martech investments in Experiences and Operations, were at $980.04 million and $526.55 million respectively.
Mobile-first is now more an accepted fact by marketers rather than just a trend, and Mobile App Development and Marketing startups justifiably received over $1.1 billion in funding, a major chunk of which was the Warren Buffet led Berkshire Hathaway investment in Apple Inc. Interestingly, MarTech Advisor had spotted this focus that marketers may have in our March researched Spendscape, which highlighted the categories that maybe invested in this year.
Acquisitions soar
This quarter’s highlight has been amazing valuations and M & A activity with a total of 93 acquisitions in Q2 of 2016. Private equity firm Vista Equity’s $1.8 billion acquisition of Marketo was significant because it shows that private investors see great value in martech. Vista Equity also picked up Cvent and Ping Identity in a further indication that the investors are ready to escalate the stakes to win the battle of the marketing clouds. Other major acquisitions this quarter include Microsoft buying LinkedIn, Salesforce procuring Demandware and Metamind, Adobe picking up Livefyre and EQT taking over Sitecore.
These mega million dollar deals indicate that the VCs faith in martech is ever-growing compared to rest of the tech sector. This, propelled by the surge in the API connector martech companies, has made it feasible for Platform / Suites to go about acquiring and integrating various capabilities within their bouquet of offerings to cater to SMBs and large enterprises alike. No wonder then that Salesforce and Adobe have ratcheted up the Marketing Cloud wars this quarter, and big clouds are expected to continue picking up smaller players in data, commerce and content technology in the last two quarters as well.
New martech countries, upsurge in investors
Though funding for the Rest of the World may seem just a speck in martech space at 4% and $173.91 million, what’s interesting is that newer countries have been added this quarter other than Canada, UK and Israel, which were prominent in the last quarter. These are Germany, Romania and Estonia, besides Singapore, Australia and New Zealand which come up intermittently in some quarters.
Another notable stat is the rise in the number of investors in addition to the regulars such as Bessemer Ventures, Sequioa Capital, Salesforce Ventures etc indicative of the fact that the growth of the martech sectors is bringing in several new funding avenues.
Category wise companies in focus for Q2
Of the top 28 companies that received funding in this quarter, 3 (DigitalOcean, The Trade Desk, Verve) have secured debt financing, 2 have got post-IPO equity funding (Apple, Groupon), 3 (Flipp, Outbrain, Impact Radius) have received funding from private equity companies, 2 (Crown Peak, Bloglovin) under the series rounds and 18 companies have been invested in by the VCs.
Here are the most notable Martech venture deals, broken down by martech landscape categories:
INTERNET
Snapchat
Snapchat’s monster funding round of $1.8 billion (at a valuation of $20 billion) in May raised Q2 investment figures for martech significantly. The social app’s popularity with millennials due to its unique kind of user engagement attracts not just big investors and brands, but also has advertisers flocking to the platform. Snapchat is expected to invest heavily in product development. Although they only started monetizing in the second half of 2015 with reported revenues of $59 M – Snapchat already have plans to hit $1 billion in advertising revenues next year. Sequioa Capital (one of the top investors who invested thrice this quarter), General Atlantic and T. Rowe Price are the main investors.
Groupon
In April, Atairos investment fund, backed by Comcast, invested $250 million in the daily deals site Groupon, signaling the potential in local marketing. A synergy with Groupon’s local advertising business could see Comcast leverage Groupon’s extensive network of relationships with local merchants for its vast advertising network. Alibaba had picked up a 5.6% stake in Groupon in February.
INFRASTRUCTURE
DigitalOcean
The company, known for its low-cost developer-friendly cloud hosting offerings, took the debt route rather than raise more venture capital, and took a loan of $130 million in April as a cheaper way to finance costly data centers around the globe, and build out more features. The present investment came from Pacific Western Bank, and have previously raised $123 million from VCs.
Vibes
Vibes mobile marketing solutions raised $45 million as part of a new partnership with telecom tech company Syniverse in June, which will be used to expand its technology platform for mobile marketing globally and run campaigns in new markets to include more industries and add to their client list.
Besides the ones highlighted above, other notable companies funded in this category are Zaius, Unlockd, OtherLevels, Roximity, Cloudability, Appboy, Verve.
BACKBONE
Intercom
Customer communications cloud platform Intercom, which enables businesses to communicate online with customers across touchpoints raised $50 million funding in April. CEO Eoghan McCabe said at the announcement, “The strength of our technology has generated incredible organic revenue growth, meaning we don’t have to pump a ton of capital into sales and marketing.” Intercom says it will not be seeking any more funding and will invest in product development to create a platform with a suite of integrated products for sales, marketing, product, and customer support teams. Social Capital (who also invested in Slack and are amongst the top investors this quarter), Bessemer Venture Partners, Iconiq Capital and Index Ventures participated in this funding.
BigCommerce
BigCommerce raised $30 million in May led by GGV Capital, showing that VCs continue to bet on software companies that help small businesses compete with the big online retailers. BigCommerce has added more advanced features to target bigger merchants, while continuing to focus on smaller sellers to sell in physical stores and on the big shopping marketplaces.
Other important mentions for this section are ClickDimensions, BlueShift, Windsor Circle, Contactually, LoyaltyBuilders and Insightly.
OPERATIONS
Slack
Enterprise messaging is a hot tech sector, and Slack with its promise to replace email, is on a hyper growth trajectory. Its April $200 million fundraise based on a valuation of $3.8 billion seems to undervalue the unicorn, which could go public within two years. Notable competitors like Domo and Atlassian are also backed by big investors, and might be able to rival Slack’s core messaging platform, but the Slack ecosystem of integrated apps and chatbots is making it a runaway winner. Slack is investing heavily in app developers, bot makers and features like voice and video chat. The funding came from three of the top investors of Q2 – Accel (who have also invested in Invision), Comcast Ventures and Social Capital (also invested in Intercom), besides GGV Capital (also invested in BigCommerce) and Index Ventures (also invested in Intercom) who also participated.
Invision
Invision, the protoyping tool for collaborative product design, closed their $55M series D round in June led by Accel and Iconiq Capital. Aiming to become the go-to collaboration platform for product designers, as Github is for developers, the funding will let them continue making strategic acquisitions of makers of smaller design tools.
Dyn
Website availability and fast-loading times have become mission critical for the world’s biggest media and entertainment companies. Internet performance management provider Dyn raised $50 million in May from Pamplona Capital Management to help companies optimize their online performance, and is developing new tools for server analytics and traffic rerouting.
ThoughtSpot
BI software vendor ThoughtSpot, a relational search engine heavily backed by Silicon Valley investors including founders of Nutanix – Lightspeed Venture Partners and Khosla Ventures – aims at disrupting the business intelligence market by making it accessible to anyone through a search engine. They announced a new $50 million financing in May to help accelerate their “search-driven analytics” – designed for regular employees to use like a search engine to find and make sense of relevant enterprise data. General Catalyst Partners also participated.
Notable mentions here include Zarget, Relay Network, Amplitude, Performance Horizon, CallRail, Drawbridge and SmartQ.
EXPERIENCES
The Trade Desk
Another company going the debt finance route, is real-time bidding demand-side (DSP) platform The Trade Desk. “This round of funding is our biggest yet,” said Jeff Green, CEO and founder, “and we will continue to pioneer enhanced technology in the programmatic advertising industry as a true buyer’s platform.” The $60 million funding, which came about in May, allows Trade Desk to continue growing by targeting mid-tier agencies.
Flipp
Toronto-based retail discount app Flipp raised $61 million from General Atlantic in April in a funding round that valued the startup at around $400 million. Flipp is poised for high growth, as it invests in user acquisition and global expansion.
Crown Peak
Cloud-based Digital Experience Management platform Crown Peak announced their $50 million investment and merger with UK-based ActiveStandards, the enterprise Digital Quality Management (DQM) provider. With several joint clients including large insurance, financial services and pharmaceutical companies, this merger creates capabilities around compliance and governance for the platform, making a strong play in the enterprise market for digital asset and experience management solutions. The funding was led by K1 Investment Management.
Medium
Online publishing platform Medium raised $50 million in a Series C led by GV, Andreessen Horowitz, Spark Capital in April. Co-founder Ev Williams said it was “to bolster our resources now given the demand we’ve seen for the vision we are building toward.” Focused on a single publishing platform vision, they aim to be the biggest platform where people come to “read and write interesting stuff.”
Spredfast
Social media marketing startup Spredfast announced a $50 million growth equity financing round in June taking their total funding to $116 million. Offering social analytics and the ability to curate and distribute content from social networks across various channels, Spredfast is making big inroads into social customer care and brand marketing. Spredfast CPO Manish Mehta said, “We plan to bring further innovations to the platform by investing in product R&D to collect and enrich even more social data, and build our partner ecosystem.” Participating investors are Lead Edge Capital, OpenView and InterWest.
WalkMe
Customer experience startup WalkMe, which makes solutions to help guide people through complicated online services raised another $50 million in funding in May from Scale Venture Partners, Greenspring Associates and Insight Venture Partners at a valuation believed to be around $400 million. The funds will be used to work on new products that use machine learning to onboard and assist users for shopping, apps and personalization.
Outbrain
Content discovery platform Outbrain announced a $45 M funding round in May invested by CEO Yarov Galai himself. Outbrain has now ventured into the chatbot space with a new product for FB Messenger. They have also integrated the technology from their acquisition of Reeve, which lets publishers know how much revenue individual articles are generating in real-time, into the Outbrain Automatic Yield product, which “algorithmically maximizes the revenue for publishers, and turns audience development from a cost center to a profit center,” wrote Galai.
Seismic
Seismic secured a $40 million funding in May led by General Atlantic which Gary Reiner, former GE CIO, who will join Seismic’s board of directors, opines is “a significant opportunity for Seismic to expand its strong customer value proposition to new verticals.” Other investors include Jackson Square Ventures and JMI Equity.
Besides this, other significant investments took place in ion interactive, Bloglovin, Contentful, Virool, Splash, TapInfluence, Captiv8, Tubular Labs, BloomFire, HelpShift, Jivox, SearchMetrics, HookLogic, Crowdly, Yotpo, eTouches, Eyeview, Persio, On24, Persado and SundaySky.
MIDDLEWARE
In the Middleware category, Mintigo and ImpactRadius are the important mentions.
Conclusion
Sales Enablement is an area of martech headed for pitched high growth, as sales and marketing teams in B2B steadily move towards efficient content management and account-based marketing. VCs are backing this space extensively, seen from the big Q2 mega-million dollar deals for Seismic ($40 million) and Showpad ($50 million).
Enterprise Collaboration and Messaging will also continue to be a big play for VCs. Large financing rounds for Slack ($200 million) and Invision ($55 million) underscore the attraction for investors looking to back the next unicorn in this space.
