Call it the Facebook effect.
The fallout from the social media giant’s IPO could cast a long shadow in opening up public markets for emerging tech companies and put a damper on investors’ enthusiasm for other top prospects like Twitter and Spotify. It also could deflate soaring valuations of young companies on the secondary markets.
And what a letdown it was. The Facebook IPO was supposed to be a yardstick of Silicon Valley ingenuity, like Google and Netscape before it. Instead, it has brought back unpleasant memories of the dot-com bust of 2000-01.
Yet many tech entrepreneurs say they haven’t been dissuaded by this IPO debacle, even as it is under review by regulators and lawmakers. They’ll continue to support innovations in hot fields such as social networking and mobile applications.
The dollars are following, as venture capitalists look to invest in companies across the spectrum, from pure entertainment industry plays to new e-commerce platforms.
“We are looking to invest in high-growth or high-potential companies that are led by a strong set of founders or management team, addressing a significantly large market opportunity and that have a compelling, novel product or solution,” says Michael Yang, managing director, Comcast Ventures, and a speaker today at Variety’s Venture Capital & New Media Summit. “In the context of entertainment, we’re looking for startups that have created new online experiences that have captivated users and have gotten them to spend meaningful time in those experiences.”
“The most important thing is the quality of the team and their ability to execute against the challenges of the business they’re in,” says Diego Berdakin, co-founder and president of e-commerce site BeachMint, and a speaker at the summit. His company is venture-funded and uses tie-ins to celebrities — including Justin Timberlake, Jessica Simpson and Kate Bosworth — to sell products.
E-commerce, whether it be flash sales, daily deals or subscription-based is a hot sector for investment. VCs say they’re also interested in media subscription models such as Spotify and Pandora, consumer utilities like Dropbox and Box.net, tablet plays and social media companies like Pinterest.
“I think traditional VCs often give L.A.-based entrepreneurs credit for the entertainment/media/celebrity aspects of their business,” Berdakin says. “People who can pair that with strong execution against an interesting technological problem set are the ones that get through the noise and really attract attention.”
“Mobile, local and social are three things you hear over and over,” says David Teichner, CEO of Yowza!!, a mobile couponing app that was co-founded three years ago by actor Greg Grunberg and has attracted increased attention due to his name recognition.
Teichner, who is also speaking at the summit, says the company, which derives monthly subscription revenue from advertisers, was self-funded until it raised $1.5 million from angel investors last August. “Anything that makes consumers’ lives easier from a mobile standpoint will be hot as smartphones achieve even higher market penetration,” he says.
Home entertainment is another area of great interest to investors. “There’s a potential for disruption in the way entertainment is delivered to the home, and VCs want to make sure they’re placing their bets on different horses because someone is going to win,” says Kurt Hoppe, also a conference speaker and director of Smart TV innovation and alliances for LG Electronics. He estimates that within four years, 90% of the company’s new television sets will be connected to the Internet — a segment growing much faster than game consoles have.
Hoppe says LG, which invests in early-stage tech companies, is excited about automatic content recognition (ACR) — the concept that what’s playing on one screen can generate user activity with another screen and lead to lucrative new business models in advertising during programming.
Los Angeles-based NowLive, founded 18 months ago with friends and family backing, streams big entertainment events like movie premieres and syndicates its live player across the Web. It’s brought in enough revenue since the beginning to support its operations, which are scaled up for big events, like the recent “Rock of Ages” premiere.
“Whether it’s an acquisition of an Instagram or any other startups, the component that makes technology most interesting is engagement, which can be defined in multiple ways, including driving transactions,” says NowLive’s co-founder and CEO Sara Bordo, who will be speaking at the summit. “At the end of the day, people are looking for a solid, elegant experience. With any consumer trying out a technology, you usually only get one chance to get their loyalty,” she says.
Whether initial funding is from venture capital firms, angel investors or friends and family, the route may be different but the endgame is the same: profitability.
9:20 a.m.: Opening remarks: Los Angeles Mayor Antonio Villaraigosa
9:30 a.m.: Research/case studies
10 a.m.: Keynote: Ben Silverman, founder/CEO, Electus
10:45 a.m.: Networking break
11 a.m.: State of the venture capital and global media business
11:45 a.m.: Future of social media: gaming, e-commerce, life-sharing
12:30 p.m.: Lunch
1:45 p.m.: Build it and they will come: how to create the next great product (Track A); KPMG IPO bootcamp (Track B)
2:30 p.m.: Entertainment game-changers: who’s transforming content and consumer experience for the better?
3:15 p.m.: Networking break
3:30 p.m.: The burgeoning L.A. venture capital and startup landscape
4:15 p.m.: Cult of celebrity: When stars align with technology companies
5 p.m.: Conversation with Andreessen Horowitz and MediaLink
5:45 p.m.: Networking reception