Emerging Themes and Trends in
Technology and Digital Media
October 10, 2013
Agenda

• Greycroft overview
• Investment thesis
• Areas of focus today
-Mobile
-Mobile payments
-Video
-Native Advertisin...
Quick history of Greycroft
Fund I
(April 2006)

Fund II
(April 2010)

Fund I Annex
(Feb 2012)

•Greycroft I - $75MM

•Grey...
And our newest fund
Fund III
(January 2013)
•Greycroft III - $175MM
•6 investments to date
Fund III themes:
•Marketing Saa...
Agenda

• Greycroft overview
• Investment thesis
• Areas of focus today
-Mobile
-Mobile payments
-Video
-Native Advertisin...
Investment thesis
• Offices in LA and NYC – both emerging tech leaders
• Small Funds – $400 Million under management
-Inve...
More than 90% of reported VC exits have been M&A
Venture-Backed Liquidity Events – Total
number of exits
600

Venture-back...
Average transaction value has held steady
Average exit size for venture backed
M&A transactions
$500M
Average M&A dealsize...
The Greycroft approach to investing is different

Lead every deal

No syndication

Board seats

20% ownership

$1B expecta...
Agenda

• Greycroft overview
• Investment thesis
• Areas of focus today
-Mobile
-Mobile payments
-Video
-Native Advertisin...
Mobile
• Shift to mobile is accelerating
-Last year, nearly 12% of time spent with media by an
adult was consumed via a mo...
Mobile and tablet sales have grown rapidly
Global internet device sales (M)

CAGR

CAGR

(06-12) (12-15)

3,000M

Tablet

...
Globally, more than one third of digital ad spend will
be on mobile by 2017
Mobile ad spending share
of total digital ad s...
The shift to mobile media is accelerating – growing at
53% p.a.
Share of media time spent per day
on mobile (US adults)

N...
Agenda

• Greycroft overview
• Investment thesis
• Areas of focus today
-Mobile
-Mobile payments
-Video
-Native Advertisin...
Highlighted trends in payments
• Though early, mobile payments represent strong area of growth,
with ~40% CAGR expected in...
Mobile payments expected to grow dramatically
Global mobile payments ($B)
$800B
721

’11-’17F CAGR = 38%

600

400

235

2...
Global smartphone users’ mCommerce activities
mComm activities of smartphone users, 2012 (% resp)
60%
51

Italy
UK

40

43...
Companies innovating in online and mobile payments
Payment
platforms

P2P
payments

Mobile POS

Retailer
closed apps

Mobi...
Key takeaways on mobile commerce

• Mobile banking and commerce increasingly common
among smartphone users
• NFC growth ex...
Agenda

• Greycroft overview
• Investment thesis
• Areas of focus today
-Mobile
-Mobile payments
-Video
-Native Advertisin...
Video
Strong Trends
•60% of US network traffic is devoted to online video streaming
•50% of all mobile traffic is video
•8...
Digital video ad spend forecast to grow rapidly
US Digital Video Ad Spending
$10B
9.1
8.0

8
7.0
5.8

6
4.1

4
2.9

2

0

...
Consumer behavior shows increased time allocated
Online video – daily minutes spent
30
Average YouTube
video is 4:21 minut...
Nearly three quarters of US internet users view video
Online video viewers (US)
300M

200
172

183

201

205

191

197

10...
Agenda

• Greycroft overview
• Investment thesis
• Areas of focus today
-Mobile
-Mobile payments
-Video
-Native Advertisin...
Native Advertising
• The concept of Native advertising isn’t new,
-it’s just being ‘discovered’ in the online business and...
Native advertising is becoming increasingly important
US Social media ad spend
$13B
11.0
Native

10

9.7

Display
8.4
7.2
...
Sponsorship dollars are flowing into native advertising
US Digital sponsorship ad spending
$4B

3.1

3

2.9
2.6
2.3

2

1....
Agenda

• Greycroft overview
• Investment thesis
• Areas of focus today
-Mobile
-Mobile payments
-Video
-Native Advertisin...
Connected devices
• Connected devices and the Internet of Things is a rapidly emerging
sector with nearly 25B new devices ...
Connected devices expected to grow rapidly, but will
not become ubiquitous over the next 5-7 years
Connected devices, worl...
Internet of things data traffic expected to grow 89%
p.a. over the next five years
Volume of data created by
connected dev...
A few big ideas to consider
• Offline data gathering/analytics
-Tremendous amounts of data are being created through the c...
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IDCEE 2013: Emerging themes and trends in technology and digital media - Alan Patricof (Founder & MD @ Greycroft Partners)

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Alan Patricof, a venture capital pioneer, founded Greycroft, LLC in 2006. Greycroft is a venture capital firm, with offices in New York and Los Angeles, focused on the digital media sector. The firm has three funds – Greycroft I, II and III – with combined committed capital of $375 million. Prior to founding Greycroft, Mr. Patricof was the founder and chairman of Apax Partners, Inc. (formerly Patricof & Co. Ventures, Inc.), the U.S. arm of Apax Partners, Worldwide, LP, now one of the world’s leading private equity firms operating in 12 countries with $41 billion under management or advice.

During the past 40-plus years, Mr. Patricof has participated in the financing and development of a large number of public and private companies. Companies with which he has been involved at the initial stages are Apple Computer, America Online, Cadence Systems, Office Depot, FORE Systems, Cellular Communications, Inc., IntraLinks, Audible, Inc. and The Huffington Post. He currently serves on the board of Boston Properties and on the Board of Overseers of The Columbia School of Business. Mr. Patricof is a frequent speaker on entrepreneurship, venture capital and social impact investing.

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IDCEE 2013: Emerging themes and trends in technology and digital media - Alan Patricof (Founder & MD @ Greycroft Partners)

  1. 1. Emerging Themes and Trends in Technology and Digital Media October 10, 2013
  2. 2. Agenda • Greycroft overview • Investment thesis • Areas of focus today -Mobile -Mobile payments -Video -Native Advertising -Connected devices NYC 131010 - IDCEE presentation vf 2
  3. 3. Quick history of Greycroft Fund I (April 2006) Fund II (April 2010) Fund I Annex (Feb 2012) •Greycroft I - $75MM •Greycroft II - $131MM •34 investments •56 investments •Greycroft I Annex $12MM Fund I themes: Fund II themes: •4 investments to date •Adtech, primarily paid media •Adtech, primarily owned media •Social media (B2B, B2C) •eCommerce (B2B, B2C) •Analytics •Gaming •Online Publishing •Online Video •Small seed portfolio 2006 Twitter 2007 iPhone 2008 2009 Facebook hits 100M users 2010 iPad Instagram 2011 Pinterest 2012 2013 Facebook hits 800M users NYC 131010 - IDCEE presentation vf 3
  4. 4. And our newest fund Fund III (January 2013) •Greycroft III - $175MM •6 investments to date Fund III themes: •Marketing SaaS •Cloud enablement •Small seed portfolio 2013 iPhone Facebook hits 100M users iPad Instagram Pinterest Facebook hits 800M users NYC 131010 - IDCEE presentation vf 4
  5. 5. Agenda • Greycroft overview • Investment thesis • Areas of focus today -Mobile -Mobile payments -Video -Native Advertising -Connected devices NYC 131010 - IDCEE presentation vf 5
  6. 6. Investment thesis • Offices in LA and NYC – both emerging tech leaders • Small Funds – $400 Million under management -Investments range from $100,000 - $5 Million • Recent addition of a Seed Fund • Focus on early stage digital media and Internet startups • Investing in Teams -Repeat entrepreneurs -Repeat experts in the space NYC 131010 - IDCEE presentation vf 6
  7. 7. More than 90% of reported VC exits have been M&A Venture-Backed Liquidity Events – Total number of exits 600 Venture-backed IPOs Venture-backed M&A deals 400 200 19 8 19 5 8 19 6 87 19 8 19 8 8 19 9 9 19 0 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 0 20 0 0 20 1 0 20 2 0 20 3 0 20 4 0 20 5 0 20 6 0 20 7 0 20 8 0 20 9 1 20 0 1 20 1 12 0 Note: IPO totals include all companies with at least one U.S. VC investor that trade on U.S. exchanges; regardless of domicile M&A totals only accounts for VC backed deals with disclosed values Source: Thompson Reuters; 2012 NVCA Yearbook NYC 131010 - IDCEE presentation vf 7
  8. 8. Average transaction value has held steady Average exit size for venture backed M&A transactions $500M Average M&A dealsize 400 300 200 100 19 8 19 5 8 19 6 8 19 7 8 19 8 8 19 9 9 19 0 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 0 20 0 0 20 1 0 20 2 0 20 3 0 20 4 0 20 5 0 20 6 0 20 7 0 20 8 0 20 9 1 20 0 1 20 1 12 0 Note: M&A totals only accounts for VC backed deals with disclosed values Source: Thompson Reuters; 2012 NVCA Yearbook; BLS NYC 131010 - IDCEE presentation vf 8
  9. 9. The Greycroft approach to investing is different Lead every deal No syndication Board seats 20% ownership $1B expectations $5M minimum Largest possible fund IPO expectations NYC 131010 - IDCEE presentation vf 9
  10. 10. Agenda • Greycroft overview • Investment thesis • Areas of focus today -Mobile -Mobile payments -Video -Native Advertising -Connected devices NYC 131010 - IDCEE presentation vf 10
  11. 11. Mobile • Shift to mobile is accelerating -Last year, nearly 12% of time spent with media by an adult was consumed via a mobile device • Digital ad-spend is going to migrate rapidly onto mobile -$8.8B in 2012 is forecast to become nearly $63B in 2017 NYC 131010 - IDCEE presentation vf 11
  12. 12. Mobile and tablet sales have grown rapidly Global internet device sales (M) CAGR CAGR (06-12) (12-15) 3,000M Tablet N/A 50% Smartphone 26.2% 24.3% 51% 27% PC 8% 6% 2,000 1,000 0 2006 2007 2008 2009 2010 2011 Source: Gartner, IDC, Strategy Analytics, company filings, BI Intelligence 2012 2013F 2014F 2015F NYC 131010 - IDCEE presentation vf 12
  13. 13. Globally, more than one third of digital ad spend will be on mobile by 2017 Mobile ad spending share of total digital ad spend worldwide 40% 36.3 31.0 30 25.6 19.8 20 14.2 10 8.5 4.6 0 2011 2012 2013 2014 2015 2016 2017 482 503 517 543 567 593 616 Digital ad spend ($B) 86 104 118 133 146 160 173 Mobile ad spend ($B) 4.0 8.8 16.7 26.3 37.5 49.6 62.8 Total ad spend ($B) Note: Excludes SMS, MMS and P2P messaging based advertising Source: eMarketer NYC 131010 - IDCEE presentation vf 13
  14. 14. The shift to mobile media is accelerating – growing at 53% p.a. Share of media time spent per day on mobile (US adults) Note: Time spent multi-tasking is counted for each medium Source: eMarketer; Needham & Co. NYC 131010 - IDCEE presentation vf 14
  15. 15. Agenda • Greycroft overview • Investment thesis • Areas of focus today -Mobile -Mobile payments -Video -Native Advertising -Connected devices NYC 131010 - IDCEE presentation vf 15
  16. 16. Highlighted trends in payments • Though early, mobile payments represent strong area of growth, with ~40% CAGR expected in transaction value through 2017 -The majority of this growth is being driven by mobile commerce and money transfers • Consumers are increasingly seeking convenience and a simplified and unified mode of both online and offline payments -Google, Facebook, Apple, payment platforms, and retailers are all working to provide solutions that help to bridge the “digital divide” NYC 131010 - IDCEE presentation vf 16
  17. 17. Mobile payments expected to grow dramatically Global mobile payments ($B) $800B 721 ’11-’17F CAGR = 38% 600 400 235 200 163 106 0 Mobile payment users (MM) 2011 2012 2013P 2017F 161 201 246 450 Note: Includes bill payments, merchandise purchases, money transfers, and NFC transactions Source: Gartner NYC 131010 - IDCEE presentation vf 17
  18. 18. Global smartphone users’ mCommerce activities mComm activities of smartphone users, 2012 (% resp) 60% 51 Italy UK 40 43 Russia US South Korea 38 38 33 30 24 20 22 18 15 11 12 14 28 26 15 17 3 3 4 0 NFC/ Mobile Wallet Note: Select ‘developed’ countries selected Source: Nielsen; Gartner Barcode/ QR Scanning Mobile Shopping Mobile Banking NYC 131010 - IDCEE presentation vf 18
  19. 19. Companies innovating in online and mobile payments Payment platforms P2P payments Mobile POS Retailer closed apps Mobile Wallets NYC 131010 - IDCEE presentation vf 19
  20. 20. Key takeaways on mobile commerce • Mobile banking and commerce increasingly common among smartphone users • NFC growth expected to be limited over next few years, with challenges on both the consumer and merchant adoption front -There is no incentive for consumer to tap rather than swipe a credit card and the interface can be less reliable • Banking and payment networks are established. There is room for innovation in ancillary services surrounding the payments infrastructure NYC 131010 - IDCEE presentation vf 20
  21. 21. Agenda • Greycroft overview • Investment thesis • Areas of focus today -Mobile -Mobile payments -Video -Native Advertising -Connected devices NYC 131010 - IDCEE presentation vf 21
  22. 22. Video Strong Trends •60% of US network traffic is devoted to online video streaming •50% of all mobile traffic is video •89 million people in the US are going to watch 1.2 billion online videos today •YouTube attracts 1 billion unique visitors who watch over 6 billion hours of video each month - this is estimated to be 1/3 of all online video traffic and grows to almost 60% when you exclude porn -Maker Studios is responsible for 4B video views per month Imbalance with advertising dollars •Online advertising only accounts for less than $100B of the $800B in total global ad spend (<12%) -Of which, online video advertising is only 7-10% of all online ad spend •24% of US brands are advertising against online video today (of approximately 4,300 national brands) NYC 131010 - IDCEE presentation vf 22
  23. 23. Digital video ad spend forecast to grow rapidly US Digital Video Ad Spending $10B 9.1 8.0 8 7.0 5.8 6 4.1 4 2.9 2 0 2.0 2011 2012 2013 2014 2015 2016 2017 Note: Includes advertising that appears on desktop and laptop computers as well as mobile phones and tablets Source: eMarketer; IAB; PWC NYC 131010 - IDCEE presentation vf 23
  24. 24. Consumer behavior shows increased time allocated Online video – daily minutes spent 30 Average YouTube video is 4:21 minutes 24 20 17 10 0 10 2010 Note: Ages 13-64 Source: eMarketer; IAB; GfK; One Productions 2011 2012 NYC 131010 - IDCEE presentation vf 24
  25. 25. Nearly three quarters of US internet users view video Online video viewers (US) 300M 200 172 183 201 205 191 197 100 0 % of internet users 2012 2013 2014 2015 2016 2017 72.2 75.0 76.6 77.3 77.8 78.1 Source: eMarketer; comScore; Nielsen NYC 131010 - IDCEE presentation vf 25
  26. 26. Agenda • Greycroft overview • Investment thesis • Areas of focus today -Mobile -Mobile payments -Video -Native Advertising -Connected devices NYC 131010 - IDCEE presentation vf 26
  27. 27. Native Advertising • The concept of Native advertising isn’t new, -it’s just being ‘discovered’ in the online business and advertisers are finding clever new uses • 73% of online publishers offer native advertising • Over half of all display ads are never in view (below the fold) • Native advertising in the context of social media alone was $1.63B > expected to climb to $4.57B in 2017 • 41% of Facebook’s Ad Revenue came from native mobile ads in 2013 Q2 • Twitter ads (all native) are projected to generate nearly $1B next year • Native advertising can be controversial or risky because it allows advertising to appear in the same format as editorial content NYC 131010 - IDCEE presentation vf 27
  28. 28. Native advertising is becoming increasingly important US Social media ad spend $13B 11.0 Native 10 9.7 Display 8.4 7.2 8 6.1 5 4.6 3 0 Native as a % of total spend 2012 2013 2014 2015 2016 2017 35.2% 38.9% 39.9% 40.5% 41.1% 41.7% Note: Native defined as branded content integrated directly within social network experience Source: eMarketer; BIA/Kelsey NYC 131010 - IDCEE presentation vf 28
  29. 29. Sponsorship dollars are flowing into native advertising US Digital sponsorship ad spending $4B 3.1 3 2.9 2.6 2.3 2 1.9 1.5 1.1 1 0 2011 2012 2013 2014 2015 2016 2017 Note: Includes advertising that appears on desktop and laptop computers as well as mobile phones and tablets Source: eMarketer NYC 131010 - IDCEE presentation vf 29
  30. 30. Agenda • Greycroft overview • Investment thesis • Areas of focus today -Mobile -Mobile payments -Video -Native Advertising -Connected devices NYC 131010 - IDCEE presentation vf 30
  31. 31. Connected devices • Connected devices and the Internet of Things is a rapidly emerging sector with nearly 25B new devices coming online over the next five years -These include your phone, embedded and wearable health devices, smart watches, new control interfaces, smart appliances, tracking tags for your possessions, and even your car • The volume of data these devices will create unrivaled volumes of data and that data presents opportunities for entrepreneurs NYC 131010 - IDCEE presentation vf 31
  32. 32. Connected devices expected to grow rapidly, but will not become ubiquitous over the next 5-7 years Connected devices, worldwide 60B 50.1 42.1 40 34.8 28.4 22.9 20 18.2 14.4 11.2 8.7 0 Penetration of connected devices (%) Source: Cisco 2012 2013 2014 2015 2016 2017 2018 2019 2020 0.60 0.72 0.87 1.05 1.27 1.54 1.85 2.24 2.70 NYC 131010 - IDCEE presentation vf 32
  33. 33. Internet of things data traffic expected to grow 89% p.a. over the next five years Volume of data created by connected devices (monthly) 600PB 563 1PB = 1,073,741,824 MB 400 300 200 159 85 24 0 Source: Cisco 2012 45 2013 2014 2015 2016 2017 NYC 131010 - IDCEE presentation vf 33
  34. 34. A few big ideas to consider • Offline data gathering/analytics -Tremendous amounts of data are being created through the connected device revolution – harness it • Quantified self -We are moving to a world where every part of ones self can be studied and quantified – find solutions to our biggest health problems • Over the top TV -Content is everywhere and at low cost – disrupt incumbents in the delivery market • Sharing economies -Bike shares, home shares, car shares, even private jet shares – make our society more efficient in our use of resources • Prize driven innovation -Competition for prizes is helping to solve some of our toughest problems and driving innovation – these are more important than creating the next social network NYC 131010 - IDCEE presentation vf 34

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