Google's retreat, FirstPartyCapital's launch and the opportunities that lie ahead
Google detonated a privacy bomb at the heart of digital advertising this month. In a short post, the company outlined that it would not use third party identifiers (including hashed emails) across its browser or ad stack to “track” and measure user behaviour from next year.
It sent the ad industry into a proper tailspin.
What did this Google move mean, people asked? Could you still use the likes of LiveRamp and Unified ID 2.0 across Chrome? TTD, LiveRamp and others quickly ramped up the PR machine to reassure us that their solutions still worked on Chrome.
Sure, but the question we are all now asking is: how long for? Is the clock ticking on our default answer to Google’s and Apple’s wayward privacy crusade?
There remains a lot of confusion with this current strategy. We would all be forgiven for thinking that Google literally has no idea what it is doing - given the lack of joined up thinking (or communication) between the browser and ad teams.
But wrapped up in its typically ambiguous double-talk there is a clear message: Google intends to retreat further behind its closed walled garden.
This third party ad tech and ad business - as well as its support for the open internet - no longer fits the investor narrative of hyper growth, high-margin. It is also fraught with many privacy landmines that the company would be better off avoiding.
Ultimately, Google just wants to funnel all marketing spend and demand to its own properties (Search, YouTube, Gmail, Maps etc) where it makes 100% margin; the quintessential non-innovating “rentier capitalist” landlord, extracting its rent from us digital serfs.
Google’s exit will leave a huge whitespace for our industry to reimagine measurement, targeting and digital marketing in a privacy-first way. Now is the time for new companies to step up and fill that void. And from what we are seeing, a whole wave of new startups are already taking on this role with gusto.
Given this recent Google news, FirstPartyCapital's raison d'être has never been more obvious: to fund the exciting ad tech, martech and first party platform/publisher startups that are building next generation solutions for our industry.
FirstPartyCapital: our progress so far
When we conceived this idea late last year of starting a verticalised funding solution for ad tech and digital media, never did I think we would end up here.
Going from writing a critique on how industry startups are funded to actually launching a live in-market offering has been an interesting process.
Having built our - now live - platform, vetted over ninety startups and recruited hundreds of investors, I think it would be useful to provide you with a progress report on the FirstPartyCapital project thus far.
Our unique fund structure is a key differentiator
The structure of our fund is critical to what we can provide startups - as it allows us to offer much more than just money. Capital is easy to come by right now so it is important to offer more value.
We operate a rolling seed syndicate made up of hundreds of investors. For those not aware of what a seed syndicate is, here's a quick definition: it is a group of individuals that invest in early stage startups (seed and series A) as one entity typically on a deal-by-deal basis.
FirstPartyCapital curates prospective deals from outside the US. After extensive due diligence we present them to the group, the syndicate members then decide if they want to invest (the cheque size starts from just $5K per investor per deal). Once the investment amount is covered, the money is transferred to the startup via our FCA-approved partners.
It should be noted that there is no obligation to invest in every deal - and our fund is open to all.
The “rolling” bit refers to the fact that the fund has no fixed period for returning deployed capital. We return proceeds to investors whenever the company they’ve invested in either sells or has a liquidity event.
We now have recruited over 250 people to our syndicate, and have a $5 million commitment for every deal.
The FirstPartyCapital syndicate is made up of some of the most senior and influential ad tech and digital media executives. These are canny investors with deep domain industry knowledge, looking to put their money to work.
Startups are keen to partner with FirstPartyCapital because of this unique global network. And our members - as part of their investment in FPC - are also interested in working with our portfolio companies.
You can call it “smart capital”. But I think it’s just a logical value exchange that helps both the startup and investor.
Deal flow, valuations and leading the round
One of the things that surprised me most about this whole process is how much excellent deal flow FirstPartyCapital is getting access to. Much of it is unique, and is not being offered to established generalist funds.
Why is this happening? These are a couple of key reasons:
FirstPartyCapital has a vertical focus with an unparalleled deep domain knowledge of this sector.
Our global syndicate is made up of the smartest people in ad tech and digital marketing that can add unique networking and commercial value.
And finally, we are open to leading the majority of the seed and series A rounds we are active in.
The last point is an important one to note. It is becoming evident to us that very few globally have the capability, tools or knowledge to value ad tech/digital media companies at the seed or series A rounds.
The majority of the time startups outside the US get over valued, reducing their eventual M&A outcomes. This critical benchmark is invariably kicked down the road in the form of a convertible note or a SAFE.
FirstPartyCapital has built - and continues to iterate - internal models to help with this process. We work with founders to make sure we arrive at a valuation that they can justify with TAM (total addressable market), market fit and growth rate. And we also reiterate that often overlooked metric (particularly, versus US ad tech), value arbitrage. Remember: we can always build better for cheaper.
To put it bluntly, FirstPartyCapital loves to lead rounds. And we are always happy to discuss this with any company.
Micro and macro trends that FirstPartyCaptial is seeing
I think the most interesting part of this process has been uncovering the macro and micro trends emerging in our industry. Having spoken to over ninety startups globally these are some of the more interesting data points:
With restrictions on one-to-one marketing, there is a renaissance in creative ad tech
The Nordic legacy of great ad tech companies is birthing a wave of smart and scalable startups
First party data, contextual and clean room tech is king, queen and everything in between when it comes to targeting and measurement
Utility ad tech around analytics, workflows and infrastructure are scalable and profitable
The public markets in Europe will soon love ad tech (keep an eye for that deal)
First party platforms and publishers - with logged in users and vertical focus - will reap the benefit of a lock down on third party identifiers across Apple, Google and Mozilla
Companies outside the US are building great products for an untapped SME market (usually the domain of Facebook and Google) to navigate the increasingly fragmented media landscape
The hundreds of billions of pounds/euros/dollars commerce media sector could be the biggest area of growth this decade
Those with knowledge of the convoluted ad tech and digital marketing ecosystem are building smarter; those with no experience are often chasing silicon valley wet dreams
Going live and how you can join our syndicate
After much development, administrative and legal work over the past six months, our platform went live this month. We will initially be loading three exciting deals - with more to come. If you are interested in joining our syndicate and accessing our global deals, then sign up here: https://firstpartycapital.com/seed-syndicate-form/.
Our goal with FirstPartyCapital is to bring our syndicate great deals and fund the best and brightest ad tech, martech and digital media startups outside the US. And we believe Google’s retreat is the industry’s opportunity.
So, as Google says goodbye. FirstPartyCapital is saying an enthusiastic HELLO.