Dealmakers: On-Demand and Deep-Linking Companies Born Under a Lucky Star
In the local marketing and tech industry, many of our companies were born under a lucky star — and continue to grow at a time when access to capital and low barriers to entry make it possible for a good idea to become great. But good ideas only become great with hard work and solid execution.
While some journalists are currently making hay (and racking up CPMs) talking of a tech bubble and impending crash, I think there are still a lot of companies delivering real value to serve their market, and that the hyperlocal industry is particularly well positioned to weather the coming years.
Two areas in the industry I see creating genuine value are in-app search, or “deep linking,” and on-demand tech. In both cases, the value these two segments of our industry bring is in the efficiencies they create. In other words, where and how they reduce friction in consumer transactions is where we will see 2016 investment and M&A activity.
Deep Linking Has an Abundance of Talent
The creation of deep links reduces some of the friction in the purchase funnel acting as the conduit by which frequently used and new-to-the-market apps can find their way to the right users.
Regardless of whether its one in four of us discovering apps through search, as Google’s research indicates, or if it’s one in three as published by TUNE, both stats demonstrate why app search and deep linking will continue to garner investment attention. You cannot connect with consumers if you cannot be found. And once you’ve connected with them, you have to keep them engaged. TUNE has created efficiencies in the purchase funnel from discovery to retention by building and buying the right tech. TUNE raised $27M January 2015, and has expanded its offering by using some of those funds for acquisition. In the last year, TUNE acquired Artisan Mobile and Appfuel.
AppsFlyer raised $20M a year ago this month, on the heels of a $7M round. Focused on measurement and attribution, AppsFlyer provides the needed attribution advertiser and ad networks are craving.
Button, meanwhile, has the ability to connect the biggest and most desired apps — “connecting the apps where people spend time with those where they spend money,” as Michael Jaconi, Button’s CEO said recently. The links created can bridge the discovery gap that exists today in the on-demand economy. And, in the process, Button, TUNE and others are driving new revenue sources for apps. Quixey’s Deep View Card™ facilitates a similar value, enabling apps to deliver what a consumer needs or wants, at the moment they want it through social, search or other paid media.
We’ll see niche or vertical players build unique, personalized experiences around deep linking this year. As an example, Linkfire, out of Copenhagen, which raised $2.3M in September, is taking on the music industry by allowing fans to find and connect with their favorite music directly from their favorite apps.
Deep linking will be the catalyst to mainstream adoption for the local on-demand economy, connecting consumers’ wants and needs with local service providers capable of meeting that need. While it’s the big platforms that drive much of today’s connections, it’s the local need that drives the demand. Deep linking tech will continue to grow the connection between local demand and global suppliers. But even these global suppliers have to do local well to earn the opportunity to expand.
On-Demand Is a Team Sport
Doing local well has been proven to be a challenging task (now-defunct Homejoy coulda/shoulda been a Hall of Famer). Because local is an Everest-like ascent, we will likely see consolidation in on-demand companies this year. Pressures from existing investors to exit or reap the rewards of their investment will increase as many on-demand companies are well into their B, C and D funding rounds.
Three M&A trends are shaping how on-demand tech is consolidating: talent, market growth and strategic alignment.
Acqui-hire has become one of the essential ways in which on-demand tech companies find their best people. Thumbtack made its first acquisition in September buying HeartThis. It was an acqui-hire to enhance Thumbtack’s engineering and product teams. The news of HeartThis’ acquisition shows how these well-funded, on-demand companies are bringing the best talent to their teams. In an article for TechCrunch, Thumbtack’s CEO Marco Zappacosta, shares that they looked at a “dozen teams for potential talent acquisitions before it settled on HeartThis.”
Another example is Instacart’s acquisition of Wedding Party. While a compelling model on its own, the ability of Wedding Party’s team to deliver both a consumer and merchant experience made them an attractive acqui-hire.
Postmates acquired Sosh in November. On the Postmates blog, the company describes the Sosh team’s talent for creating “intuitive products that unlock hidden local experience and empowers local artisans and merchants.”
Other consolidation will be for strategic reasons, where more established businesses have taken investment in on-demand as a way to retain existing customers and/or ward off competition. In those instances, look at who is leading or joining some of these big funding rounds:
- Urgent.ly, for roadside assistance, has backing from Verizon giving them national market access.
- ClassPass had a $30M raise solely from Google Ventures. They will, and should, scoop up smaller players to build a strong national and international presence.
- Bringg raised $5M 2015 from a single strategic investor, ITURAN. ITURAN is a security and logistics company now invested in an on-demand delivery platform.
In a more traditional M&A approach, we’ve also seen consolidation as companies enter new markets. Helpling and competitor Hassle merged last year, demonstrating that growth through acquisition is an expedient way to enter new markets and increase your install base. Handy, with more than a million bookings on its platform, raised $65M in 2015 after entering the UK market with a 2014 acquisition of Mopp.
On-demand funding deals are not dead in 2016, but we will not see many seed rounds. Rather, what money does flow into on-demand will be to support R&D, consumer growth and acquisitions.
Those Lucky Stars
On-demand and deep linking are smartly equipped to make 2016 their year. The money has been raised and the backing is strategic, giving both tech segments access to the market, talent and consumers. Regardless of whether a particular company has the right pedigree, or is just in the right place at the right time, it will all come down to how they play the game.
Dealmakers: Deep linking and On-Demand Local Economy
|Deep linking Tech|
|Linkfire||$2.3M Seed September 2015||VC: Northcap, The Danish Growth Fund|
|Artisan Mobile||Acquired by TUNE October 2015|
|Branch Metrics||$15M Series A February 2015||VC: New Enterprise Associates, Pejman Mar Ventures, Cowboy Ventures
Angel: Ben Narasin, Zach Coelius
Institutional: TriplePoint Capital
|AppsFlyer||$20M Series B January 2015||VC: Fidelity Growth Partners, Eight Roads, Magma Venture Partners, Microsoft Ventures, Pitango Venture Capital, Rittenhouse Ventures|
|TUNE||$27M Series B January 2015||VC: Icon Ventures, Accel Partners
Institutional: Performance Equity Management
|Button||$12M Series A January 2015||VC: Redpoint, Atlas Venture, DCM Ventures, Slow Ventures
Institutional: Greycroft Partners, Vayner/RSE
Angel: Fabrice Grinda, Jose Martin
|Local On-Demand Tech|
|Bringg||$5M Series A December 2015||Strategic: ITURAN|
|Sosh||Acquired by Postmates November 2015|
|ClassPass||$30M Series C November 2015||VC: Google Ventures|
|Handy||$50M Series C November 2015||Institutional: Fidelity , TPG Growth, Highland Capital
VC: Revolution Growth, General Catalyst
|Thumbtack||$125M Series E September 2015||Institutional: Baillie Gifford, Tiger Global Mgmt.
VC: Google Capital, Javelin Venture Partners, Sequoia Capital
|Urgent.ly||$7M Series A September 2015||VC: Allianz Digital Corp. Ventures, Forte Ventures, Verizon Ventures|
|HeartThis||Acquired by Thumbtack September 2015|
|Wedding Party||Acquired by Instacart August 2015|
|Hassle||Acquired by Helpling in July 2015|
Charity Huff is an active member of the local media industry, contributing in an advisory capacity through public speaking and her entrepreneurial ventures, including Tru Measure, a metrics-driven, technology services company that captures consumer engagement generated from media and advertising. She can be reached on Twitter @charityhuff.