Venture investors may have turned their attention to earlier stage ad-tech companies at the right time now that big investments and strong IPOs could give their valuations a boost.
On Monday morning, Turn announced an $80 million Series E round, which included investments by Fidelity Investments and BlackRock, in the latest sign that investors are returning to embrace the sector.
September and October 2013 saw two big public offerings for RocketFuel and Criteo, which were both embraced by public investors at the time. Thanks to this attention from massive investment managers, early-stage ad-tech companies may have more leverage at the bargaining table.
The word that public investors are embracing the ad space is good news for venture investors who continued to invest billions in the sector in the face of initially tepid public-market response. Investors had been concerned by the lack of enthusiasm for an earlier wave of companies like Millennial Media, which is down 68.8 percent from its high as of market close on Monday, or YuMe Inc., which priced well below its target when it made its initial offering in April 2013.
As these advertising companies got the cold shoulder from public markets, funding declined, and investors moved more heavily into earlier-stage investments in 2012 and 2013, according to data from CrunchBase.
For public investors, these later-stage investments represent an opportunity to buy earlier and for a bigger pop than if they were to invest in those companies for the first time at their public offerings.
Given the number of early-stage companies that are coming to market, investors interested in the sector will have plenty to choose from.
Despite falling commitments, investors still poured $1.52 billion into 331 companies in 2013, down from $1.93 billion in 2012, but still up from the $1.02 billion invested in 2009, according to CrunchBase data.
“There is continual innovation going on in the ad-tech space. Every 12-to18 months you see a new wave coming in,” said Jeff Crowe, a managing partner with Norwest Venture Partners and an investor in Turn.
As public investors have grown more comfortable with advertising technologies through public investments, they’re getting a better understanding of the opportunities presented by private companies, Crowe said. He declined to comment on whether Turn benefited from the phenomenon.
Now, however, a host of companies stand to benefit through renewed interest in their own public offerings. “You’re going to see more IPOs coming out of the sector,” Crowe said. “There were half a dozen in the last 12 months, and you could easily see a half a dozen more in the next 12 months.”
Image via Flickr user vanherdehaage.