Key Strategies For Mediatech Startups To Attract Venture Capital Funding

Digital media & entertainment is a $2.48 Tn global market. Enough room for startups to take a slice. There are three key trends in mediatech that are boosting the development of startup ideas: First, new technologies usually find their first adoption in online media. 

Compare this to the development of various cloud applications, 5G internet, and most recently, generative AI. 

Secondly, time spent online is increasing all over the world. India has one of the highest usage figures, with over five hours online per day. 

Thirdly, there are various touchpoints in the media landscape where individuals can identify inefficiencies easily. 

This allows anyone to develop a startup idea, test it cost-effectively, and build a business model around it.

Overcoming Challenges In Crafting Effective Business Models

Firstly, the willingness to pay for online products is traditionally low. For this reason, many business models, especially consumer-oriented ones, are based on advertising. Accordingly, the number of active users with a high engagement rate is a key metric. Secondly, consumption and distribution are often dominated by individual players such as Meta, YouTube, Google, Netflix, Spotify, etc. 

Accordingly, business models must be built that co-exist with these providers and generate value for the ecosystem. Thirdly, the digital media & entertainment industry, more than other industries, thrives on waves of compression and expansion. 

For example, we are currently seeing consolidation in the movie streaming market. On the other hand, we are experiencing a higher expansion of AdTech and MarTech solutions, which are mainly led by industry-specific AI models.

Strategic Considerations In Mediatech

First, you have to ask yourself whether you want to aim for a consumer or enterprise solution. While consumer solutions (B2C; creator economy, gaming, scalable content platforms, etc.) open up a larger customer group with different pain points, the willingness to pay is often low. 

In the enterprise market (B2B; media SaaS, adtech, martech, etc.), on the other hand, access and the network to potential customers is important, while the willingness to pay is higher and even a few individual customers can lead to a product-market fit.

In both cases, the phenomenon occurs that sooner or later external capital is needed to address a sufficiently large customer group. Either to adequately market a B2C product or to develop a B2B solution to the point where it is sufficient for pilot tests with companies. This is where venture capital comes into play: venture capital firms invest specifically in companies that have such high growth potential that they can grow five to tenfold within a few years. 

Product-market fit is relevant for venture capital firms because it gives them enough visibility to estimate future earnings, discount them, make a suitable valuation of a company, and thus minimize the risks of the investment.

Understanding Product-Market Fit

In the case of enterprise solutions (B2B), it is primarily about gaining a large enough customer base that will use the product, generate a quantifiable value generation for businesses, and thereby estimate an average purchase price that will help project future revenues. In the case of consumer solutions (B2C), the aim is to have established such a high number of users and engagement rate on the basis of which monetisation models can be used to generate sustainable profits. In both cases, go-to-market is a key element.

Acquiring Initial Customers

While the go-to-market for consumer solutions can be handled relatively simply via social media networks, it is much more complex for enterprise solutions. Firstly, access to actual decision-makers in the company must be established. 

Secondly, companies often have specific problems for which a general solution is not sufficient. Thirdly, sales cycles in the B2B environment are much longer, as various stakeholders are involved. It helps if founders have existing experience in the target industry and are therefore familiar with its dynamics and pain points.

In all cases, it is helpful if founders have existing startup experience. There are different stumbling blocks in different phases of building a startup. While in the very early phase the involvement of customers in product development is particularly relevant, in the later phase the understanding of different customer segments and access to geographical markets should be focused. 

The latter in particular venture capital firms can help to leverage the business and establish connections with their own network. For this reason, the question is always justified: What benefits does which venture capital firm bring me at which stage of my startup?

Selecting The Right Venture Capital Partner

Good venture capital firms are not only financial resources but also strategic partners. Accordingly, sector-specific funds are a promising starting point. Especially in a global media & entertainment industry, where international players control various value creation processes, but are also dependent on local innovations in some areas. 

After all, you should always ask yourself whether you really need venture capital money. Especially in the early stages of idea and product development. There are other options, such as incubators and accelerator programs. Which bring other advantages and disadvantages.