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Is 2016 the Year for Digital Media?

By Joanne Jacobs

At the beginning of every year, we turn our attention to the future. We look for the trends and the opportunities, eager to be part of a great wave of success. As a result, we pore through research and trend reports, consume vast quantities of data and often arrive at the same place. Overwhelmed with the sheer abundance of data, we can easily fall back on opinion, intuition and our knowledge of the past. After all, we tend to rely on past performance as an indicator of future opportunity. But should we?

What I am always interested in is not the pure data – but its interpretation. I’m looking for insight. We need to use data to fuel our own insight process and help us make decisions.

Looking at the startup sector, venture capitalist, Tomasz Tunguz takes us through some of his thought processes in analysing 16 of the major tech categories over the last five years. He breaks out the initial – or “seed” investments from the later and larger Series A funding to provide a sense of follow-through. In a way, the seed investment indicates a kind of intent with the following investment showing firmer commitment.

The data comes from Crunchbase, the platform that grew out of TechCrunch, and now aggregates data about innovative companies and entrepreneurs around the world. When the data is visualised it is easy to see which sectors are volatile, which have close alignment between seed and series A investments and some which have significant lag or lead indicators.

sector_latency_201601 There are five category areas that draw my attention:

  • Fintech – while this category has been in the news in Australia with the launch of Stone and Chalk and the Tyro Fintech Hub, it has also been a hot topic globally, with Level 39 in the UK leading the charge. So while we can see a relatively stable volume of seed funding in the Fintech category, we can also see some serious spikes in series A investment in 2013 and 2015. But 2014 saw a significant fall. Will 2016 see similar falls or will the trend continue? For a snapshot of the Fintech world, take a look through the Fintech100 report.
  • Analytics – 2015 saw an upswing in seed investment while series A continued its downward trend. But this category attracts around 10% of all investment for both seed and series A, so it demands considered attention. And because many of the other categories rely heavily on analytics to drive innovation in their platforms, I would not be surprised to see an upswing in series A through 2016.
  • Education – I have long been interested in this category. It is one that has, historically, been a low priority for large enterprises, but this seems to be changing – and with that will come opportunity and growth. The recent, strong upswing in seed investment augurs well, but needs to take into account a 12-18 month lag time that often affects the education category.
  • Security – with a growing focus on security – especially in the enterprise market, it’s interesting to see a lack of seed investment. But with the growing importance of the category to business trust and reputation, we should see renewed interest and innovation in this category.
  • Digital media – this is interesting partly because of the lack of series A funding for the last five years. While the overall trend line for seed funding is heading up, the follow-on funding has not been flowing. By contrast social media has seen a strong downward trend for both seed and series A. Perhaps we will begin to see a shift of funds between categories – and maybe, just maybe, 2016 will be a shining year for digital media.

But what about the remaining 11 sectors? What do you think is worth watching this year?

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