I began my career as a journalist and cut my teeth in the magazine business. Media was my first love. The same is true for many of our team. There was something marvelous, almost magical, about using words and images on paper to generate emotions and unanticipated thoughts in large groups of people, to produce new knowledge, novel behaviors and delight.
From that halcyon perspective, our team has viewed the diminishing of media with sadness. It has been like watching a grand old friend die slowly from implacable cancer. There is nothing to be said; everything has been done. You can’t even buck the patient up. It feels false. Everybody knows how this story ends up, and it isn’t pretty.
Content, and the marketing tools and analytics that support its business models, was one of our earliest areas of investment focus. That seemed natural. We had domain expertise, great contacts, and strong reputations. But, perversely, our deep involvement actually led to quick, radical shifts in our views here.
Because of our deep involvement, we could see early on the corrosion of magazine and newspaper circulation, the cable audience restlessness, the terminal collapse of ad rates, the rising audience antipathy toward intrusive advertising, and a host of other ills. In response to the swift shifts in this landscape, we moved our focus from “media” to “content,” and then from “content” to “content experiences,” as investment areas, over just a few years.
What we've been seeking from these changes in focus are two things:
1) A Series A Investment Market. Our role, as moment-of-inception investors, is to bring great companies to successful Series A rounds. In terms of traditional content, the Series A investment market has essentially vanished. Investors feel over-indexed in the space. The investments they have aren’t doing that well. They see stronger opportunities elsewhere. Without a vigorous Series A market, we can’t accomplish our mission.
2) A Path to the Future. Content companies can make money today. Obviously, ads are being sold and delivered today. Facebook makes billions. But, as investors focused on the very beginning of startups, we aren’t focused on today; our investments will see their value flower at least five years from now. The arrows for all traditional forms of media are sharply downward. They have a present, but no future. Death is certain, the only question is when.
Even with all these issues, we continue to believe value will emerge from content in some form. Why? Because stories are eternal. Wherever there are humans, there are stories. Wherever there are tribes, there is news, gossip, schadenfreude. Cavepeople did it. Our forefathers did it. We do it and today’s rising generations will do it - create and share stories, seek the truth that lets them understand how to manage their lives, and desire new, delightful experiences.
What form will those stories of tomorrow take, and what business models will underpin them? We believe that the strongest potential lies in the expansion of stories to all of our senses. The oldest media, books, only involved the eyes. Radio added the ears. TV combined eyes and ears, hence its power. Now we can begin to see how stories can be told using all of our senses, exciting many parts of our brains. Digital smell. Haptics. Shared 3D experience.
Today those potentialities are expressed as virtual reality or augmented reality. But we think those are thin and temporary descriptors for a new form of story whose true contours we don’t know yet.
In terms of business model, we feel that the innate intensity of all-sense storytelling lends itself to commerce and direct audience support as revenue drivers. Audiences will pay for ways to intensify or expand their experiences, they will buy as part of that experience, ala game bling, or high-end equipment for E-sports.
Since we see a path toward the future here, but can’t really see where it leads, our investment focus in content today is on tools for the creative class. The storytellers, videographers, podcasters, game designers, 3D technologists, by their early, experimental work, will show humans new ways to create and experience stories. The way people respond to these nascent offerings will define how the market will frame up and what products and business approaches will have the right stuff to succeed.
We think the emergence of five-sense storytelling, however it forms, will invigorate Series A investors both from media backgrounds, but also from areas like biology and neuroscience. We think immersion brings together our inner world and our outside world in ways that many will recognize have deep and lasting value.
The old order of media is dying. But, in business as in nature, from death arises new beginnings. As we mourn the passing of the storytelling world that nurtured us, we anticipate participating in its successor.
The media king is dead. Long live the king!
By Managing Partner Mike Edelhart