Why we invested: Beeswax
The typical VC reaction to an ‘ad tech’ deal these days is “sorry, we don’t invest in ad tech.” I almost had the same reaction when I came across Beeswax. But as we dug deeper into the team, company, and industry we learned something: this wasn’t just another adtech company. Beeswax is a SaaS company providing tools for marketers to address four key trends in programmatic advertising:
“Would a hedge fund use Schwab to buy equities?”
This from the Beeswax pitch deck jumped off the page at me. Of course they wouldn’t. A hedge fund’s bread and butter is creating unique strategies leveraging proprietary data. Yet in programmatic advertising, even the brightest and most capable marketers have relied on ad agencies and opaque third party platforms to get that targeted ad in front of you on ESPN.com. With Beeswax, these marketers are empowered to build custom strategies in-house, all while maintaining complete data ownership.
The “every company is becoming a tech company” paradigm is proliferating in all sectors. Technology is enabling companies to cut out middlemen and run previously outsourced functions in-house, and the future for marketers is running programmatic advertising in-house with Beeswax. Beeswax is already revolutionizing advertising for companies ranging from tech to media to CPG, with many more sure to join the movement soon.
While existing ad tech platforms struggle to differentiate themselves and reap profits under the old paradigm, Beeswax has begun to steal their business (and the ~$20B of yearly programmatic ad spend in the US), and we are only getting started.
Proliferation of Video
Beeswax also capitalizes on another drastic shift we are seeing in advertising. In 2017, video represented 15.9% of the digital ad market on desktop and mobile, and total digital video ad spend is expected to grow from $13.2b to $22.2b in the next four years. We have already seen several acquisitions reflecting this trend, including Adobe’s purchase of TubeMogul and Amobee’s purchase of Videology. Over 40% of ad spend on the Beeswax platform is in video, and the company has already built strong relationships with leading smart TV and media companies. Beeswax is in good hands to continue to grow alongside video advertising — the company’s CEO Ari Paparo wrote the Video Ad Serving Template (VAST) standard for serving video ads.
SaaS at Last
It’s not only the tech that’s interesting. As investors, we love SaaS models because they are predictable. Revenue isn’t lumpy like that of current ad tech companies charging their clients on a percentage of spend, and customers have incentive to concentrate their spend on one platform based on low marginal cost. It turns out that marketers also like SaaS models for the same reasons — transparent and predictable costs that proportionally drop as their spending increases…an economy of scale benefit that all software companies should share with their clients.
The Right Team for the Job
Concepts alone, of course, will never build a company. With Beeswax, we are putting our money behind the absolute best in the ad tech business. The company’s three co-founders have played senior roles on ad tech teams at Google, the 800 pound gorilla of the digital advertising world. CEO Ari Paparo has served in executive positions at industry defining companies like DoubleClick (which sold to Google to kick off the programmatic ad industry as we know it), Nielsen (whose ratings define ad prices), and AppNexus. A friend in the industry bluntly remarked “Ari is famous in our industry and really smart engineers are joining that team.” There is a reason the co-founding team recognized an opportunity based on ad tech trends in 2014, before anyone else, and there’s a reason they will continue to capitalize on this opportunity. We’re excited to be along for the ride.
