Martech vendor investment forecast: Sunny with just a few ‘clouds’
Columnist Scott Vaughan recaps a panel from the recent MarTech Conference in San Francisco that focused on investing in the future of marketing technology.
A powerhouse panel of marketing technology investors came together at the 2017 San Francisco MarTech Conference to discuss and debate the future of the marketing tech investment landscape. Moderated by Scott Brinker, the panel continues to be bullish on the future of martech.
Why? A few reasons:
- Marketing is becoming an agile discipline, and companies are investing in tech to keep pace with changing customer habits.
- It’s marketing’s turn: the marketing organization is the last business function to be automated.
For background, the panelists were seasoned martech and technology VCs who have invested in a broad spectrum of tech companies. The panel was comprised of Ashu Garg, general partner at Foundation Capital; Doug Pepper, managing director at Shasta Ventures; and Roger Lee, general partner at Battery Ventures.
Here are the highlights and takeaways from my front-row seat:
- While every market worth investing in has a “supergraphic,” the changing nature of marketing — driven by consumers and the resulting digital transformation of business — is quickening the pace of marketing technology adoption.
- The marketing technology investment environment shows no signs or symptoms of an investment bubble. Growth and innovation are prevalent across martech categories (even email).
- Of the nearly 5,400 martech providers, about 1 percent are (or have the potential to be) standalone enterprise cloud “platform” players ($1 billion more in revenue). The other 99 percent will revolve around these enterprise platform players, consolidate or die.
- What makes martech unique is marketers themselves. Marketers, the primary buyers of martech, are natural “experimenters.” They regularly test new software, so they’re more likely to buy more tools, more often.
Marketing is on the front line of businesses’ digital transformation
No role in corporate America has changed as much as marketing over the last 10 years. Marketing professionals and departments are leading the digital transformation of business. This has investors leaning into the need for new technology to advance marketing’s contribution to this transformation.
According to Ashu Garg, roughly $100 billion has been spent on martech over the last decade, with more growth projected as marketing budgets continue to shift from offline to online spend.
Much of this change is driven by a reaction to their customers’ desire to engage and interact digitally with their brands and company. Garg shared, “Marketers aren’t waiting for their IT departments to swoop in and save the day. They’re diving in to figure it out.”
This was highlighted as a significant reason why every marketer must embrace technology or “get out of the way,” as Pepper put it.
Martech isn’t in a bubble, but marketers may be living in one
This begged the question: “The explosion of new marketing technology… this feels like a bubble, correct?” asked Brinker with a grin.
The panel, however, agreed there isn’t a bubble. “A bubble is speculative funding, big risk-taking and little to no growth or profits,” said Pepper. “Funding is holding steady between $500 million and $1 billion over roughly the last 10 years. And there is solid growth and innovation happening widely in martech.”
With all the noise created by both new and existing tech vendors moving into the a white-hot martech space, marketers are quickly becoming overwhelmed by so many options. Lee quipped, “With so many new options to understand and evaluate, it might be easier for marketers to go hide in a bubble.”
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