INSIGHT: So Social - 5 Significant Q1 Social Media Investments

Investors continue to sling money at social media startups, even if they have no revenues and no hint of making a profit any time soon. Just look at Snapchat. That's partly to do with the fact that they they have something potentially even more lucative and impossible to pin down - teenager attention. Hence Facebook's near-USD20bn outlay for WhatsApp at the beginning of the year. Other tech giants might soon follow suit to keep up with young people's rapidly evolving online habits. And investors are looking to place early bets on what could turn out to be the next Instagram.

Investors poured almost USD270m worth of VC funding into social media across 35 deals during Q1 2014. The breadth of investment suggests the social media market is maturing as the ecosystem diversifies, from investments in smaller niche verticals such as sport and music to secret messaging apps and data mining firms. Here are five of the most-significant investments from the quarter.

1. Secret

Mobile messaging apps are a vital part of the mobile landscape and the startups capitalising on consumer demand for privacy in the wake of  the Julian Assange and Edward Snowden revelations are gaining traction fast. Standard-bearer Snapchat, where the point is that messages don't stay on the app, is now reportedly more popular than Twitter with US teens aged 12 to 24. Another one to watch is Secret. It lets users post anonymous confessions and content to their circle of friends and is gaining particular attention amid rumours Facebook is interested. The startup reportedly raised USD10m from Google Ventures and Kleiner Perkins Caufield & Byers during the quarter, nabbing a USD50m valuation in the process. The company has no revenue, but this has been of no concern to Facebook in terms of acquisitions in the past.

secret.ly

@GetSecret

2. UrbanSitter

Local social networking is also a key area of social media investment. With the growth of vertical marketplaces, peer-to-peer services and mobile payments, sharing companies such as UrbanSitter, Lyft and Airbnb are at the intersection of these trends and the demand for more granular, personalised services is rocketing. UrbanSitter is an online service connecting parents with babysitters based on recommendations, because parents are understandably cautious when it comes to babysitting. 

Lynn Perkins, CEO of UrbanSitter, tells StrategyEye: “We’ve taken a new approach to finding childcare by leveraging a parent’s existing social network to provide trusted recommendations. We also supply detailed sitter profile and performance data to inform your decision - a caregiver’s reviews and ratings, average response time and volume of repeat business from families.”

The 20-employee San Francisco startup is trying to snag a piece of the fragmented USD47bn US childcare business with its online marketplace. The firm has facilitated more than 170,000 babysitting jobs since its 2011 launch, mostly in San Francisco and New York. It’s not profitable yet, but it raised USD15m back in February, bringing its total funding to date to USD22.7m. In terms of making money, the site charges fees, including a USD15 deposit parents pay when they book a sitter for the first time. Caregivers can also pay monthly fees to rank higher in the site’s search results. It's off to a decent start, but the company has got some competition including Care.com, which, post IPO, is on its way to a market valuation north of USD800m. 

urbansitter.com

@urbansitter

3. Doctor At Work

Health is another industry that is - disjointedly - shifting to digital. Doctor At Work, a Russian-speaking social network aimed specifically at medical professionals, raised USD3m back in March. The deal increases the network’s valuation to USD16.5m. Its backers include three major Russian venture funds, Aurora Venture CapitalBright Capital and Guard Capital. Doctor At Work’s service, which claims to attract more than 25% of all doctors in Russia, enables users to help make diagnoses, publish clinical cases, search for vacancies and communicate with each other in order to improve professional standards. The network also promotes financial opportunities for medical companies.

Last year the site’s turnover exceeded USD1.5m. Its clients include a dozen or so major global pharmaceutical companies, which view the social community as one of the few legal channels to promote prescription drugs, and since its inception back in 2009, the site has won several Russian awards. So things are looking up. 

doctoratwork.ru

@doctor_at_work

4. TeamSnap

One key verticle in social netoworking is sport. The industry has a natural social following as fans follow teams and players, so emergence of tech to support those fan and player networks seems a natural step. TeamSnap, a US-based social sports app developer, raised USD7.5m in January, in a Series B round that was contributed to by more than 21 angel investors, bringing its total funding to date to USD11m.

It's been a fruitful year for the app developer that saw two acquisitions - Weplay, a sports-focused social networking and team management site, and Rteamsite.com a similar counterpart. It’s aimed at parents and coaches with features like telling users what games are coming up as well as last-minute changes to a match, while keeping track of team payments and players. At the moment it’s available on a freemium pricing model. A league managing up to 50 teams and up to 1,000 players cost USD249 per year. More of a strong focus on mobile will help this startup drive expansion as there’s still plenty of room for growth as the company’s biggest competitor may be simple old email and word of mouth amongst coaches and players. 

teamsnap.com

@teamsnap

5.4c

People aren't at the heart of social networking monetisation. Their data is. 4C is a social data startup that raised USD5m in a Series B funding round from Jump Capital during Q1. Launched last year as a result of a merger between Voxup and The Echo System, 4C creates technology that turns social data into actionable marketing intelligence. The firm’s total investment to date comes in at USD8.25m. The startup looks at how online behaviour affects consumer attitudes towards brands. Its offerings are pure SaaS, so it gets recurring revenue from customer subscriptions. If it gets it right then the company is in a strong position, especially as we live in an on-demand world where increasingly more consumers combine their TV watching with consuming social media on their smartphones and tablets.

4c.com