Tech start-ups serving the international media, entertainment and creative (MEC) sectors are struggling to find growth stage funding, according to a new study.
TechMutiny Insights has conducted in-depth interviews with tech startups in the creative industries across the UK, the US, Scandinavia and Europe, with regards to their funding needs and realities, as well as analysed the vulnerability/resilience of 420 international digital tech products and services, with some interesting findings.
Based on interviews with start-ups and a qualitative analysis of more than 420 international tech products and services, the report calls for the investment community to offer more funding options between initial seed investment and major venture capital finance.
Despite declarations of governments worldwide that the digital economy and the creative industries are among the fastest growing contributions to global gross domestic product, the investment communities are not responding in terms of the opportunities they offer MEC start-ups.
In addition, the report discovers that tech start-ups targeting the Music industry are the most prolific compared to start-ups focusing on other MEC sectors, but they are also the most likely to crash and burn before they establish their businesses.
The main findings of the TechMutiny Insights research report include:
*A majority of the interviewees (56%) said they had a tough time topping up their original seed investment.
* A majority (56%) said they were not depending on state-supported funding; in fact, one openly stated, “No sane strategy would,” as public support came with far too many restrictions.
* Corporate investment from the MEC industries is lacking, as the biggest single share of those questioned (43%) said they struggled to find senior decision makers who understood the benefits of digital technology.
Located in the UK, the US, Scandinavia and Europe, the start-ups approached about funding for this report are not struggling near-bankruptcy enterprises.
In fact, more than 60% had steady regular clients. Some 62% felt no reason to pivot as their original concepts remained robust. Moreover, a majority (78%) had seen the number of employees and revenue grow since they started or remain the same.
Yet, obtaining those extra financial reserves to take the business to the even faster growth stage has been much tougher than has been implied by media coverage of digital tech investments.
“The start-ups we talked to are influenced by a generation of pioneers like Facebook’s Mark Zuckerberg, Spotify’s Daniel Ek, Evan Spiegel at Snapchat, Oculus Rift inventor Palmer Luckey and the founders of Angry Bird, the true disruptors of media and entertainment,” says Juliana Koranteng, TechMutiny’s publisher and founder. “Yet, it seems investors and decision makers in the MEC sectors could create more mid-level funding options for the tech ventures helping to evolve and revolutionize their businesses.”
She added: “The MEC industries are among those that have benefitted the most from tech innovation as 21st-century consumers worldwide listen to music, watch TV and film, play games and purchase fashion items via smartphones, laptops, tablets and Smart TV sets.
“But VC and corporate investors appear to be too risk-averse when they could be this century’s daring explorers and adventurers, the real next-generation fortune hunters who help grow the global economy.”
In addition, TechMutiny Insights looked at the MEC sectors that attract the most attention from digital start-ups and what percentage of those fledgling enterprises are most likely to see their companies collapse before they establish their businesses.
* Music had the most casualties in terms of the proportion (37.2%) of related start-ups that burned out, crashed and closed during the period surveyed. Acquiring licensing rights to music is a brutally complex business that most fledgling tech companies are rarely prepared for.
*After music, Social Media start-ups hoping to be the next Facebook or ride on its coattails were the next most vulnerable (32.6%) to the challenges of running a business, followed by Books and Print Media tech ventures (29%).
* Start-ups targeting Sports had the highest survivability rate (100%), followed by Fashion (96.6%), then Film and Video (83.3%).
The TechMutiny Insights study covered and interviewed in-depth 16 tech start-ups located in the UK, the US, Scandinavia and Europe, targeting 12 media, entertainment and creative (MEC) industries. They are Advertising, Architecture and Design, Art and Photography, Books and Print Publishing, Fashion, Film and Video, Games, Live Entertainment, Music, Social Media, Sports and Television.
Those interviewed were selected because they are award winners, have comfortably caught the attention of business angels and seed financiers and been resilient enough to have businesses that lasted at least one year during the period spanning October 2012 and January 2016.
Additionally, more than 420 international digital tech products and services analyzed about their vulnerability as businesses were chosen because they had originally received high-profile media coverage in at least three international specialist and general business publications, and/or had approached TechMutiny directly.