Ad Agencies Investing in Startups
For the past few years, I’ve watched a few agencies and holding companies invest in emerging companies primarily within the digital media space. One area that I’m responsible for at work is to be an expert in the digital media space and if an opportunity arises for corporate developmental opportunities, I can bring the right stakeholders at work and our holding company and talk about investments/acquisitions/etc. I was reading a blog post recently about agencies trying to be more like VCs and I wanted to respond.
I’m still wrestling with the notion of advertising agencies investing in startups. There are a few reasons why I’m having trouble with this:
- Agencies should be media neutral, so investing in companies creates potential conflicts/liabilities
- Most agencies have no idea about corporate development within the startup world
- What money would the agency use to invest in the company? Would the money come from it’s clients or on off the balance sheet? How would the financial part work?
- The Venture Capital model is fairly hit driven, 1-2 portfolio company exits make up for the miss-rate of the entire portfolio. Will agencies be making enough investments to make up for the potential misses? Hit driven model.
- Do agencies add any value to startups other than ad dollars (that’s very positive) and potential introduction to their clients?
Just a few thought starters, what are yours..?