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10 VCs say interactivity, regulation and independent creators will reshape digital media in 2021

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The digital media industry will give us plenty to talk about this year.

When we last surveyed venture capitalists about their media investments, the big topic was the impact that the pandemic would have on the industry, and on the prospects for new startups.

Obviously, the pandemic hasn’t gone away, but when asked to predict the biggest storylines for 2021, VCs pointed to themes as varied as new distribution models, new kinds of interactivity, new tools for creators, the return of advertising business models and even the role of media in a democratic society.

“We are headed toward a content universe where consumers’ power of choice grows to new heights — what premium content to consume and pay for, and how to consume it,” Javelin’s Alex Gurevich wrote. “The consumers will have the final choice! Not traditional media and content distribution companies.”

For this new survey, we heard from 10 VCs — nine who invest in media startups, plus a tenth who’s seeing plenty of media pitches and was happy to share her thoughts. We asked them about the likelihood of further industry consolidation, whether we’ll see more digital media companies take the SPAC route and of course, what they’re looking for in their next investment.

Here’s who we surveyed:

Read their full responses below.

What do you think will be the biggest trend or story in digital media in 2021?

Daniel Gulati: Defining media’s role in a democratic society. What accountability exists when an individual company’s pursuit of scale leads to the spread of disinformation? When a platform’s terms of service appears to collide with constitutional rights, who makes the call and what happens? To what extent should governments support the viability of local media organizations in the face of global competition and a rapidly changing digital landscape?

These are high stakes issues that will be front and center through the year.

Alex Gurevich: The continued disruption of content distribution models, whether that’s the debundling of cable via the plethora of SVOD services, or the way new content is released (i.e., on-demand at home versus movie theaters). We are headed toward a content universe where consumers’ power of choice grows to new heights — what premium content to consume and pay for, and how to consume it. The consumers will have the final choice! Not traditional media and content distribution companies. The pandemic has greatly accelerated this trend.

Matthew Hartman: The two largest social networks, Twitter and Facebook, removed the account of a sitting president and a set of related, follower accounts. This has fundamentally reset the media stack. This will accelerate action the government had already planned to take, including to reshape Section 230. The ripples will be felt throughout media, affecting how news is distributed through social media, what startups can use bigger platforms to grow, what the exit options are for small talent acquisitions and the fragmentation already occurring.

Second, the rise of synthetic media. Algorithmically enhanced or created media is a shift we identified at Betaworks in 2018 and in 2021 it will only increase in scale and scope. Yes, this affects deep fake detection (with companies like Sensity.AI leading the way) and other nefarious uses — but it will also start to fundamentally reshape the way media is created, from the cost of animation to the cost of writing stories, to editing and creating CGI.

Third, game streaming will continue to grow, with audiences that are starting to blow away those of regular TV. An enormous number of people tuned in last year to watch Alexandria Ocasio-Cortez play Among Us on Twitch with popular streamers (she hit 435,000 concurrent viewers at one point). And that wasn’t even close to the biggest event ever on Twitch, David Martinez, aka TheGrefg, hit 2.4 million concurrent viewers for the unveiling of his new Fortnite skin. Game publishers have finally started to understand the power of streamers not just to launch a new game, but to revive old ones, with games that groups of streamers can play together (like Among Us or Rust) soaring in popularity this past year.

Jerry Lu: The emergence of interactive media platforms outside of just gaming.

Because of their isolation due to COVID, people are yearning for social interaction and we’re seeing greater engagement across platforms like Twitch and Zoom, which make interactive communications possible. Previous iterations of media platforms were top-down broadcast, whereby companies produced content they thought consumers would like. Over the past five years, we’ve started to see a greater shift toward the long tail, whereby content comes straight from the consumer.

Gaming and esports were at the forefront of this shift from passive content viewing to interactive entertainment experiences. I believe that 2021 will be the year when we see platforms beginning to embrace interactivity as a form of audience participation, blurring the line between viewer and active participant. I’m excited at the prospect of seeing this form of interactive content consumption applied to other sectors, like education, childcare and commerce, to name a few.

Jana Messerschmidt: We will see a proliferation of products that enable content creators to build businesses outside of traditional media companies. These creators will leverage their existing brand, following and social media engagement to become entrepreneurs, building revenue streams across multiple different products.

There are a plethora of new tools for creators: for writers (Substack, Medium), personalized video shoutouts from creators (Cameo*, PearPop), new audio platforms (Clubhouse, LockerRoom) or all-in-one tools for creators that include merch, subscriptions, tipping and more (FourthWall). Now is the time for creators to be rewarded by their fans for their content creation.

Historically, the big social platforms (Facebook, Instagram, Snap*, Twitter, TikTok) have failed to create meaningful paths for their creators to monetize. They make money from advertisers and thus their resources are focused on those advertising customer demands.

  • denotes Lightspeed portfolio company

Michael Palank: If 2020 was the year every major media company either announced or grew their direct-to-consumer video/audio/gaming offering, 2021 will be the year where those offerings optimize and differentiate or die. We expect the hunger for original content to continue, but we feel the type of content will continue to diversify from both a story and IP perspective and a format perspective. It is not unthinkable that a major media company like Apple, Amazon or Disney looks to acquire Clubhouse in 2021.

As the lines between video games and filmed entertainment continue to blur we can also envision new companies popping up to take advantage of this trend. I also feel these content platforms will need to differentiate by way of better discovery and personalization.

I fully expect every major media company from Disney to Apple to Amazon to Microsoft will be looking for new and innovative ways to separate themselves from the rest of the pack in 2021.

Marlon Nichols: I think that the continued creation of streaming platforms from content creators/owners (e.g., Disney+, HBO Max, etc.) will force downward subscription pricing adjustments across the board and streaming platforms will need to revisit advertising as a revenue stream. That said, we know that watching ads on a paid platform won’t fly with consumers so I believe we’ll see contextually relevant product placement become the accepted form of brand/content collaboration going forward. I led MaC’s investment into Ryff because of this thesis.

Pär-Jörgen Pärson: Institutions and legislators will have a big effect on social media platforms. I think there will be pushes on antitrust behavior, and social networks will have to behave like media — meaning that they also need to take responsibility for the content that’s on their platform, not only from a user agreement standpoint like today but from an editorial standpoint. I think we’ll see many more editors-in-chief in this industry, as editorial becomes more and more important in our polarized world. This has the potential to change the social media platform landscape quite dramatically, and I’m not entirely sure yet on the long-term impact commercially.

M.G. Siegler: It’s sort of boring, but I wouldn’t be shocked if we see a swing back toward advertising-based models. I think there are two parts to this: First, if and when the pandemic recedes, I think a lot of traditional big advertising players like travel, will come roaring back. Second, it feels like there’s been a move away from advertising to paid subscriptions for a while now and I think these things are cyclical.

To be clear, I think both will continue to exist, I just think that after years of underindexing on paid subs, now we’re perhaps on the verge of overindexing on it … Obviously, advertising never went away, I just think it may be due for a bit of a renaissance (though I say that hoping the powers that be make those ads a better user experience — I think that’s the only way there’s not another backlash against them).

Laurel Touby: The biggest trend in digital media will be companies that don’t call themselves media companies, but that clearly draw from the business model playbook of media companies. For example: Companies that monetize their communities by giving sponsors and advertisers access to their audiences; or technology startups that sell wearable products and upsell their customers with access to premium high-value content.

Hans Tung: Contextual social networks: Video and livestreaming with the likes of TikTok and with other players like Instagram and Snap will continue to drive creativity and engagement. Clubhouse is now garnering a lot of attention as audio captures the attention of a new generation. This also creates new opportunities for established audio players like YY or Ximalaya. At the same time, apps like Clubhouse are an evolution of Snap or Twitter where influencers of all sorts gather to build a new following on new platforms.

However, one of the most interesting things we’re seeing is the emergence of contextual social networks that are focused on solving real-life problems. We see a lot more companies taking the best of audio and video experiences and experimenting with the next iteration of apps like Headspace and Calm, to solve societal issues, personal issues such as how to deal with anxiety, etc. These social networks may not scale as quickly or grab headlines like Clubhouse but they’re designed to bring people together to solve problems. We are also seeing professionalized networks such as Valence or Chief use these audio/video networks to address issues for a particular gender or underrepresented group, or apps that create virtual networking for communities.

Digital media delivered with differentiated experiences: Peloton may not immediately jump to mind as a digital-media company but they are one of the best at producing a high-value experience using extremely high-quality content that goes far beyond simple fitness or even the need for hardware. Increasingly more categories will become “Netflix-ized” where content is king and the experience is delivered through your smartphone.

As with Peloton, the experience is further enhanced with social interaction, such as leader boards, access to the best instructors, etc., which in turn expands the reach of the content. It’s a powerful loop that is driven by quality content, and the components feed off each other to make it more accessible. If you then couple it with Affirm to make it more affordable, you’ve got a flywheel on steroids. This pattern will emerge in other categories.

Consumerization of enterprise communication: Another aspect of media is communication, which we are seeing evolve in the enterprise space. It started with Slack a few years ago and Zoom more recently. Now with companies like Yak or the emergence of various conference apps, we see a higher usage frequency between companies, companies and their customers, and within the enterprise itself.

How much time are you spending looking at media startups right now?

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Indonesian logistics startup SiCepat raises $170 million Series B

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SiCepat, an end-to-end logistics startup in Indonesia, announced today it has raised a $170 million Series B funding round. Founded in 2014 to provide last-mile deliveries for small merchants, the company has since expanded to serve large e-commerce platforms, too. Its services now also cover warehousing and fulfillment, middle-mile logistics and online distribution.

Investors in SiCepat’s Series B include Falcon House Partners; Kejora Capital; DEG (the German Development Finance Institution); Telkom Indonesia’s investment arm MDI Ventures; Indies Capital; Temasek Holdings subsidiary Pavilion Capital; Tri Hill; and Daiwa Securities. The company’s last funding announcement was a $50 million Series A in April 2019.

In a press statement, The Kim Hai, founder and chief executive officer of SiCepat’s parent company Onstar Express, said the funding will be used to “further fortify SiCepat’s position as the leading end-to-end logistics service provider in the Indonesian market and potentially to explore expansion to other markets in Southeast Asia.” SiCepat claims to be profitable already and that it was able to fulfill more than 1.4 million packages per day in 2020.

The logistics industry in Indonesia is highly fragmented, which means higher costs for businesses. At the same time, demand for deliveries is increasing thanks to the growth of e-commerce, especially during the COVID-19 pandemic.

SiCepat is one of several Indonesian startups that have raised funding recently to make the supply chain and logistics infrastructure more efficient. For example, earlier this week, supply chain SaaS provider Advotics announced a $2.75 million round. Other notable startups in the space include Kargo, founded by a former Uber Asia executive, and Waresix.

SiCepat focuses in particular on e-commerce and social commerce, or people who sell goods through their social media networks. In statement, Kejora Capital managing partner Sebastian Togelang, said the Indonesian e-commerce market is expected to grow at five-year compounded annual growth rate of 21%, reaching $82 billion by 2025.

“We believe SiCepat is ideally positioned to serve customers from e-commerce giants to uprising social commerce players which contribute an estimated 25% to the total digital commerce economy,” he added.

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InsurGrid raises pre-seed financing to help modernize legacy insurance agents

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Insurance agents spend hours handling paperwork and grabbing client information over the phone. A new seed-stage startup, InsurGrid, has developed a software solution to help ease the process, and make it easier for agents to serve existing clients — and secure new ones.

InsurGrid gives agents a personalized platform to collect information from clients, such as date of birth, driver’s license information and policy declaration. This platform helps agents avoid sitting on long calls or managing back-to-back emails, and instead gives them one spot to understand how all their different clients function. It is starting with property and casualty management.

The startup integrates with 85 insurance carriers, serving as the software layer instead of the provider. Using the InsurGrid platform, insurers can ask clients to upload information and within seconds be registered as a policyholder. This essentially turns into a living Rolodex that insurers can use to access information on the account, and offer quotes on a faster rate.

Image Credits: InsurGrid

There’s a monetary benefit in providing better service. Eden Insurance, a customer of InsurGrid, said that people who submit information through the platform converted at an 82% higher rate than those who don’t. Jeremy Eden, the agency owner of Eden Insurance, said they were able to show consumers that its plan was $300 cheaper than its existing rate.

At the heart of InsurGrid is a bet from the founding team that legacy insurance agents aren’t going anywhere. Co-founder/CEO Chase Beach pointed out that the majority of the $684 billion of annual property and casualty insurance premiums in the United States is distributed by approximately 800,000 agents working in 16,000 brokerages. So far, InsurGrid works with more than 150 of those agencies.

When asked if InsurGrid ever had plans to offer its own insurance, similar to insurtech giants Hippo, Lemonade and Root, Beach said that it is solely working on innovating around the sales process for now. He said that these big companies, which have either recently gone public or are planning to, still rely on agents to be successful.

“Instead of us replacing the insurance agent, what if we gave them that same level of technology of a Hippo or large carrier,” Beach said. “And provide them with the digital experiences so they can compete in 2021.”

As time goes on, he sees insurance agents taking the same role that financial advisors or real estate agents take: “very much involved in the process because they are that expert.”

Other startups that have popped up in this space include Gabi, Trellis and Canopy Connect. The differentiator, the team sees, is that Beach comes from a 144-year-old insurance legacy, giving him key insights on how to sell to agents in a successful and effective way. It is starting with sales, but expect InsurGrid to expand to other parts of the insurance process as well.

To help them compete with new and old startups, InsurGrid recently raised $1.3 million in pre-seed financing to help it fulfill its goal to be the “underdog for the underdogs,” Beach said. Investors include Engineering Capital, Hustle Fund, Vess Capital, Sahil Lavingia and Trevor Kienzle.

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Backed by Blossom, Creandum and Index, grocery delivery and dark store startup Dija launches in London

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Dija, the London-based grocery delivery startup, is officially launching today and confirming that it raised £20 million in seed funding in December — a round that we first reported was partially closed the previous month.

Backing the company is Blossom Capital, Creandum and Index Ventures, with Dija seemingly able to raise pre-launch. In fact, there are already rumours swirling around London’s venture capital community that the upstart may be out raising again already — a figure up to £100 million was mooted by one source — as the race to become the early European leader in the burgeoning “dark” grocery store space heats up.

Image Credits: Dija

Over the last few months, a host of European startups have launched with the promise of delivering grocery and other convenience store items within 10-15 minutes of ordering. They do this by building out their own hyper-local, delivery-only fulfilment centres — so-called “dark stores” — and recruiting their own delivery personnel. This full-stack or vertical approach and the visibility it provides is then supposed to produce enough supply chain and logistics efficiency to make the unit economics work, although that part is far from proven.

Earlier this week, Berlin-based Flink announced that it had raised $52 million in seed financing in a mixture of equity and debt. The company didn’t break out the equity-debt split, though one source told me the equity component was roughly half and half.

Others in the space include Berlin’s Gorillas, London’s Jiffy and Weezy, and France’s Cajoo, all of which also claim to focus on fresh food and groceries. There’s also the likes of Zapp, which is still in stealth and more focused on a potentially higher-margin convenience store offering similar to U.S. unicorn goPuff. Related: goPuff itself is also looking to expand into Europe and is currently in talks to acquire or invest in the U.K.’s Fancy, which some have dubbed a mini goPuff.

However, let’s get back to Dija. Founded by Alberto Menolascina and Yusuf Saban, who both spent a number of years at Deliveroo in senior positions, the company has opened up shop in central London and promises to let you order groceries and other convenience products within 10 minutes. It has hubs in South Kensington, Fulham and Hackney, and says it plans to open 20 further hubs, covering central London and Zone 2, by the summer. Each hub carries around 2,000 products, claiming to be sold at “recommended retail prices”. A flat delivery fee of £1.99 is charged per order.

“The only competitors that we are focused on are the large supermarket chains who dominate a global $12 trillion industry,” Dija’s Menolascina tells me when I ask about competitors. “What really sets us apart from them, besides our speed and technology, is our team, who all have a background in growing and disrupting this industry, including myself and Yusuf, who built and scaled Deliveroo from the ground up”.

Menolascina was previously director of Corporate Strategy and Development at the takeout delivery behemoth and held several positions before that. He also co-founded Everli (formerly Supermercato24), the Instacart-styled grocery delivery company in Italy, and also worked at Just Eat. Saban is the former chief of staff to CEO at Deliveroo and also worked at investment bank Morgan Stanley.

During Dija’s soft-launch, Menolascina says that typical customers have been doing their weekly food shop using the app, and also fulfilling other needs, such as last minute emergencies or late night cravings. “The pain points Dija is helping to solve are universal and we built Dija to be accessible to everyone,” he says. “It’s why we offer products at retail prices, available in 10 minutes – combining value and convenience. Already, Dija is becoming a key service for parents who are pressed for time working from home and homeschooling, as one example”.

Despite the millions of dollars being pumped into the space, a number of VCs I’ve spoken to privately are sceptical that fresh groceries with near instant delivery can be made to work. The thinking is that fresh food perishes, margins are lower, and basket sizes won’t be large enough to cover the costs of delivery.

“This might be the case for other companies, but almost everyone at Dija comes from this industry and knows exactly what they are doing, from buying and merchandising to data and marketing,” Menolascina says, pushing back. “It’s also worth pointing out that we are a full-stack model, so we’re not sharing our margin with other parties. In terms of the average basket size, it varies depending on the customer’s need. On one hand, we have customers who do their entire grocery shop through Dija, while on the other hand, our customers depend on us for emergency purchases e.g. nappies, batteries etc.”

On pricing, he says that, like any retail business, Dija buys products at wholesale prices and sells them at recommended retail prices. “Going forward, we have a clear roadmap on how we generate additional revenue, including strategic partnerships, supply chain optimisation and technology enhancements,” adds Menolascina.

Dija testing on Deliveroo

Image Credits: TechCrunch

Meanwhile, TechCrunch has learned that prior to launching its own app, Dija ran a number of experiments on takeout marketplace Deliveroo, including selling various convenience store items, such as potato chips and over-the-counter pharmaceuticals. If you’ve ever ordered toiletry products from “Baby & Me Pharmacy” or purchased chocolate sweets from “Valentine’s Vows,” you have likely and unknowingly shopped at Dija. Those brands, and a number of others, all delivered from the same address in South Kensington.

“Going direct to consumer without properly testing pick & pack is a big risk,” Menolascina told me in a WhatsApp message a few weeks ago, confirming the Deliveroo tests. “We created disposable virtual brands purely to learn what to sell and how to replenish, pick & pack, and deliver”.

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