Top Venture Capital Firms Investing MarTech and AdTech

23 Jul 2021 • 4 min read

The unforeseen covid pandemic of 2020 and half of 2021 has caused major disruptions in all businesses across the world. Retail has been arguably the most dramatically affected. For much of 2020 most of the developed world saw online shopping dominate consumer spending. Startups have rushed to develop new tools for online retailers to expand and improve their marketing. The trend toward digital shopping has been evident for several years but only accelerated during 2020. Online sales increased by 32% in 2020 and are up by 39% in the first quarter of 2021. This rapid increase is driving innovation.

Despite the dramatic gains in the volume of online retail, funding for marketing technology has remained relatively stable over the last five years with deal flow in marketing tech dropping at a 3.5% compounded annual growth rate according to Crunchbase. Annual invested capital in the space is just under $2 billion. Advertising is no longer the venture magnet it was in the past, with the flow of VC dollars in the space dropping dramatically in recent years. According to data from Crunchbase, adtech deal flow has fallen at a roughly 10% compounded annual growth rate over the last five years. More than 90% of digital ad spend growth goes to monopolies like Facebook and Google leaving Adtech space growth into a steady decline.

While it is difficult for advertising technology startups to raise capital, the marketing technology (Martech) industry continues to expand. AdTech investments peaked in 2011 and have steadily declined since. The global Martech sector has exceeded US$121.5 billion in value in 2020. There has been US$44B in total venture capital funding and continues to grow. As a result, Adtech is going out of favor and everyone is recasting themselves as Martech. More than the label, the business model and technology are what matters most. The line between AdTech, MarTech, and Retail is blurred. Many investors do not see a difference. Software-as-a-service is more typically associated with marketing tech and has become more attractive to investors because of their ability to develop recurring revenue, maintain direct relationships with customers and continue to create recurring revenue streams.

Top MarTech and AdTech Venture Capital Firms

With the exception of corporate backed funds, these Venture Capital firms have completed the most investments in the Marketing and Ad Technology sector and, for the most part, are the large VC’s based in the United States.

YCombinator

YCombinator is an international seed stage startup accelerator based in California with over 2,000 launched companies in all sectors. They have made over 52 MarTech investments in such firms as gusto, Faire, WEPay among others.

Techstars

Techstars is one of the largest startup accelerators and investors in the world operating accelerator programs internationally since 2006. They have made approximately 65 in the MarTech sector including Caravel and Fango.

Battery Ventures

Battery Ventures is a 37-year-old investment firm and venture capital firm headquartered in Boston active in the MarTech sector. GroupOn is one of their investments among 63 others at various round levels.

500 Startups

500 Startups is the second largest startup investors and accelerators in the world. They have made 359 investments world-wide in marketing-related businesses and approximately 80 in the MarTech sector including Saucey and Lettuce.

First Round Capital

First Round Capital Is a venture capital firm that primarily invests in pre-seed and seed stage startups. They are agnostics regarding industries in which they focus; regardless, they have invested in approximately 58 MarTech related companies. Ùber was one of their pre-seed stage investments.

Accel

Accel is a seed and growth stage venture capital firm headquartered in California, USA, founded in 1983. Their focus is in Software, internet, Enterprise, E-commerce and SAAS. They have made approximately 57 investments in MarTech firms.

DFJ Growth

DFJ Growth is an old-guard Silicon Valley based VC founded in 1959 that invests primarily in early stage startups. They have made 55 investments in MarTech firms including disruptive startups like Baidu, Skype and stripe.

Sequoia Capital

Sequoia Capital started in Silicon Valley in 1972 investing in early and growth stage startups that now have a capitalization of $3.3 trillion. They have made investments in Airbnb, 23andme, Zoom among others. They have made more than 55 specific Martech investments.

New Enterprise Associates (NEA)

New Enterprise Associates (NEA) is a venture capital firm founded in 1977 with offices on the east and west coasts of the US. Their focus has been in the biomedical sectors but are active in the MarTect sector with over 53 investments.

SV Angel

SV Angel was founded in the mid-1990’s in California to support innovative seed stage startups such as DoorDash, Warby Parker, ShipBob and others. They have made over 53 investments in the MarTech sector.

Conclusion

MarTech and AdTech early-stage investors often have their eyes on the potential exit of their startups. For many marketing and ad tech companies, the ultimate goal is to sell to or merge with a larger company that is listed on an exchange.

Recently, marketing technology startups have a larger pool of potential acquirers than advertising technology startups; therefore, more attractive to venture capital investors. Even with the highly competitive AdTech and MarTech sectors In recent years, it’s not all bad news. Funding has continued at a steady pace, especially for MarTech, as investors have become more discerning than they were a few years ago. They are also carefully watching how AI advances will affect innovative software and online advertising and marketing solutions.