If “Mad Men” were set in the present day, the show would have to be renamed “Math Men.”
The protagonist of the popular television series—the dapper, duplicitous advertising executive Don Draper—would have to trade in his polished shoes and pressed suit for sneakers, a hoodie and a T-shirt with a company logo or an ironic saying.
Three martini lunches with clients at the Waldorf Astoria would be replaced by jumbo burritos eaten in front of the computer and washed down with a Red Bull.
It might not make for great TV. But for venture capitalists, the future of marketing continues to make for an appealing theme for early and later-stage investments. VCs have channeled hundreds of millions of dollars to the sector this year alone, and have made some of their money back through exits, as well.
Since last year, venture and growth investors have put more than $900 million into providers of marketing analytics and automation software. The largest funding recipients include email marketing service Campaign Monitor (which raised $250 million in April), sales software provider HubSpot (closed on $100 million last year), and social media campaign tracking app HootSuite (which brought in $165 million last year in a round that included a secondary component.)
Over the same period, investors have reaped even larger amounts in exit returns. Acquirers shelled out more than $4 billion last year to acquire Responsys and ExactTarget, two publicly traded marketing software providers with VCs as major shareholders.
Acquisitions of privately held Neolane and Silverpop, two other marketing-focused SaaS providers, also brought in hundreds of millions of dollars. Analytics and automation are the dominant themes, with VCs predicting that the revolution is just getting started.
“The whole idea is that advertising is going from something that was all around the creative to something that is very analytical, very targeted,” said Michael Brown, a general partner at Battery Ventures, who provided the “Mad Men” analogy.
The old advertising adage that half of the ads weren’t working, you just didn’t know which half, no longer applies. Results are measurable. And products that generate demonstrable returns will see rapid adoption.
The result is that sales and marketing executives will be doing a lot more buying in addition to selling. Research firm Gartner Group estimated in 2012 that within five years, CMOs would routinely surpass CIOs on IT spending. The flow of venture capital dollars to marketing startups supports that notion.
The shift is well underway, observed Dave Barrett, managing partner at Polaris Partners, whose firm led a $100 million April round for InsideSales, a provider of applications for analyzing sales and marketing data, communicating with customers, and other functions aimed at accelerating sales.
Barrett blogged following the round that the “re-innovation of the sales and marketing industry demands that the next generation of great, transformative sales & marketing automation companies be built.”
This story first appeared in Reuters Venture Capital Journal. Subscribers can read the original story here. To subscribe to VCJ and other venture-related research products, click here for the Marketplace.
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