Print
Email
Print Edition Stories
Wednesday, March 3, 2010
How I See It
New England talent, infrastructure will help social media find niche
MHT's Rodney Brown: App developers see opportunity in new iPhone
MHT's Galen Moore: New 'hyperlocal' web trend
Map of New England mapping companies
Most discussions regarding social media as an industry in New England eventually lead to a sidebar on “the ones that got away.” We all know about the great ideas that emerged in New England, and then were ignored as either irrelevant or unfundable — only to grow wings in Silicon Valley.
Will this continue? I don’t think so. There are a few not-so-subtle shifts that lead me to believe New England will develop a modest-sized, but sustainable, social media industry. One development is the emergence of a true ROI on social media investments in business applications. The days of social media being viewed as a means of simply sharing information with friends are over. This is important, as New England investors tend to weigh proven profitability models more heavily in the investment decision than simply coming across the next big idea.
Many companies are seeing that investments made in increasing their customer service efforts via Twitter trump their online chat or telephone support in terms of cost effectiveness. Entire sales campaigns are being launched solely using social media. One result of their success is a higher likelihood that investors see social media as a legitimate investment opportunity.
Another dynamic is the merging of social and mobile technologies — an area where New England has some notable strength and success stories. As smartphones become the dominant means of computing and communicating, it will be difficult to develop one without the other.
There’s also what I call the “beyond e-mail” phenomenon. E-mail has for the past 10 years dominated the communications pipeline. Organizations use e-mail as a one-way “push” channel to send newsletters and offers. Social media is emerging as a must-have communications channel to reach consumers. Unlike e-mail, social media encourages a two-way dialogue between businesses and stakeholders. It’s more like an intimate conversation versus someone shouting from the mountaintop. For the entrepreneur launching a social media business, there are positive developments. According to the National Venture Capital Association, the number of angel-backed deals increased by 6 percent in the first half of 2009, though funding per deal declined by 31 percent. The good news is that angels are willing to part with capital, despite the drubbing of their personal holdings in the stock market. At the recent New Hampshire High Tech Council Angel Forum, panelists indicated that their respective angel groups are now once again actively looking at new opportunities and intending to fund them. Some of these same groups were in a holding pattern one year ago.
Many social media startups have a software-as-a-service, model, which helps to limit the upfront capital required to launch a business. It is likely we’ll see a number of successful exits of social media companies where angel financing in the $500,000 to $2 million range is sufficient to reach a liquidity event without a VC round.
Another huge advantage for our region is the bounty of talent. On any given evening you can find one or more social networking and/or mobile events in the Boston area. These events draw strong crowds, consisting of students, entrepreneurs, investors, and potential advisers or board members. Social media has captured the attention and interest of a broad cross section of our tech community. Savvy entrepreneurs can tap into this network, using the experience and connections of others to grow their business.
New England’s social media industry will look different than Silicon Valley’s. I believe we will dominate certain niches, with a bias toward companies with business-oriented applications where there is a clear customer ROI. Early-stage companies that can demonstrate ROI have a good chance of obtaining funds, especially if they can limit their capital requirements.
Matt Pierson is an angel investor in Bedford, N.H. He serves on the board of the N.H. High Tech Council, Semester at Sea, JitterGram and Nanocomp Technologies.
Comments
If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.
RSS Feeds
