The world of ad tech is whirling at a noticeably increasing speed as consumers demand engaging brand experiences and more relevant and personalised advertising. Marketers are requesting agencies and ad tech vendors tackle tricky challenges at an accelerated pace to deliver solutions. Speed to market is now the key to competitive advantage for suppliers and the end customer.
However, all too often start-ups, especially those investing heavily in product development, find obstacles in the way of growth, just when they are making the leap to becoming a sustainable scale-up, because of lack of credit from traditional sources. These challenges can be caused by payment terms, we know from research that 90 days is becoming the new norm for payment from large brand advertisers to their agencies – and the ad tech suppliers will not be paid until after that period of time - but there is another reason.
The real issue is that lenders have not developed a model for credit that reflects the fast-paced, hectic, constantly iterative world of ad tech and marketing start-ups. Traditional lenders don’t understand how to evaluate the business propositions, the way results are forecast and the real indicators of long-term growth in this environment, so they cannot offer solutions flexible enough to meet the market’s needs.
A fast growth adtech company aiming to capitalise on market opportunities quicker than competitors needs high levels of available capital so that it can reinvest revenue into new technology, campaigns or business development as fast as possible. At the early stages of growth, it is vital for a company to maximise market share – especially in the crowded ad tech market.
Mobile video platform LoopMe is a great example of a company that has managed to grow rapidly while building deep foundations thanks to working with the right funding model. The company has doubled staff numbers and opened offices across Europe and the US in the past 12 months and has an aggressive expansion strategy in 2017, with plans to continue growing the business internationally.
LoopMe’s product is in great demand among agencies and advertisers and has been rapidly winning clients. Validation of their strategy and future success was demonstrated by LoopMe’s successful $10 million funding round this month. However, earlier in 2016, as with all fast-growth start-ups, LoopMe faced a challenge in continuing to invest in technology and company growth, while maintaining a stable finance base.
Its founders solved the working capital issue by making use of FastPay’s debt finance solution, leaving them free to invest their venture capital funding in continued research and development. The company has a FastPay credit facility that it can use to support its growth ambitions, including expansion to new markets like the US.
‘The FastPay facility allows us to invest in and build an industry-leading technology solution, which otherwise might have taken years to deliver. In a market where speed and agility is everything, not being required to wait for traditional financing can be a key competitive advantage’ said Stephen Upstone, CEO of LoopMe.
FastPay ‘graduates’ include mobile DSP StrikeAd who successfully sold to Sizmek in 2015 and The Exchange Lab, another company that can attribute its success in part to being able to access financing via a quick and easy solution. The company launched in 2007 and the credit support allowed the company to grow quickly, establish its expertise and develop its proprietary tech, all resulting in revenue of nearly $32m in the year before it was bought by GroupM in December 2015.
At FastPay we are specialists in digital media and positioned to help digital media companies growing on both sides of the Atlantic. We understand the pain points and pressures when it comes to financing and know a good product when we see one - we don’t just assess the assets on the balance sheet but use our deep understanding of the world of media to understand the real credit worthiness of borrowers. That means we can have a proper conversation about your business model and offer genuine help.
Matt Byrne is the UK Director of FastPay, a financial technology platform providing credit and payment solutions to digital industries with offices in Los Angeles, San Francisco, New York, and London.
Matt Byrne, UK Director of FastPay