With Q3 2024 officially behind us, a number of sector specific reports have been published that are worth covering. This is not only helpful for startups and investors who are actively deploying in those sectors, but also to founders at the beginning of their journeys who are looking for ‘requests for startups’ or problem areas worth diving into. I chose to focus on 5 areas that are particularly relevant to us at Remagine Ventures.
Media and Entertainment (includes Martech and Adtech) by Luma Partners
LUMA Partners released their Q3 2024 Market Report for the Digital Media & Marketing sector. As previously mentioned on VC Cafe, the media and entertainment space is experiencing a lot of disruption: the move from cable to streaming (and from streaming to Youtube), shorter attention spans driving consumers to short form vertical video (TikTok, Instagram Reels and Shorts) and big changes to how content is created (and the cost of creating content) thanks to generative AI.
Highlights from the report:
- M&A activity is up for the third consecutive quarter and 51% year over year – this includes several Israeli startups like Salesforce acquisition of Zoomin for $450M , and Playtika’s acquisition of Superplay for $700M in cash and up to $1.9 billion in earn out based on performance.
- There is an increasing convergence of content generation, data & identity, and marketing automation, driven by AI. This will impact the world of media and entertainment in a profound way, across three areas:
- Content Generation: Generative AI is capable of creating diverse forms of content, including text, images, music, and video. This capability could revolutionise content production and distribution for media and entertainment companies. For example, our portfolio company HourOne can generate high quality videos of people speaking in a talk show, completely generated with AI.
- Data & Identity: AI excels at analysing user data to deliver personalised content recommendations, targeted advertising, and tailored user experiences. This could transform how media and entertainment platforms engage their audiences and generate revenue.
- Marketing Automation: AI-powered tools can automate marketing tasks like content creation, social media management, and ad campaign optimisation. This automation could significantly impact how media and entertainment companies promote their content and reach their target audiences. For example, our portfolio company Munch automatically creates short form, vertical clips for social media from any long form video and understands what’s trending.
Gaming by Konvoy
The latest report by Konvoy, a gaming venture capital firm, analyses the state of the gaming industry in the third quarter of 2024. There’s been little growth in the gaming industry year over year – it is projected to reach a market size of $188 billion by the end of 2024 (a modest 3% growth) and is expected to grow to $223 billion by 2029.
Three key trends worth paying attention to in gaming in Q3 2024:
- Funding – The total amount of private funding for the first three quarters of 2024 is higher than the entire 2023 total, largely due to Disney’s $1.5 billion investment in Epic Games. Private funding in the gaming sector reached $811 million in Q3 2024, marking a 15% increase from the previous quarter. Traditional content studios are facing compression in VC funding, as content alone doesn’t seem to be a strong fit for venture capital at this stage. 41 gaming M&A transactions occurred in Q3 2024.
- The impact of AI on gaming – AI-related companies attracted 22% of the total funding in Q3, equating to $113 million, up from 10% and $52 million in Q2. Two notable AI investments were Volley’s $55 million fundraise and Series Entertainment’s $28 million Series A round. There’s significant investor interest in AI-powered gaming startups, particularly those focused on virtual characters and tools that streamline game development processes.
- Distribution is changing in a number of ways:
- Discord’s launch of “Activities” in September offers developers another avenue for distribution and user engagement.
- Epic sued Apple, Google and Samsung for the anti competitive behaviour and won. That means that 1) Epic now has its own app store, attracting developers by charging 12% compared to Apple’s 30%. The ruling could potentially allow developers to retain more revenue by bypassing Google’s fees and regulations.
Generative AI in the Enterprise by Deloitte
The Q3 2024 report of Generative AI in the Enterprise by Deloitte surveyed 2,770 senior leaders from organisations with active AI implementations. The big picture: enterprises are recognising the value of generative AI and are investing more heavily in development and deployment. However, several key challenges hinder wider adoption, including concerns around data management, risk mitigation, governance, and value measurement.
Key highlights from the report:
- Enterprise is interested in GenAI but leaning in with caution: 67% of surveyed organisations are increasing their generative AI investments due to observed value. However, 68% of organisations have moved only 30% or fewer of their generative AI experiments into production.
- The key benefits enterprises find in generative AI are improved efficiency, productivity, and cost reduction. But organisations are realising a broader range of benefits, including increased innovation, improved products and services, and enhanced customer relationships
- Risk, Regulation, and Governance as Top Barriers: Concerns around risk management, regulatory compliance, and governance are significant barriers to generative AI development and deployment. Organizations feel less prepared to address these challenges, with only 23% rating themselves as highly prepared for risk and governance aspects.
Crypto by Andreessen Horowitz
The a16z State of Crypto Report 2024 highlights several key trends and developments in the cryptocurrency sector:
- Record activity – even though we don’t hear about it as much in mainstream news, Crypto usage and activity have reached all-time highs, indicating growing mainstream adoption and increased utility of blockchain technologies. The report estimates there are 30 to 60 million monthly active crypto users worldwide, representing 5-10% of global crypto owners.
- Stablecoins and Defi are the most popular uses for crypto today. Case in point, Stablecoin transaction volumes surpassed Visa’s in Q2 2024, underscoring their utility and growing adoption. DeFi protocols currently hold over $169 billion, with staking and lending being popular subcategories.
- Improved blockchain infrastructure – Ethereum’s “Dencun” upgrade has led to a substantial decrease in transaction fees for L2 networks and lower transaction costs and increased capacity have spurred the growth of consumer apps like low-cost NFT collections, onchain games, social networks, and prediction markets.
Spatial Computing by Enders Analysis and Precedence Research
According to the 2024 spatial computing market update by Enders Analysis, the spatial computing ecosystem is experiencing an upturn due to increased availability of head-mounted devices (HMDs) primarily by Apple and Meta, albeit with very different strategies.
Key highlights in the spatial computing space:
- Market Size and Growth: The spatial computing market is expected to grow significantly, with projections suggesting it could reach USD 280.5 billion by 2028, growing at a Compound Annual Growth Rate (CAGR) of 23.4% from 2023. This indicates robust growth fuelled by technological advancements and increasing adoption across various industries.
- Market leaders: Apple is rumoured to release the Apple Vision Pro 2 in 2026, costing 30% less than its predecessor. Apple has chosen a design for the Vision Pro that lacks controllers, making it primarily reliant on passive entertainment. In contrast, Meta is deeply engaged in gaming and 3D experiences, showcasing the potential for the HMD category. Meta has the most affordable and popular VR headset, the Meta Quest (including the new 3S model) and is working on project Orion, revolutionary new AR glasses.
- New Entrants: More companies coming into the space: media and entertainment companies are learning in on AR/VR/XR content and experiences, although gaming expected to remain the dominant use case until the end of the decade. A potential killer app for VR and smart glasses might turn to be live sports.
You get the picture: there’s a ton of innovation happening across media, gaming, AI, crypto, and spatial computing. The convergence of these sectors, particularly through AI integration, creates unprecedented opportunities for ambitious founders.
At Remagine Ventures, we’re particularly excited about backing early-stage founders building at these intersections. If you’re working on something innovative in these spaces at the pre-seed stage, we’d love to hear from you and explore how we can support your journey.
I'm a former general partner at google ventures, head of Google for Entrepreneurs in Europe and founding head of Campus London, Google's first physical hub for startups.
I'm also the founder of Techbikers, a non-profit bringing together the startup ecosystem on cycling challenges in support of Room to Read. Since inception in 2012 we've built 11 schools and 50 libraries in the developing world.
- Weekly #FIRGUN Newsletter – October 25 2024 - October 25, 2024
- Q3 2024 Quarterly Emerging Sector Analysis - October 22, 2024
- What comes after LLMs for VC Investments - October 20, 2024
