Market Research Startups Attract Funding, But Investor Interest May Have Already Peaked

Today, decisions by marketers are informed by tech’s (second) favorite currency: data. But even with data, marketing efforts are difficult to measure, even while marketers face increasing pressure to justify and clearly demonstrate ROI.

To help in the endeavor to prove value, a number of startups have been funded to help marketers do the research necessary to make it easier to discover, and later acquire, you. For those startups who have taken on the task, let’s find out how much investors are responding to the opportunity.

Investment In Market Research

Using Crunchbase data, we analyzed global VC deals made into market-research-focused startups from 2014 through 2017 to date. We limited our results to companies that facilitated gathering survey data, automated tasks in the marketing research process, or helped marketers interpret market research data.

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As the chart below indicates, venture capital interest in supporting market research startups has waned considerably. But the drop is not as precipitous with context, and if 2017 holds to its current trend, market research funding could be looking up.

While 2014 was an incredibly hot year for startups in the market research sector, performance in that year, in terms of funding dollars, was largely skewed by two major rounds raised by two unicorns:

• SurveyMonkey, the popular surveying tool, raised $250 million in a private equity round at the start of 2014. Since then, the company has not raised another round, nor does it have ambitions to go public in 2017.
• Qualtrics, an enterprise-capable surveying tool and fellow unicorn, followed SurveyMonkey with a $150 million Series B. Investors include Accel Partners and Insight Partners, both of which have participated in previous or follow-on rounds.

Without these two major funding hauls, 2014’s total funding amount would be much more modest when compared to 2015. Excluding the two unicorns, 2014’s haul would be reduced to approximately $181 million from $581 million. In this scenario, 2014 market research startups raised $71 million less than they did in 2015.

But with competition due to these outsized rounds from two unicorns, 2015 proved to be a disappointing year with a total haul of a little over $252 million—even though deal volume grow modestly by nine. The largest recipient of funding in 2015 was UserZoom, which raised a total of $34 million as part of its Series A.

The drought of funding continued into 2016, with a continued, moderate drop in funding and number of deals—likely attributable to the slowed funding pace across most sectors in 2016. But the low-tide of funding is showing signs of breaking as we look at 2017.

In total, 2017 market research startups have raised $360 million, over double the amount raised in the whole of 2016, and eclipsing 2015’s total amount invested. So far, Qualtrics’ $180 million Series C makes up the bulk of funding for 2017. And as we look forward, it’s possible that a couple more Qualtrics-size deals could help 2017 break 2014’s total funding amounts.

However, aside from unicorns, which startups in the market research category are attracting investor interest?

Market Research, Now More Accessible And Intimate Than Ever

While market research can prove invaluable for marketers, it is often a resource-intensive endeavor for most businesses to take on. Accordingly, market research remains out of reach for many small businesses and startups. But that could be changing.

“Previously, local corporations could conduct customer research or automate feedback loops,” Erin Borron, Head of Digital Solutions at DAYTA Marketing, told Crunchbase News. “Now it’s available to your local mom and pop shop.”

One startup that is reducing the cost of market research is Attest, a real-time surveying tool. The London-based startup raised $3.1 million in April 2017. It charges $640 dollars to conduct a survey with five questions and 250 “completes.” Mail questionnaires, on the other hand, typically cost a minimum of $5,000.

SurveyMe, which raised $2.5 million in February 2017, also fits the same mold.

Of course, surveys aren’t the only tool at a marketer’s disposal. Increasingly, marketers are relying on tools that monitor your physical reactions to round out their market research. And according to Borron, marketers are getting ever-closer to making that data actionable.

“[User behavior insights] has been traditionally the hardest to measure, but it’s where we’re probably seeing the greatest advances… in terms of tracking physical movement and correlating it to marketing efforts,” Borron explained.

Likely to the chagrin of privacy advocates, marketers, with the help of startups, are having an easier time than ever tracking physical reactions. For instance, EyesDecide, which has been “purpose built for market researchers,” lets marketers and researchers use standard webcams to track eye movement in order to derive insight on ad effectiveness from target markets. The startup behind EyesDecide, xLabs, raised $650,000 dollars in seed investment.

Major companies are also taking note of startups that track potential and current customers. Emotient, a company that interpreted feelings from viewers for marketing purposes, was acquired by Apple in January 2016 for an undisclosed sum.

In the meantime, there’s no guarantee that market research startups will continue to hold the imaginations of investors. While 2017 is looking rosier than the prior two years, it may be the case that 2014 was the year market research investment peaked. On the bright side, at least marketers won’t have to worry too much about being automated away by robots.

Illustration: Li-Anne Dias