September 06, 2017
Holden Page is a Crunchbase News editor and columnist.
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Apple’s earbuds are all but ubiquitous.

However, its attempts to have everyone listen to podcasts through those buds, wireless or wired, has been a mundane slog. While Steve Jobs claimed in 2005 that “Apple is taking Podcasting mainstream,” only 24 percent of US consumers have listened to a podcast in the past month, according to a January 2017 Edison Research study.

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Yet podcasts have proved persistent in their production and stubborn in their longevity. While growth in the industry may not be particularly exciting when compared to fast-paced unicorns and ICOs, the format is making steady, if moderately paced, progress. And over the past few years, podcasts have entered the consciousness of the mainstream thanks to the popularity of Serial, which took on a life of its own.

But unlike the slow and steady adoption of podcasts, VC funding into the audio-focused field has fluctuated and appears non-committal. It’s not that entrepreneurs aren’t trying to build large, sustainable startups around the medium with the help of funding, as we will find out. But the story of podcasting startups hews close to the maxim “so close, yet so far.”

Podcasting Makes Do With Little Funding

Whether it’s due to the amateur roots of podcasting, or lack of mainstream appeal, startups, including those that produce content and provide tools to distribute and measure the success of episodes, have only raised a touch above $158 million since 2008.

For a format that has been in existence, formally, since 2004, it’s an incredibly small investment amount. For comparison, Vox, a digital media corporation that focuses primarily on digital, journalist-fueled content, has raised $308 million.

According to Crunchbase data, VCs have only made 49 funding-disclosed deals with podcasting startups since 2008. (69 deals were made that did not disclose fundings, according to the same dataset.)

Naturally, this is a small sample size to work from when attempting to analyze trends. But what we can derive from the data is this: podcasting has yet to find its breakout moment with investors.

Although the number of deals ticked up through 2014, funding remained volatile and low when compared to content and video-based content startups. And while 2013 appears to be a breakout year for podcasting startups, the story behind the bar is much less appealing. Of the $53.5 million invested in that year, a total of $50 million went into First Look Media, a journalistic enterprise that produces podcasts, but also has a strong presence in other media verticals as well.1

Meanwhile, from 2014 onwards, deal counts have gone down while funding amounts have stayed low. And although an uptick in funding and deals is underway in 2017, it’s unlikely that this year will surpass 2013 levels. It’s also unclear whether the trend, at least in dollar terms, will continue on an upward swing.

Entrepreneurs Still Want You To Listen

But the tepid investment environment has not detracted entrepreneurs entirely. Three types of startups in the podcasting industry—those that produce content, those that distribute and measure it, and those that help listeners, well, listen to podcasts—have received funding.

The most well-funded startup that produces new podcasting content is Gimlet Media. Thus far, the company has raised three funding rounds totaling $22.5 million, valuing the podcasting company, according to ReCode, at $55 million pre-money. Founded by Alex Blumberg, a former producer of the popular podcast This American Life, the company has attracted funds from Lowercase Capital, Betaworks, Fueled, and others.

According to the Financial Times (paywall), the increased investment is intended to fuel Gimlet Media’s ambitions to be the HBO of podcasts. Following, with much less funding, is Inear Entertainment. Unlike Gimlet Media, the company does not appear to primarily use iTunes for distribution and charges for listens through its own platform.

But the number of podcast startups that create content is much smaller than those who wish to facilitate the distribution of that content. Art19, for instance, raised $7.5 million last month to help podcast creators upload, distribute, and monetize their shows. Acast, which has raised a total of over $13 million, also provides a similar offering alongside Pippa and Omny Studio.

For consumers of podcasts, Stitcher serves as a suitable alternative to iTunes. The company has raised a total of $18.8 million for its desktop and mobile podcast app. Castbox, also a Stitcher competitor, has raised $3.2 million to facilitate the listening and sharing of podcasts.

The amount of market share both startups manage to scrape away from iTunes and the Apple-owned podcast app will be hard won, and progress could be lost if Apple decides to redirect its attention back to those audio files. Thus far, the iPhone maker’s all-in-one distribution and listening platform has years of momentum behind it, giving it approximately 63 percent of the podcast market. How long it will remain the benevolent dictator of podcasting is anyone’s guess.

From this perspective, Apple’s dominance in podcasting—accomplished mainly by the fact it even bothered to show up—could be a reason why the sector is largely ignored or overlooked by venture capitalists. And while it’s possible there is a disruptive idea incubating, after approximately a decade of hoping for such a startup, it may just be that entrepreneurs have to accept that podcasting business, although growing, will never have its own hockey stick growth moment.

For VCs looking for returns courtesy of explosive growth, that’s more than enough reason to keep the checkbooks closed to listeners, creators, and distributors.

Illustration: Li-Anne Dias

  1. First Look Media, unlike Vox and others, has made a point on its corporate website to note its investment in podcasts.