VCs Slow To Fund The Visual Obsessions Of Gen Z & Millenials

Adobe’s venerable Photoshop isn’t always the top choice for those looking for quick and straightforward photo editing. Especially in a mobile context.

People are looking for new ways to create artistic photos, often on the go. Though Instagram and Snapchat already cater to the Millennial urge to share every bit of one’s daily life, over the past few years, many photo mobile editing apps have popped up to address the demand for creating better and more diverse visual content.

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Within the last ten years, around $199 million has gone into these startups, according to Crunchbase data. 2014 and on witnessed the largest number of deals and funding rounds, totaling about $161.4 million.

For the new generation whose lives revolve around smart pocket gadgets and are eager to capture everything visually, mobile has become more and more important, and has already made lifestyle changes.

“Gen Z has been brought up with both the Internet and in an increasingly mobile-first world, with cameras in smartphones,” Hovhannes Avoyan, CEO and Founder of PicsArt, told Crunchbase News. “This has led to images becoming the primary way in which we communicate, on networks, via messaging and on mobile,”

Let’s follow where the money is being invested in mobile photo apps.

Key Players

Out of all photo editing app companies, VSCO has raised the most capital, $70 million to be exact. Accel Partners and Goldcrest Investments closed its $40 million Series A in 2014. The following year, the Series A investors and Glynn Capital Management participated in its $30 million Series B round. When asked what unique qualities it offers its investors, the company declined to comment.

VSCO users can edit photos and curate collections, but unlike the case with most social platforms, they can only follow photographers they admire (no comment or heart buttons for you). In 2015, the Oakland-based company acquired Artifact Uprising and Moving Science to bring more photography to the real world and to integrate machine learning into photo curation.

PicsArt ranks second in the total amount of money raised. Its $25 million Series A in 2015 came from investors such as Sequoia and Insight Venture Partners. The next year, DCM Ventures and Siguler Gulf & Company joined its $20 million Series B round.

To date, it seems unlikely that PicsArt has let its investors down. With more than 400 million installs and 90 million MAUs (monthly active users), reported by the company itself, the free app has been ranked top ten in U.S. photo and video app category for four years in a row.

Compared to VSCO, which focuses more on filters, PicsArt lets users share collages and drawings with friends. In 2016, PicsArt introduced “image remixing,” which enables any creator within the community to make their images editable by other creators.

Some photo editing and sharing apps have largely operated under the radar in terms of fundraising, but have attracted love from their users and the media regardless. Prisma, the app that employs AI and turns your photos into Van Gogh or Picasso style, has about five to ten million MAUs, according to TechCrunch. Others include Polarr, a cross-platform software that enables anyone to become a pro photo editor, and Picturesque, which helps photographers select photos using AI.

Investment Landscape

Out of all the funding rounds we’ve looked at, most are Seed, Angel, Series A, or Series B rounds. The prevalence of early-stage capital indicates that VCs are merely laying tentative bets on the burgeoning photo editing app industry.

Indeed, photo editing startups are riding the wave of social media and mobile technology expansion. As smartphones become commonplace, more people connect in the virtual world, and necessitate the ability to readily and visually share something online.

“The idea of a camera in every pocket feels just a revolutionary as having an Internet browser in every pocket,” Nabeel Hyatt, a General Partner at Spark Capital, told us. Nabeel led the Series A investment in Picturelife, a startup that provides personal storage services. (Note: Picturelife met its demise 18 months after being acquired.)

Addressing Crunchbase News, Avoyan, CEO and Founder of PicsArt, added that “an increased demand for photo and image editing on the mobile” makes the photo editing app category especially appealing for investors, considering that “people will create 1.2 trillion photos this year alone.”

The Future of Photo Editing Apps

More photos are being edited, shared, and discovered than before, but where exactly is the photo editing industry going? Through talking to investors and entrepreneurs, Crunchbase News summarized a few notable trends in the space:

First, the AI craze has spilled over to the photography world. More photo editing startups are incorporating machine learning and computer vision into their software to improve user experience and create advanced features. For example, Palo Alto-based startup Polarr is making huge investments in AI. In fact, half of its team currently works on developing fast image recognition and segmentation algorithms on mobile devices, according to its CEO.

“[AI can take over] mundane tasks for users and do them really well. For example, matching exposures, better denoise, better reconstruction of image details,” Borui Wang, Founder and CEO at Polarr, said to Crunchbase News. “To make AI really consumer worthy, it needs to be 99 percent reliable all the time.”

Second, for photo apps, the intuitive next step to expand user base and revenue is through enabling the editing of other visual channels such as videos, gifs, and stickers. Currently, a common way of generating profits is through charging for advanced filters and features based on either a one-time fee or a subscription model.

Many photo editing apps have already gone down the path of diversification: PicsArt started off as a photo studio and then expanded into gifs, animation, and video. Over the past two years, VSCO has also taken on video editing and gif creation.

Finally, a scaling tactic, in terms of revenue and usership, can be made through community-building. Once the app gains enough users, it has hopes of evolving into a social platform, a process that PicsArt, VSCO, and Prisma have been experimenting with.

In the world of mobile photo editing, scaling from an app to an actual business can be difficult, especially when the app’s life and death lie in the hands of download numbers, DAUs, and MAUs.

That said, there is quite a lot of potential in the mobile photo editing space. Even though visual social media giants like Instagram are looming over the fledgling photo apps, the apps that we spoke with weren’t afraid of them. Instagram is a social nexus, they said, while they are building editing tools for new generations.

While the overall photo editing space appears to be on the rise, most VC funding is concentrated within a few prominent apps. And that means that the pool of likely winners may be shallower than you have expected.

You can apply filters to your vacation pictures and share your dog photos however you want, but VCs are not yet ready to go all out on the photo editing industry.