Is Start-up Funding a Rigged Game?

Don’t feel like reading? Listen to this blog instead

VC funding in the United States reached a combined $69.1 billion in 2020. Considering only 1% of startups evolve into a unicorn startup like Slack, Uber, or Stripe, billions of dollars are flowing into a highly competitive game, which few survive. How is this money being spent, and who are the ones ultimately reaping the rewards? The answer to these questions can be found in a simple analysis of tech startup budgets.

Many see the tech startup funding system as a metaphorical arms race, as tactics are constantly evolving while most companies strive to improve customer acquisition over all else. The cost of user acquisition is on the rise, which is resulting in large percentages of budgets being allocated for this area of growth. As a result, when a tech startup receives VC investment, an average of 40% goes towards user acquisition and advertising. So, who is sitting currently sitting atop the advertising throne?

Google and Facebook Run the Game

Big Tech giants like Google and Facebook are currently the most influential advertising platforms. As startups spend approximately 40% of every VC dollar on advertising, most of this money is flowing into Google and Facebook. This system ensures that no matter the success of a startup, these two tech giants will profit off of VC funding.

Paid growth has become a critical component of any start-up’s operations, and this is not going to change. However, should Google and Facebook be the ones at the helm of the ship? The unavoidable presence of these two tech giants is looming across industries and businesses of all sizes. When a new startup receives a million dollars, it’s safe to assume that Google and Facebook will earn $250-400 thousand in advertising costs.

While this approach does work for companies with a robust user acquisition and growth strategy, it does a fair amount of harm to others. This is especially true for businesses that operate in the considered purchase space, where Google ads continually fall short and fail to deliver strong ROI. Businesses must remain cautious with their advertising expenses, and run tests across multiple channels. Allocating budgets outside of Google and Facebook could hold the key to success for some startups that aren’t seeing results with those solutions.

Digital Advertising Alternatives to Google

While Google and Facebook advertising delivers results for some startups, we must step back and consider the ethical implications of the privacy overreach that these two companies represent. These two tech giants are regularly under fire for data privacy issues, and yet they still manage to maintain their stranglehold on digital advertising. In order to restore balance to startup advertising, new channels and solutions should be explored.

The death of 3rd party cookies and the rise of blockchain technology are coinciding events that will alter the trajectory of digital advertising. For startups, this represents a new host of solutions that are capable of outperforming Google so that VC money can be maximized throughout the advertising and user acquisition process. Now, startups can receive greater transparency around attribution models and avoid click fraud while also improving targeting and data-privacy.

Only two entities own a duopoly on the advertising ecosystem, and as a result, an unhealthy and rigged game has emerged. In order to level the playing field, it is healthy for more competition to arise and present alternative solutions for startups.

An Emerging AdTech Solution

ReverseAds is one of these emerging solutions, using the distributed web and our keyword road mapping algorithm to deliver improved campaign results for our clients. Our mission is to break the chains of big tech, and we are doing this through a privacy-first advertising solution that outperforms Google for considered purchase start-ups. Now is the time to explore forward thinking alternatives that open up new channels for growth and carry your startup into the future.

We’d be delighted to speak with you about how to improve user acquisition and maximize your advertising dollars. Email us at info@reverseads.com to schedule a time to speak with a ReverseAds Data Intelligence Specialist.