Emerging From Facebook’s Shadow: A Look at Trends in Social Media Venture Capital Funding from 2011-2012

Abstract

My paper explores the relative value of being a social media related company on venture capital funding across all rounds of financing within the United States over the last two years. Although venture capital as an industry has decreased on the whole in recent months, this paper explores the effects within the industry that are specific to social media companies. Using a combination of truncated regression and multiple imputation, I present results that show the differences in funding for social media companies and how they vary by round of financing, timing of the transaction, and broader industry of the target company. Ultimately, I demonstrate how social-related companies appears to suffer strongly as they approach later rounds of financing (for Series E funding, ranging from -117% to - 284% of what they would otherwise receive). I additionally show that companies that focus almost exclusively on social media appear to have seen their advantage over other companies erased over time. Finally, my results demonstrate a clear difference in the effect/value of social media in different industries. All of these results could be backed up by stronger or more complete data, pointing the way for future research.