Big Madison Avenue agencies often describe themselves as "investment managers," but usually they're referring to investing other people's money -- their clients'. MDC Partners' KBS+ unit is one of the few shops that puts its own money where its mouth is, and it is bringing in a new director to oversee the burgeoning venture capital unit that is responsible for doing that. To boost its deal flow, the agency has recruited Madison Avenue vet turned venture capitalist Jessica Peltz to direct its investments.
“I don’t necessarily think every agency should get into venture capital,” says Josh Engroff, chief digital media officer of MDC’s The Media Kitchen and managing partner of its KBS+ Ventures unit. “I can tell you why we do it: To have a seat at the table. In a world that is changing this rapidly, you’ve got to have skin in the game.”
To help increase the unit’s “deal flow” in hopes of getting in on the ground floor of the next big thing that could rapidly change the world Madison Avenue operates in, Engroff has brought in a new director to oversee investments for the unit, naming Jessica Peltz investment director.
Peltz, who cut her teeth developing traditional and digital media strategies for some of Madison Avenue’s most respected media organizations (Zenith and Initiative), left the agency world in 2012 to leverage her brand experience in the high-stakes world of venture capital, joining Joe Jaffe’s Evol8tion as head of business development. There she helped some of the world’s biggest brands -- companies like Kraft, Unilever and Mondelez -- vet early-stage investments in some of the most promising technology start-ups impacting the world of marketing. Just prior to joining KBS+ Ventures, Peltz helped mentor start-ups for incubators in New York (NYC BigApps), Silicon Valley (UpWest Labs) and did stints in the start-up communities in Tel Aviv and Austin too.
It was that combination of experience, plus her nature to nurture and mentor, that attracted Engroff to fill the position that has been vacant since former director Taylor Davidson stepped down in July to pursue his own venture-related endeavors.
Davidson, who helped launch KBS+ Ventures with former Managing Partner and Media Kitchen Chief Digital Media Officer Darren Herman (who left last year to join Mozilla), helped kick-start the unit, which launched in 2011 and currently has 12 start-up ventures in its portfolio (including several “follow-on” investments in them).
That was a great start, says Engroff, who adds that the unit has several new investments about to close and wants to dramatically increase its deal flow. He says it’s unlikely that KBS+ Ventures will ever do the kind of volume that conventional, pure-play VCs do, but that the goal is to expand beyond the kind of “ad tech” start-ups that have dominated much of Madison Avenue’s thinking for the past several years of venture activity.
Engroff wouldn’t comment on the “investment thesis” of other big agencies, other than to say agencies typically “go after the next bright, shiny object,” and often entrust the investment management to the agency’s finance executive -- who may be great at managing corporate strategies, but may not necessarily be ideal for managing startup cultures.
That’s sort of the whole point behind KBS+ Ventures, he says, and why he brought Peltz in to direct it. He describes her as a mentor, and notes the fact that her gender adds to that cultural framework, because venture capital tends to be dominated by men.
Peltz says she considers the mentoring and development of early stage start-ups her favorite part, and she refers to them as “little babies” that require a lot of attention in the early stages, and not as much later on as they grow.
Interviewed last week on day three of her new job, Peltz says she hasn’t formed an investment thesis yet for the unit, but that she was attracted to rejoin a Madison Avenue organization because of the unique, “entrepreneurial” culture at KBS+.
Engroff says the unit will remain consistent with its investment strategy of the past, looking for an identifying early-stage players that have the potential to impact KBS+’ clients' business, but with the prospect of a genuine “return” on the agency’s capital, not just for strategic reasons.
That said, Engroff says the unit generates plenty of strategic returns too, because its deal flow gives it visibility into next-generation players that could transform advertising, media and marketing, and even when it doesn’t make capital investments in those companies, the unit frequently maintains relationships with startups and even mentors them as an indirect adviser, introducing them to clients that may help them grown their businesses in other ways.
Engroff calls that role “goodwill,” “karma” and simply making “connections” -- but he says that investment thesis is that if you do good things with startups, “it will come back to benefit you.”
In the near term he says KBS+ Ventures wants to boost its actual investment activity. He says it will never be “50” deals a year, but it’s not unreasonable for the unit to make a dozen or so annually.
As for expanding beyond conventional ad tech players, he says the unit currently is exploring things like “shopper technology” and data and analytics startups that have the potential to change the way people think and behave across the entire funnel.
“There are emerging areas that I guess you could call ad tech, but they have the potential to be more strategic,” he says, adding that the payoff for KBS+ in getting in on the ground floor of those businesses is that it could begin to impact a much bigger part of its clients’ enterprises than conventional advertising and media.
Peltz says she admires some big Silicon Valley VCs -- most notably Andreessen Horowitz -- but that she doesn’t plan to remake KBS+ Ventures in their image. Instead, she says she wants to take the “best practices” from leading VCs and apply it for the benefit of KBS+’s clients, and a return for the agency too.