As noted in Part I: Digital Media Funding Trends, Foley Partner Beth Felder gathered a group of digital media investor experts – Don Dodge, Developer Advocate for Google, James Geshwiler, Managing Director of CommonAngels and Eric Hjerpe, Partner at Kepha Partners – at our 2014 FOLEYTech Summit for a discussion on digital media investing. We’ve compiled their top insights below.

Since the paid subscription model is substantially dead, what is a successful revenue model for a digital media company?

Almost all digital media companies use a channel strategy for acquiring customers.  The most successful find a channel partner willing to pay the digital media company to provide services to customers that the channel partner has already established and delivers.  In the early stages sometimes digital media companies just have to find ways to drive revenue, even if they aren’t pursuing directly their long-term strategy.  Investors want to find companies that have a plan for revenue that offset investment dollars such that the company can self-sustain operating expenses and focus investment on expansion and growth.

How do investors evaluate the required users and their prospective “stickiness” when considering a post-seed investment?

The dilemma that many digital media companies face is that their sticky users aren’t paying subscription fees and the company is faced with an unproven advertising revenue stream.  Generally investors do not value users as an independent metric for evaluating potential investments, instead they want to see proven revenue streams and plans for sustained growth.

Is it better to get strategic (versus financial) investors early on as part of a seed syndicate?

It is always helpful to have a large strategic investor, both for the connections and resources they may be able to offer and the signaling to the market that your technology is credible.  However, come time for an exit if the large strategic has not chosen to acquire you, especially given the access to information that strategic has as an investor, it can signal to the market that you have a problem and are damaged goods.