Signs of change

It's a revolution. In China and elsewhere, digital television screens are increasingly replacing static signs and information systems in public places to engage passers-by with media information, advertising and entertainment.

And it's a revolution that has the backing of venture capitalists. The market potential for digital out-of-home (DOOH) media systems, as they have come to be known, has been recently endorsed by venture firms Gobi Partners (Gobi), based in Shanghai, and Oak Investment Partners of the US.

The two firms recently provided a combined $30 million in Series C financing for Digital Media Group (DMG), which has 16,198 digital screens across Chinese transport networks delivering news, entertainment and advertising to more than 14 million people on trains, station platforms and bus stops each day.

The recent funding came as DMG won an exclusive contract with Shanghai Metro TV to operate screens on all 13 lines of the Shanghai Metro system for the next five years. It now operates in nine cities and across 30 underground railway lines in China.

DMG was founded in 2002 and received seed capital of $1.4 million from Gobi in 2004. Then in February 2005 it raised another $8 million in Series A funding from Gobi, Japanese advertising agency Dentsu and Japanese mobile phone operator NTT DoCoMo. A further $32.5 million was secured in 2006, when Oak Investments invested alongside Gobi and Menlo Park-based Sierra Ventures.

“Venture capital investment in DMG has helped the business's structure and corporate governance. It has given it new directions, areas to develop and new thinking,” says Tom Tsoa, chief executive of DMG.

The firm is planning to expand its activities by combining mobile phone technology with its digital screens so it can offer advertisements which users can participate in, according to Tsao.

It has been a turbulent decade for venture capital fundraisers in Israel. Fundraising for the region has reached $11 billion over the last 10 years, peaking in 2000 with $2.8 billion before troughing in 2002 and 2003 following the dotcom crash. Fundraising picked itself up again in 2005 with a respectable $1.7 billion and sustained itself at around the $1 billion mark for the subsequent two years.

Perhaps unsurprisingly, given the global financial climate, Israeli fundraising nosedived 30 percent in 2008 to just $793 million compared to $1.14 billion in 2007. This year will be even worse than 2008 according to the IVC, which compiled the research, as it predicts a total fundraise of just $300 million for 2009.