Content versus technology investment levels in the kids space

I had an investor call me up recently (I’m completely blanking on who it was but hi if you’re reading) lamenting that her thesis about the Kidtech and Safetytech spaces were being spoiled by a lack of investable opportunities. This kicked me into solving a data blindspot I’ve had for years: how much investment is actually going into the broad Kidtech space relative to the much more established kids content (streaming and linear) sector?

This is certainly not a meticulous analysis but as an approximation I’m reasonably confident in it. Data sources:

Filtering for a few sensible variables, total investment (or at least VC investment) into all kids digital excluding content looks like this:

Total VC investment into kids digital opportunities (Kidtech, Edtech, Safetytech)

One important caveat, this includes Edtech investments (I’ll separate that in a bit) but as a very broad measure of how much is being invested in the kids digital ecosystem (Kidtech and Safetytech), it’s okay. On average there’s ~$370m in new investment going into this sector, which seems…pretty tiny if you compare it to almost anything relevant? I mean, in 2017 the SuperAwesome growth round alone was almost 10% of all capital raised in the space.

Let’s break this out a bit more and add some context. Here is the same data, cut for the last four years to coincide with the start of the streaming wars (Disney+ etc), with Edtech investments separated (bear in mind that 20 and 21 were peak bull market VC years) and investment in kids streaming content included:

Edtech v Total Digital (Kidtech, Edtech, SafetyTech) v Kids Streaming Content Investment

Kids content investment is obviously being accelerated by the streaming wars (both as a retention and acquisition mechanism) but even still it’s pretty startling to see the doubling effect. Equally thought-provoking is the fact that specific Kidtech investment (i.e. spending on the digital infrastructure) is truly tiny: the normalised average looks like ~$200m/yr.

Finally, just because I was curious about the total ratio of content to (hand-wavy) infrastructure investment in the kids space, I looked at the same data but this time including total content spending i.e. both linear and streaming content investment.

Edtech v Total Digital (Kidtech, Edtech, SafetyTech) v Kids Content Investment

I guess you can think of this as entertainment v education v infrastructure investment levels and the only surprise is the sheer size of the contrast. Presumably there is some cost duplication effect as kids content shifts from linear (theatrical, TV) to streaming but it isn’t material for the category comparison.

There are lots of things I haven’t done here, specifically around investments into general gaming but also taking into account internal company investment into kidtech and safetytech functionality. Thoughts welcome, especially if they’re data-shaped. On the basis of this approximation though, a few partially considered observations/questions:

  • There is an obvious under-allocation of capital in Kidtech and Safetytech (as my anonymous investor caller was clear on) which you can maybe think of as a revenue (content) versus insurance (safety) business model/pricing/value challenge?
  • Based on investment levels it seems like the lack of quality (meaning scale, sensible P&L) Kidtech/Safetytech companies will continue to be a feature
  • I think I would comfortably buy some kind of kids content index fund for a while and equally comfortably own some the top decile kids content
  • No, I haven’t thought about the ramifications of generative AI on the kids content market but I don’t feel it obviously changes the underlying demand curve for any of these categories

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