How Venture Capital Money Is Linked to SXSW Panels and Buzzwords

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This idea that the social media bubble is "quietly deflating" because venture capital money has gone elsewhere has not taken much account of why venture capitalists invest in certain companies. From 2010 to 2012 social-related start-ups got 6 percent of VC funding, while this year that has dropped to 2 percent. To Bloomberg Businessweek's Joshua Brustein, that indicates the end of the social media craze. But, that theory treats the interests of venture capitalists as real, substantial shifts in the economy, when really they have more to do with buzzwords at conferences than anything else. 

To attempt to illustrate that point, we looked at how South by Southwest Interactive panel titles in all their buzzwordy goodness correlate with this trend in venture capital spending on social. The height of the social media craze came back in 2011, according to Brustein, during the "social media money boom." That also happens to match up with the use of social-related terms in panel names at South by Southwest, as our graph below shows. 

As you can see, the percentage of panel names with words like "Twitter," "Facebook," and "Social" was much higher in 2011 than this year, which might explain the drop in VC funds—a trend the media also noticed, declaring 2013 the year that the terrible SoMoLo (social, mobile, local) era finally ended. Similarly, as start-up funding has continued apace, so have the panels about start-ups.

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To be sure, SXSW is just one of the many tech conferences throughout the year. But, it's certainly one of the most influential, known for making apps, like Foursquare, famous. Also, similarly notable conferences, such as the ones put on by AllThingsD and TechCrunch, have less buzz-wordy panel names like "Chat with Tim Cook," which does little to illuminate the content of the session. 

So by that  crude calculation, where VC money goes has more to do with words investors hear at events than actual economic trends. And Brustein admits as much in his piece, when he says "New buzzwords have arrived: Big data and cloud companies are grabbing the imaginations of venture capitalists." 

This article is from the archive of our partner The Wire.