Saturday, September 23, 2023

A Foray into Media-For-Equity Investing

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Shreya Christina
Shreya has been with for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

Series entrepreneur | Founder of | Philanthropist | Chief officer of the father.

Venture capital investments have historically fluctuated with macroeconomic trends. During the early 2000s dot-com bubble, total U.S. venture capital investment fell by about 42% in just one quarter in early 2001. This pattern was repeated during the 2008 downturn when total risk investment fell 60% in just one year. As a result of these events, many investors are shifting capital away from companies and into debt to try to secure higher payouts.

One piece of advice I’m currently hearing is that founders should “grab as much money as possible”, stay low, and don’t make drastic decisions that will affect their capital expenditures in the months to come, as a similar pattern is becoming more and more a reality. Meanwhile, I believe a media-for-equity strategy is a great way to grow your business without spending capital. It also helps you create awareness for your business and brand, which can lead to more sales and profits.

Media-For-Equity and Its Relevance in the Business World

Media-for-equity is a financing model where companies trade stocks to media conglomerates for advertising space. This model is best for scale-ups with limited growth and expansion budgets. If successful, the media investment generates demand and sales, leading to higher business valuation, which inherently leads to long-term revenue and growth for the media group.

This model has been around for 30 years, but has only recently gained worldwide popularity. It was first implemented in Sweden and became popular in the DACH region in the 2000s.

A media-for-equity deal is generally a low-risk engagement for media groups. In some countries, including Sweden and the US, independent media-for-equity investment funds work with media groups to structure these deals. In other countries such as Switzerland, the UK and Spain, media-for-equity investment funds are dedicated corporate investment divisions of the media groups such as Ringier, BBC, ITV and Mediaset.

Benefits of Media-For-Equity

Media-for-equity deals for B2C companies are a great way to get started with traditional media. It can be an efficient way to increase brand awareness, increase market share and sales, and expand your business into new markets. The deal must be integrated into an omnichannel growth strategy and take advantage of media campaigns lasting up to 24 months or more. Scale-ups should explore the model in the product-market fit phase.

Meanwhile, the media group can drive innovation, diversify its revenue streams and take advantage of all media inventories. The model enables the media conglomerates to go beyond their existing business model, expand their asset portfolio and build long-term resilience.

Successes of Media-For-Equity in Europe

Recently, DMG Ventures’ investment in Cazoo was a real-life example of blitz scaling. Cazoo went from ideation stage in December 2018 to launch in December 2019 to unicorn status in June 2020 to a $7 billion SPAC deal in March 2021. The company is now the fastest British business once achieved rare and coveted unicorn status.

In the case of Zalando, perhaps its most famous media-for-equity deal, the company has seen staggering revenue growth over the past four years. It’s even more impressive considering that Zalando was founded a year before the media-for-equity deal in 2008, similar to Cazoo.

Satispay followed a similar track to Cazoo and Zalando. Founded in 2013 as a wallet-based payment solution for consumers independent of debit and credit cards, Satispay closed a media-for-equity deal in 2020 with Ad4Ventures, the investment arm of the Mediaset Group. With its Series D fundraising round, it became the first unicorn company in Ad4Ventures’ investment portfolio and Italy’s second unicorn.

Investigating media-for-equity and its global impact

As can be seen, media-for-equity has potential, which is why I think more business ecosystems should learn from it.

Borderbridge published the first media-for-equity whitepaper in 2021: “The rise of media for equality” (download required). These and other insights have successfully aided the decision-making process in the launch of at least two media-for-equity funds I know of: Fame Media Global in Singapore and Influencer Capital in Amsterdam. This year, Borderbridge published the “Global Media-for-Equity Report 2022(download required), which draws on more than 50 interviews, 40 case studies, and 793 investments from around the world. Some key findings include the following.

• Startups that have traded stocks in exchange for ads over the past decade continue to lead with an 84% survival rate compared to the industry average of 10%.

• In seed and early stage financing, media-for-equity investments appear to be on average three times higher than VC investments.

• Ten new media-for-equity funds have been established in the past three years.

But to me, the main takeaway from these reports is that media-for-equity has become a critical stage of development for many startups aiming to become unicorns.

Three tips to keep in mind in a media-for-equity deal

As exciting as media-for-equity is right now, there are a few things to keep in mind.

1. Take the time to get clarity on what you want to get out of the media deal and how it will fit into the company’s omnichannel growth strategy. Use Borderbridge’s insights and framework to discover the country-company-fit deal.

2. Ensure your business is operationally ready to scale. Your business could generate a lot of customer demand after taking this step, and you want to make sure you’re prepared to handle that demand effectively.

3. Media-for-equity can be used to extend the runway of your company’s financing and adjust the existing budget. Therefore, focus on building a good unit economy. This usually allows a company to negotiate better percentage details with its next round of investors.

What’s to come for Media-For-Equity

The future of media-for-equity is global activation, which has already begun. I envision the next stage of development as a decentralized global media-for-equity fund powered by blockchain technology that will allow companies to trade company stocks for media in a simple, streamlined way. Business Council is the premier growth and networking organization for entrepreneurs and leaders. Am I eligible?


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