Media for equity, a financing option that provides advertising in return for equity in a company, is proliferating at an increasing rate, recognized by startups as a powerful engine for sustainable growth.
Also known as media for growth or airtime for equity, media for equity is an alternative investment model where companies are trading equities to media conglomerates in exchange for advertising such as television, print, radio, and online. The model promises to deliver a number of benefits for startups, including increased brand awareness, access to customer data, customer growth, and guidance from large media groups.
Media for equity has been in the market since the ‘90s but has only gained popularity in the 2000s, especially in the British, Nordic and German space. The model has been adopted by a number of successful startups including Zalando, an online retailer that went public in 2014 at a US$6.8 billion valuation, and About You, another fashion online retailer which reached unicorn status in 2018 after securing US$300 million in funding.
A new report by Mediaforgrowth, a startup that operates in network connecting industry stakeholders, gives a comprehensive overview of the media for equity ecosystem, sharing funding trends observed over the past years.
According to the report, interest in media for equity has picked up significantly over the past decade with over 1,000 startups having embraced the model so far. While ten years ago, there were just a few media for equity funds, there are now more than 30, showcasing increased interest in the investment model.
A deep analysis of companies that have engaged in media for equity reveals that fintech, e-commerce, digital health, food and beverage are the top five industries that are leveraging the alternative models. 31% of these companies operate on either a business-to-business (B2B) or a business-to-business-to-consumer (B2B2C) model.
Delving at funding and exit trends, the research found that startups backed by media, on average, raised more funding than their counterparts, and exited in a shorter time-span.
On average, startups that are supported by media secure three times more funding than other startups, the report says. Also, those that are backed by both media and venture capital (VC) investors reach the exit round via an initial public offering (IPO) 32 months faster. Citing Pitchbook data, the report notes that the industry average for a traditional investment to exit is about 8.2 years, against 5 years and six months for media for equity-backed startups.
Looking at regional trends, the research found that Swedish and Indian companies have been the biggest adopters of the investment model, having each recorded more than 160 deals.
In India, the Times Group, the country’s largest media group, has completed a record of 900+ investments. The group started looking outside of India three years ago, and through its VC arm, Brand Capital International, has invested more than US$4 billion worth of media across a wide range of sectors including fintech, edtech, healthtech, retail and consumer durables, the report says.
The fund, which targets international brands looking to grow revenue and brand equity in India, counts in its portfolio the likes of Fintech.TV, a media platform specializing in fintech, blockchain and technology, OneValley, a premium global innovation hub for startups, corporations and individuals, and Deskera, a cloud-based business software provider of integrated business-applications-as-a-service
In Europe, SevenVentures, the corporate venture arm of German media and digital entertainment provider ProSiebenSat.1, has been a prolific media for equity investor. The firm, which provides the startups it backs with cash and media investments as well as operational support, invests in business-to-consumer (B2C) organizations across various industries.
Fintech companies currently in SevenVentures’ portfolio include Bonify, a Berlin startup providing a personal financial management platform, Ottonova, a digital health insurance provider, and Friday, a licensed digital insurer operating in the German and French markets.
Past fintech investments include Auxmoney, digital lending platform for consumer credit, Ayondo, a provider of trading services, and Creditweb, one of the largest providers of retail mortgage financing in Germany.
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