Media for Equity: the newest VC concept from Europe. Elena Bocharova for Berliner Börsenkreis 30 June, 2015

Full text

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Media for Equity:

the newest VC concept from Europe

Elena Bocharova

for Berliner Börsenkreis

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Outline: get excited

How do you finance a company? A brief

overview

Media for Equity: what do we know about it

Usual timing

Practical mechanism

Players

Key takeaways

Q&A

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How do you finance a company?

Public

Private

Debt

?

?

Equity

?

?

Loans

Stocks

Bonds

PE (LBOs) & VC

You can classify the ways to finance a company along 2

dimensions (note: these are external ways of financing)

A company can borrow from a private or a public investor – and choose

between debt and equity

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There is a timeline of financing

Idea

Established

business

3Fs: Friends,

Family &

Fools

Venture

capital

Private Equity: private

placement/ LBO

Private Debt: bank loans

Public Equity: IPO

Public Debt: bonds

Usually, a company chooses a certain way of financing at a

certain point in its development

2nd

stage

Seed

3rd stage

The choice often depends on how much money a company has to spend

on raising money!

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Media for Equity: what is it?

A company gets media coverage ( out-of-home ads, TV time,

newspapers and magazines ads, radio spots) in exchange for its

equity.

Goals:

+ brand recognition

+ growth of customer base

+ increase in sales

Was practised first in the late 90s by the Ströer company (billboards

and out-of-home advertisment)

Media for equity is a way to quick recognition

Media for Equity is one of the newest alternative investment models in the

world

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Where does media for equity fit in?

Idea

Established

business

3Fs: Friends,

Family &

Fools

Venture

capital

Private Equity: private

placement/ LBO

Private Debt: bank loans

Public Equity: IPO

Public Debt: bonds

You need to think about when the company especially needs

media coverage

2nd

stage

Seed

3rd stage

Media

for

Equity

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A detailed look at timing

Seed

Start up

Second

stage

Third stage

Established

Concept

development

Product

ready to

Product

market

Develop

markets

Sustainable

revenue

Increased media coverage starts making sense when the product is ready

to go on the market

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Another example of timing

1

2

3

Founded – strong team

Prototype stage

First contacts established &

sales generated

Scalable business

operations

Proof of concept

No clear category

leader established yet

Mentoring + EUR 25k

Cash (min EUR 2m) and

Media investments (min

EUR 1m)

TV Media + Cash

Seed

1st round

2nd/3rd round

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The mechanism is really simple

Media partners

Cash investors

M4E Management GmbH

Media4Equity Invest GmbH

Startup

Product & business development

500k

500k

200k cash

180k cash

500k Ad space

500k Ad space

300k cash

All parties involved claim that it is a win-win transaction

Three parties typically involved are an investment fund, a

start-up and media partners

The „trick“ is that media companies usually have unused media space which would either

stay empty or be used for the corporate ads of the company itself. In this scenario,

however, they sell this space, even though with a discount.

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Reference case: mjam.at

a part of

Apr ‘10

May ‘10 Jun ‘10

Jul ‘10

2011/2012

Jun ‘14

„pre media“

valuation @

EUR 800k

Shareholding

7.6%

Media investment

EUR 195k

Increase in orders

during campaign:

+90%

After financing

rounds

dilution to 5%

Exited @ valuation

EUR 7.4m

(EUR 370k)

Multiple: 6.2x

It also indirectly led to the development of the whole Delivery Hero group

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Investment fund

Media company

Investment examples

Who are the players?

Germany

The concept appeared in Germany in the late 90s and then expanded

into other markets

• Founded in 2000 • Located in Cologne • 30 portfolio companies • Focus on Hi Tech, online

marketing & eCommerce

• Founded in 2011 • Located in Munich • 14 investments

• International out-of-home and online advertising

• A network of TV channels through Media Alliance Europe (Germany, France, Scandinavia, Poland, etc.)

• Founded in 2011 • Located in Berlin

• 13 investments • The first MfE fund to combine different types of media

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Who are the players?

Austria

Outside of Germany

The best markets for media for equity to work are those where venture

capital is in short supply

India

Sweden

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Key Takeaways

Companies need brand recognition to expand their customer base and

boost sales. They can get it from media partners in exchange for a stake in

the company (through an investment fund)

It is an early-stage financing (2nd – 3rd stage in the venture phase)

The concept appeared in Germany in the late 90s

It works best on the markets where lack of VC financing can be obsereved

There are seemingly no losses for the start up, media partners and the

investment fund – only venture capitalists can loose their investment if the

start up fails

Media for equity covers the gap in the early-stage financing and solves

the problem of inssuficient marketing expertise

Media for equity is one of the few VC innovations coming

from Europe

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Q&A time!

Figure

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References

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