Media for Equity:
the newest VC concept from Europe
Elena Bocharova
for Berliner Börsenkreis
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
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
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!
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
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
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
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
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.
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
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