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The rise of media capital as a sustainable financing model for startups and media giants

  • Guests' introduction
  • Question for Greg: what3words probably has partnered with half of the media for equity funds that exist out there, so it was very difficult to leave anyone out. Monetizing the business and getting to the partners - it was through the power of consumers. You’ve been part of so many deals and a lot of them have happened cross-country. What worked very well, in particular for what3words?
  • Question for Sheena: Every fund has its own way of explaining how the model works, how they partner up with the companies and provide different services and support. Sheena, can you please explain this about ITV AdVentures, the fund that is supported by ITV and obviously investing ITV inventory. 
  • Question for Neha: In terms of the Times of India Group, what should a founder expect from a partnership with the Times of India Group? What are the services that would be part of the deal, apart from just the transaction itself?
  • Question for Niko: It's very difficult to explain the German Media Pool’s model. As an independent fund, you have so many different media partners to cater, you have to ensure that a company makes sense for the media that they provide and the startup has the flexibility to choose and not just to get any media, just because we have to strike. How do you do it? How does it work and why should a startup, for example, consider German Media Pool compared to a media company in Germany and just doing it itself? What does success mean to you as a founder, as a startup, and what are you looking at to basically say, look, this deal, it was successful to me, or maybe I'm not sure I would reconsider or think about this again.
  • Question to Antoaneta: What does success mean to you as a founder, as a startup, and what are you looking at to basically say, look, this deal, it was successful to me, or maybe I'm not sure I would reconsider or think about this again? What worked particularly well for Smule in that case then? 
  • Question for Greg: As a growth manager, you've done a few campaigns that were cross country, but also from the UK going into places like Vietnam, Asia, India. I mean, India is such a multicultural market. What are the things you wish you knew back then, or what are the things that maybe are not so obvious when you do a media for equity deal that you should probably think about before you do it?
  • Question to Greg: In terms of creators: you have the ad campaign in the UK, which got many awards, but I've seen many of your ads. I think there is a pattern of having some bit of humour, and irony in those ads. Is that something that just works for what3words or what have you actually seen that really stands out in terms of creatives?
  • Question to Greg: As a founder, do you feel the need to have an external agency or auditing firm to say, look, you are getting the right market value for this?
  • Question for Neha: Media for equity at the end of the day is part of the broader venture capital landscape or funding option landscape. What have you seen in terms of stages of growth or industries that work particularly well for you and for them?

Niko: We are German Media Pool. We are an independent media for equity fund, which means that we're not owned by any media group. We're like a venture capital fund - on the one side we have media groups, and on the other side we have startups. So we use the media that we get from our media partners to invest in startups to help them accelerate their growth and in return we get shares. That's the independent media fund model. That's also what makes us different from a lot of the other media for equity players that are out. We've been around for about 10 years. We have more than 50 media partners. We have media partners in print, out-of-home, radio and television.

And on the other side, we have 38 portfolio companies several of that are very well known at least in the German market, like About You, Clark, Grover Sanity Group, or Momox. And we're super happy to be part of this growing awareness of media for equity and also super happy about other media companies that are investing because we think that this model is something that can really help accelerate the growth of startups.

Antoaneta: Hi everyone. My name is Antoinette and I'm a Vice President of Partnerships and Customer Marketing at Smule. So Smule is a music app. It's about singing with millions of people globally. In fact, we're the most downloaded karaoke app of all time.

From our experience, we have two media for equity deals, one in Europe, and one in India. The Indian one is active - it has been renewed for a second time. I cannot really mention the numbers, but it's an eight-digit deal, I think it gives a perspective on things. It has been quite an exciting experience for us and something we would definitely repeat.

Neha: I’m Neha Kothari Ranavat, Senior Director of Brand Strategy & Communications at Brand Capital International. I'm part of the strategic investment of Times Group, which is the largest media conglomerate in India, a 190-year-old media conglomerate.

We have print, digital, out-of-home, radio, and so on. We are the Brand Capital International team out of San Francisco and making investments into international markets and startups, helping them to launch into the Indian market. So what we help is to understand the Indian consumer market, and the media landscape of India, and then of course, I help them to pick the right campaigns, at the right time with the right target audiences to launch themselves into the Indian market.

Sheena: Hi everyone. I'm Sheena. I'm the Director of ITV AdVentures. Hopefully, some of you know ITV. We are the largest commercial television broadcaster in the UK. In 2021 we launched ITV AdVentures, which is our own media equity investment fund.

We look to take minority investment stakes into game-changing, direct-to-consumer startups in exchange for commercial advertising, airtime across the ITV channels and also ITV X, which is our fresh new streaming service that we launched just in December last year.

Our first investment actually in 2021 was into what3words. Since then, we've made 6 investments over the past couple of years. The most recent of which was a company called Resi, which we announced just last week. If any of you are planning to do anything in terms of renovation to your own homes, definitely go check them out. 

Greg: Hi everyone. I'm Greg, Head of Growth at what3words. For those who don't know what3words, we’re a UK-based tech company. Essentially what we've done is make talking about location easy. And what that means is we've broken the world into 57 trillion squares and given each square a three-word address, each one of those squares is three meters by three meters. Each square has its own three-word address from the dictionary. We operate in over 50 languages. Essentially it's mapped the whole world, giving everyone an address. It doesn't have to be a building. It could be kind of any location.

We've done a ton of media for equity deals. I think probably we are one of the leading businesses in the world in this space. Our first one was with Channel 4 in 2020, but since we've done with ITV two tranches, we've worked with German Media Pool, and we've worked with the Times Group. So all our investors are on this panel, which is kind of awkward but also lovely. So ranging from 2 million up to much more than that and probably we’ll do more. It’s a model that works for us.

Diana: I think what3words probably has partnered with half of the media for equity funds that exist out there, so it was very difficult to leave anyone out. Maybe we can actually start with you, Greg, because what3words has an interesting business model. It's more of a B2B2C business model, and I think you guys have understood earlier on the power of branding and marketing and have done these deals, as you said, for the last eight years. Monetizing the business and getting to the partners - it was through the power of consumers. You’ve been part of so many deals and a lot of them have happened cross-country. What worked very well, in particular for what3words?

Greg: Media for equity gave us access to huge household names like ITV, and the Times of India, where we weren’t getting in there before. We were spending where everyone else spends: Facebook, Google, or Meta, I should say Google which is great. We saw growth. 

We are reaching consumers. People are installing the app, but you're correct, our business model is B2B and we need partners to know about what3words and to think of us as a big thing. Getting in places like the ones that you guys represent was the fastest way into that. Off the back of the TV in the UK for example, we've closed brands like Boohoo in Germany, and DHL is now one of our partners. We've got DTDC in India - lots of brands that we weren't really getting a foot in the door with until we started doing TV campaigns, doing print campaigns. Now it's much easier to do that. That's probably the biggest thing that has given us is hitting our business objectives from a sales perspective. The other thing it does for us, obviously, is it helps us retain our cash for areas where we need cash.

That is performance media. Unfortunately, Google and Meta take a lot of our cash and then employing a very high-quality sales team and also putting money into high-quality production. The ads that run in these media - we get to retain our cash so that the ads that are running are super high quality, super premium kind of ad that we're placing there because we've spent enough time and money on doing that thanks to the cash that we saved by the media for equity deals.

Diana: I think every fund has its own way of explaining how the model works, how they partner up with the companies and provide different services and support. Sheena, we can start with you because the fund is supported by ITV and obviously investing ITV inventory. 

Sheena: The inventory that we offer is obviously exclusively ITV inventory. It's linear inventory across the entire family of ITV channels. And then also we have kind of the addressable opportunity via broadcast through ITV X.

In terms of our differentiators, we are the largest commercial broadcasters, so we have just unparalleled reach. We also have the ability to offer regional linear advertising and then obviously the super addressable opportunity via ITV X. So across the various different elements of TV advertising, we can pretty much hit those touchpoints. In terms of how we partner with the companies - we invest anywhere from a million pounds to upwards of 5 million, typically in various tranches of investments. We always take minority equity stakes and we generally always co-invest with a cash investor, a VC fund that's very much helping the businesses be well capitalized, that’s an important criterion for us. We want there to be sufficient cash runway over the period that the company's deploying TV. And largely the reason for that is also we like it when the TV is part of an omnichannel marketing mix. We think that is when successful campaigns are able to come to fruition because the TV has such a positive amplification benefit in terms of all the other marketing channels that you pursue. So that's our model in a nutshell, beyond the obvious kind of media that we deploy, we also offer all the other kinds of elements of planning and launching a TV advertising campaign for the first time.

I have a dedicated media planning team that helps with everything to do with planning, executing and optimizing the media through to the actual measurement and attribution of the campaign. And then also an in-house creative team that can very much help startups with the actual production of the TV ad. So the full end-to-end service, if you like. 

Diana: Neha, in terms of the Times of India Group, what should a founder expect from a partnership with the Times of India Group? What are the services that would be part of the deal, apart from just the transaction itself? Because I think especially with what3words, you work closely on adapting those creatives to the local market and so much more.

Neha: It almost feels like I'm gonna give my resume right now because it's storytelling. Media for equity is all about really knowing the funds, not only of the startup but also of the media that we offer. So when I always use this analogy of Times of India - it taps into every media for every consumer in India. You wake up with a newspaper, which is a habit of every Indian that's there. You read a newspaper, you look at some marketing, which is where your trust-building begins. You get into your car, you're listening to the radio, which is dominated by the Times of India. You are looking at your phone, you are looking at the airport billboard, so wherever you are, you're tapped into some media or some kind of outreach, which is done by us.

When we look into any of the companies internationally and we are looking for making an investment, we always ask ourselves: is this product or service really gonna work in India? So we're first thinking about India: are you ready, are you a product ready for India? Post that we never talk about this is your ad campaign, this is the pricing, this is how it’s gonna be, this is gonna be your ROI, these are the downloads you have to get. 

We are always talking about brand solutions because for us it's that equity that we've invested in, we wanna ensure that it's gone 10x from what we have invested in it. All our teams, at any given launch, which we did with even what3words or Smule, support the international team, which could be print, digital, or out-of-home. So you are pretty much getting an induction first with brand solutions customized for what will work for the Indian audience. Post that, we pick and choose based on phase on how developed is this product, whether is it ready for the Indian audiences, are we gonna get an ROI. And that's when we actually plan to launch any campaign.

Diana: I think it's very difficult to explain the German Media Pool’s model for the people to understand the complexity of this. But purely as an independent fund, having so many different media partners to cater to exactly what Neha said, you have to ensure that a company makes sense for the media that they provide and the startup has the flexibility to choose and not just to get any media, just because we have to strike. How do you do it? How does it work and why should a startup, for example, consider German Media Pool compared to a media company in Germany and just doing it itself?

Niko: I think many of the things that were said by Times of India and by ITV are also something that we do. So, for example, we try to tailor the media to the specific startup, we also have people in our company who know media planning, who's done media planning for years and years, and who can help the startups set that up. So all of those things, a very similar approach to what you're doing. With us, the difference is that we have all these different media groups that are our partners and it took a while to evolve into the model that we have today.

Today’s model - every single deal is really custom-made for the startup with a selection of those media groups that, make sense for that startup's media strategy. And that means sometimes it can be just one out of 40 media partners that come to play for a certain investment or it can be like we did with About You for example. We had more than 30 media partners participate in providing them with the media. We really work with the media groups and with the startups to establish what the optimal mix is. We spoke not so much about the model, how do we make money and how the media groups make money. We do make money just like a venture capitalist does on the exit of the company. So when we exit an investment that we did, those media groups that participated in providing that media for that specific startup also get the proceeds from that exit. That's quite important. Every deal for us is almost like a new deal. It can be a certain set of media partners here, another set there, and another set there. That makes it very flexible and really the possibility to adjust to every startup's needs.

Maybe just one more thing because it so far has not been mentioned so much. Why would a startup do a media for equity deal, apart from the access to media groups’ knowledge in the local markets? It's also about quality and price. All of the people sitting here are really working very, very hard to provide startups with a super price, super value and fantastic quality.

And for us, it's always very interesting because we like to consult the startups that we're talking to, but at the same time, we like the startups to have exterior advice coming from the industry about the value of our deals. Because if they hear it from somebody else, like an agency or from a media consultant: this is a good price, this is a good deal, then we feel confident and the startup feels confident that it's a good deal that's being done. 

So we are actually encouraging our companies that are talking to us to get outside advice about the quality and the pricing of our media deal.

Diana: A lot of companies are spending money on digital and in fact on the panel earlier this morning, we looked into a research where almost 40-50% of their spend actually goes into marketing spend for a late-stage company.

But what I normally get from a lot of founders that are doing media for equity for the first time is that they come to evaluate the deal with a preconception or the misconception that they need to understand what they get in terms of cost per click, the same way as they were looking at when they were doing a digital campaign and trying to probably cross reference that to channels like even probably TV or more traditional. Immediately not comparing apples to apples. I know you were part of some of the deals and you joined later on, but if you were to do a deal now, even maybe from your previous experience, what does success mean to you as a founder, as a startup, and what are you looking at to basically say, look, this deal, it was successful to me, or maybe I'm not sure I would reconsider or think about this again.

Antoaneta: I think Niko started to touch on this. Initially, the first thing that a person thinks when they're cutting a media for equity deal is: I am getting free cash to spend on media and I'm getting this media at a discounted rate. And that matters and that's important, but it gets even more important to measure as the deal progress.

What you're getting us questions is very valid. We have the same: we are a very data-driven company, and for us, it's important to measure the ROI of a particular deal regardless of whether it's TV or performance marketing. And from our experience, it has mattered a lot to have the ability to measure all of these channels.

For example, we're running a TV campaign. We want to have attribution to those installs, we want to know how many people installed our app when they viewed the TV ad, otherwise, how would we compare which ad works better, and which placement works better? If it's better to invest in TV or radio or print. There has to be a way. 

Diana: What worked particularly well for Smule in that case then? 

Antoaneta: Well, for example, for TV we did integrate with our attribution partner, our MMP, we used Adjust. We integrated the media for equities they’re tracking, of their airing schedule with Adjust, our attribution partner. 

They were tracking the incremental installs over, let's say the 10-minute period post airing schedule, and then we calculated ROI. We were able to exactly track who installed the app, how much they spend on the app, and measure ROI. And of course, it's more than what you would see from performance marketing. The cost per install is higher, but still, you have a baseline, you know, how higher it is. And then eventually in the longer run, we were able to see that after spending some time on traditional media, our CPIs on performance marketing are dropping. So obviously it's not just brand awareness, it also translates at some point to something that is tangible to more likability by the audience and then better perception, more incentive to download the app and then pay for it eventually. It does work, but it's important to track it. It's important for yourself and for your media planning. It's important for your investing partner, obviously, as well, because you are together in the same thing. You're both interested in having a successful outcome and if you're able to optimize, even if it's not just comparing to the rest of your media, but just among this media. It's still very important and it's also important to your board members.

Diana: I think TV has a great multiplier effect on any other channel and it makes other channels work much harder, but also translating that into a digital word, you've seen already some cost optimization in terms of your installs.

Niko: If you're a startup and you're striking a media-for-equity deal, I think there are two things that are important: 

One is that you're able to optimize while the campaign is on air, so you're getting data in and then you can change the media plan. And most media partners I know allow changes of media plans in flight to adjust the media plan as you go along and make it better and better, because no media plan is perfect at the beginning. Obviously, there is a lot of hypotheses, and then you just adjust it and, and improve it. 

And the second - we would always recommend having a deal in tranches so that you have a first tranche of whatever, a million, for example, euros. And after you use that, you still have a point where you can decide, whether are you going to go for a second tranche or a third tranche. That way you're lowering the risk with the media deal and at the same time, it should be big enough at the beginning so that you actually can see how is the media performing. If you just take a tiny slice, you will never see how television works. You do need to invest in television before it starts to work.

Antoaneta: We start actually testing before it's even on TV. So in our experience, we shoot a TV ad and then we do different cuts and we test on user acquisition channels like Instagram, let's say. And then we see which performs better and believe it or not, it also is a very good predictor of what will perform better on. That has been our approach and it's been working super well for us. 

Diana: Greg, as a growth manager and someone that thinks about growth, you've done a few campaigns  that were cross country, but also from the UK going into places like Vietnam, Asia, India. I mean, India is such a multicultural market. What are the things you wish you knew back then, or what are the things that maybe are not so obvious when you do a media for equity deal that you should probably think about before you do it?

Greg: I think the first one is: you want to make sure that the media owner is on board with your vision and that they believe in your product and that they think it's a good fit for their market. What you don't want is a media owner who is looking to place a bet on some remnant inventory because they've got some spare inventory, let's try and make some money out of this.

The Times Group, for example - from day one, they took us through all of their properties. They really gave us all the education that we needed to launch into this market that frankly we didn't understand, and they do have a lot of different media channels. They were on board from day one and really cared about our growth. So I would say, first off, make sure they're in it for the right reasons. 

I think secondly you wanna make sure that the channels within the company are a good fit for you. Niko mentioned price, obviously, that's important. It’s great to get a good deal and get huge amounts of value, but you have to make sure that it’s a good medium for your startup. For example, we didn’t do radio with German Media Pool because we all agreed that it wasn't a good fit for us. So just because it looks like a good deal in the numbers, make sure you really kick the tires on it and, and think that, okay, is this gonna be a good deal for us as a company in this market.

Diana: I’m curious in terms of creators: you have the ad campaign in the UK, which got many awards, but I've seen many of your ads. I think there is a pattern of having some bit of humour, and irony in those ads. Is that something that just works for what3words or what have you actually seen that really stands out in terms of creatives?

Greg: It depends on where we're at in the market. So in the UK now, you're right, we started going down this humorous route, and I think that's because most people, not most, but about 50% of the people in the UK have heard of what4words and they understand the whole kind of 57 trillion square thing. In markets like India or in Germany, we've had to go back to that and educate what we are first. Now, in the UK it’s less about this is the product and this is what it does and it's more around, if anyone's seen the ad, it's an old lady stealing this younger guy's post. And so we are now starting to feed in that we are not just for if you twist your ankle in the woods, you can call the emergency services and give your address, we are being used by huge delivery companies like DHL, DPD. Other ads in the future could involve some of our other partners like Mercedes or Subaru. We are in loads of car satellite navigation system. So the creative just depends on where we're at in each market at that time.

Niko: The creative is so important. And I think that television has one great ability to do storytelling, and it's especially good for startups because startups often have to explain what is unique about them, what their service actually does because oftentimes these are such innovative things that people don't use them every day yet. Through a TV ad, you really have the potential to talk about your product and your service in a way that you can't in many, many other forms of marketing. So it's very powerful. 

Sheena: Some of the most iconic ads that actually do so well in terms of really building kind of brand awareness and affinity are ones that have just focused on either just being funny or being emotional or just building a real connection with that end viewer that then ultimately becomes a customer. They don't have to necessarily be kind of really focused on explaining the product proposition. It's more about actually as Niko says, utilizing the benefits of TV as a highly rich audio-visual format to just speak to a consumer on a very base level. 

Greg: These guys are demonstrating right now the third thing that I would look for in a media for equity partner, which is expertise and preparedness to give you that expertise. You know, from day one, are they going to sit down and really help you with the media plan or are they just going to give you a ton of spots and let you do your own thing? 

ITV, for example, we got direct access to the people that were literally moving the spots around, they were telling us what shows will be a great fit for us and we had done our first trance with ITV through an agency actually. And then we did our second trance direct. What I could say is we got a lot more out of the second deal. We saved money because we didn't have to pay an agency and actually we were just hearing everything from the horse's mouth. That's another thing that I would look for, where possible, to try and work directly with the media owner and if they're prepared to offer that level of expertise. 

Diana: Can I just challenge you on that? Because I mean, obviously you've already done the deal with ITV beforehand, so this was the second round. But as a founder, do you feel the need to have an external agency or auditing firm to say, look, you are getting the right market value for this?

Greg: I think yes and no. So the German Media Pool deal as Niko said, there are lots of media owners in there and there are lots of media that we don't have expertise in internally. And so we did need some help. So we did work with an agency in Germany.

But with a single TV deal in the UK, we’ve got expertise internally. We have got access to media agencies that we can kind of speak to, even if the whole deal doesn't run through them. So, I think we always need to be confident that it's a good deal, but every deal is different. 

Diana: Media for equity at the end of the day is part of the broader venture capital landscape or funding option landscape. I want to go back to Neha because you've worked closely with so many companies at Times of India Group. 

I get asked by a lot of founders, what should I know or what should I consider when I go into a media for equity deal, am I at the right stage, am I the right fit for this funding option? What have you seen in terms of stages of growth or industries that work particularly well for you and for them?

Neha: I think each sector is different. Post-pandemic - the way we consumed media today is very different from what we used to do earlier. You would sit on a television at a certain time to watch a certain show. Right? Now you've got so much content on television, there are so many ways for you to be entertained, get your news information and all of it.

So are you ready for a certain market? First, you need to have a checklist of, whether is my pricing right; do I have to explain this product and spend my media just to educate the market or am I going to be able to scale up the product or service? I'm at a stage of series A-B, I'm at a growth stage where I can invest in my product if I have to localize it into multiple languages. For India specifically, and even for the Times Group, we are in this together. Like I think Niko and Sheena also touched upon television - you have television as a beautiful way to explain a product or a service. India has multiple media platforms like radio. You listen to it and you get excited with sound or you’re looking at a newspaper, you smell the newspaper, you're looking, you believe in it. You trust in it because that's the medium you've grown up with. For us, it's always the right media, but also is the company ready for India? 

We have postponed campaigns. We do not prefer media getting burnt if you're not ready. We like to divide our campaigns into phases. We start with the phase one experiment, as Greg mentioned for what3words. We went into phases: first, we educated about what3words to understand each of our platforms. We customized each of our solutions and then we said, are we even ready for television? Are we ready for going outdoors? Because yes, we wanted that huge noise to be made in airports, on billboards, on every airport that anybody would go you would see a what3words ad or Smule if you are actually listening to a music awards, you see Smule everywhere, every radio listener is listening to it. So targeting the product with the right platform is what our job is, but we also prefer that the company goes with it because we understand the India market and we want to do this journey together.

Sheena: I think that's such an important point. We always say to founders: make sure that operationally you are ready to scale when you go live on TV. And that's an area that we spend a fair amount of time really diligencing and understanding and getting comfortable with. Sometimes we have walked away from deals or postponed deals because we just think actually, you get one chance to launch on TV and you want to make sure that you are in a position to genuinely maximize the customer demand that you're able to get, but also that it's a really positive customer experience and that you're building a really strong brand on the back of it.

Niko: In essence, what is media for equity? Media for equity is media groups supporting startups and entrepreneurship. And one of the best things that can happen to any economy is entrepreneurship, because of innovation. So it's this is all goodness in my view, what we're doing. I'm very happy about what I'm doing every day when I get up. 

Diana: I think that's a very nice way of ending the panel discussion as well. There were loads of other things to chat about if you enjoy the conversation, if you like the topic, there's an entire report which features many more other funds and startups. Thanks so much for listening.

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