Startups nowadays are constrained mainly by three significant gaps: the knowledge gap, the marketing gap, and the funding gap. Does this make a case for why media should be more widely considered as a driver of innovation and startup growth?
According to the Romania-born Diana Florescu, founder of the first global network that backs founders to grow revenue and scale internationally using the power of advertising, mediaforgrowth, it surely does. She explains that as a concept “Media for growth” (also known as “media for equity” or “airtime for equity”) is a financing option that provides founders with advertising such as television, print, radio, and online, in return for equity. As an investment model, it is dedicated to startups or scale-ups which do not have high marketing budgets and because of that, they trade equities to media companies in exchange for advertising space.
Today mediaforgrowth, a startup that operates in an environment with many innovation stakeholders, releases its “The State of Global Media for Growth Funding’‘ report in order to provide a comprehensive analysis of the media for equity ecosystem.
The report reveals that 1000+ start-ups have raised media for equity funding to raise brand awareness and scale without spending cash. Additionally, media for growth-backed startups are reported to raise on average 3 times more funding than other startups.
“With uncertain times worldwide, it’s understandable that taking risks in a new venture doesn’t appeal to everyone. For startups facing a new reality, a good place to start to reevaluate is their growth rate. The new view of growth is not at all costs but at a reasonable cost. At mediaforgrowth we help ambitious founders tap into complementary funding options to VC funding such as “media for equity”, while 1 preserving cash reserves and reducing dependency on raising new rounds of funding,” Diana Florescu explains.
However, despite the impact of media for growth, by and large, the founder, investor, and media community in CEE are not sufficiently aware of this investment type.
To identify the opportunity for regional innovation stakeholders, and define which are the most widely held beliefs holding back the adoption of media for equity, The Recursive reached out to Diana Florescu.
The Recursive: Would you say that the CEE innovation market is ripe for the opportunity to benefit from media for growth?
Diana Florescu: I believe media for growth funding can be successfully implemented in the CEE region. As with any shifting tide, there’s a series of factors contributing to the success (and failure) of such investment types.
First, a vibrant startup community and access to risk capital: CEE startups took home €5.4B in funding last year – double the investment compared to the year before according to a recent Vestbee report. However, capital in CEE (particularly at growth stages) used to be scarce and so CEE founders had to adapt to meet market conditions. Our region is particularly defined by high-growth, low capex, scalable business models (B2B SaaS) targeting 7-8 years exits to attract VC funding. Out of the 34 unicorns that have been created in CEE to date, only 8 (24%) operate on a B2C model.
Media for growth funding favors certain types of businesses and industries. According to our latest study, 70% of the startups that raised media for growth funding operate on a B2C model. Consumer brands have longer time horizons and don’t fit the time horizons of VC fund lifecycles typically. Founders in this domain need to think about playing the long game and building enduring businesses that are built to last. The right media landscape and size of the total serviceable market also matter. A key factor that can directly have an impact on the adoption of media for equity investments is the size of the consumer market, access to the Internet, and their willingness to embrace new technologies.
TV rules the CEE ad market. In countries such as Romania, Poland, Bulgaria or Croatia the share of people watching TV on a TV set every day exceeds 80%. Most TV stations do not struggle to fill up inventory, in fact in some markets such as Romania, TV inventory is saturated allowing media broadcasters to charge a premium. This is an important aspect when considering how media for growth funding started in the late 90s. It was a great incentive for some of the largest publishers in Germany such as ProSiebenSat.1 Media, which at the beginning followed the unsold inventory strategy. They saw an opportunity to diversify their revenue streams.
How to identify if media for equity is a good option for a startup? Do the industry, stage, or geography play a role?
By analyzing 382 unique investments completed in the last two decades, we were able to identify several common traits defining the “ideal’ startup profile for this type of funding:
The top most popular industries are E-commerce, Digital Health, FinTech, Food and Beverage. The majority of these companies were at Seed or Series A stage, and 31% operate on a B2B or a B2B2C business model. Some of the world-leading brands have raised media for growth funding.
There are several factors that startups should consider when assessing whether media for growth funding (particularly TV) is appropriate for their business. First, is their target group large enough? If the business targets a niche group, it is probably more efficient to think of a niche medium. Then, their geographical presence. If you are only present in the big cities, you may end up paying for the total country reach, not only wasting part of your marketing effort and resources but also disappointing users from smaller towns.
Which media for equity funds are targeting CEE founders?
Any founders looking to scale in the DACH region, Nordics, France, and the UK can tap into media for growth funding. At mediaforgrowth we have a healthy partnership with most of the media funds and outlets across these regions. We are in talks with one of Poland’s largest media networks and looking to establish more collaboration with publishers in CEE in the year to come.