What is Media for Equity and why is it important for startups?

What is happening to traditional media? Is it indeed outdated or did we just not learn how to work with it yet? Vinay Solanki, head of Channel 4 Ventures, says that startups nowadays have three significant gaps: the knowledge gap, the marketing gap and the funding gap; learning how to play with the marketing piece can solve the puzzle.

What is happening to traditional media? Is it indeed outdated or did we just not learn how to work with it yet? Vinay Solanki, head of Channel 4 Ventures, says that startups nowadays have three significant gaps: the knowledge gap, the marketing gap and the funding gap; learning how to play with the marketing piece can solve the puzzle.

What is media for equity?

This alternative business model is dedicated to startups or scale-ups that do not have a considerably high marketing budget and basically „companies trade equities to media companies in exchange for advertising space”. The media companies end up owning equities but instead of money they offer advertising, the goal being reaching the widest possible audience.

The equation is simple: media space = company shares.

(image source Media for Equity: An untapped investment model for broadcasters and startups in Central Eastern Europe, Grai Ventures)

Media for Equity investment funds can aim for shares from 5% to 15% in exchange for a certain period of media plan implementation and usually they come as venture arms of big media corporations.

The evolution of media for equity

As revolutionary as the concept might seem, paying with shares for media exposure actually originated a long time ago, in the early 2000 there were already a few investment funds that were using media to help startups grow. Firebox was one of the first startups that used the media for equity strategy right from the start and today earns millions of pounds per year.

As the trend grew nowadays there are a big variety of media funds and TV stations with corporate funds and the media sold spread from TV space to radio and outdoor advertising. A good contemporary example could be ABOUT YOU, one of the fastest growing fashion-tech startups in Europe, valued at more than 1 billion dollars, launched in 2014, started using media for equity in 2016 which brought them national exposure and pushed them to expand internationally.

The collaboration for media for equity

In order for media for equity to work it needs the active collaboration of multiple stakeholders: the startups, the venture, the media companies and media agencies.

Vinay Solanki (head of Channel 4 Ventures), Marta Zuska (head of BD at NextTECHnow), Dennis Ahrling (principal at German Media Pool) and Chris Sheldrick (co-founder & CEO at what3words) sat down together at a panel to discuss the model of media for equity, telling the story of their own experiences in this field, organised by Grai

The first concern that was raised is that oftentimes companies do not invest enough in awareness marketing out of the fear of being too expensive or hard to track, there being a certain „it may not work” culture. 

That is where media for equity steps in, since the startups do not need to invest money they don’t have or money they can potentially lose and the investors are also more interested in the highest exposure possible so that the startups can actually succeed.

There are two types of media for equity investors:

There are more ways in which a media for equity company can operate: some of them do not get involved in the creative and strategic part of the campaign, startups rather work with media agencies, but they do offer feedback along the way. While others are involved in building the media campaign from the beginning.

Why use media for equity?
  • The variety of startups they can work with is extremely broad, it could work for mainly anything in B2C;
  • Media mix, using several channels at the same time to reach the audience - startups could choose from media partners depending on their need, from TV to billboards or radio.
  • Expert media planning and adjustable advertising - the plans can be changed over time, till they achieve the goals;
  • High quality media.
Why not?
  • It is not a model for every kind of startups, it is more suitable for the B2C type of businesses;
  • When a startup receives money for equity there is a higher flexibility in how to use them while in this case they only have media capital. 
  • The model is not fully adopted in many countries.

Main takeaways

Media for equity can be very effective: you get access or buy media, just like any other buyer, but instead of paying with cash you pay with shares and we dig around to see if that is fair and create the risk profile. We are a lot like a VC fund, we are looking for making equity returns. But we are creative, flexible but also pragmatic. Our main job and differentiator is to really find companies that can benefit from this model.” - Vinay Solanki, head of Channel 4 Ventures.

Chris Sheldrick on the other hand is one that benefited directly from the media for equity model, what3words gaining a high national exposure, they wanted to be present in the mind of every single consumer and they managed to. He says that a company gets a lot of credibility when using this type of advertising. “It’s definitely been a great experience for us”.

*The event was powered by Grai Ventures, a digital media and venture building company, that conducted a European study on the matter of media for equity.

**The full whitepaper is now available to download here

 


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