One of our recent cases, ShowHau Center, includes an investment called media for equity. In this blog post we'll briefly cover what media for equity is, when it works, and how it functions in Invesdor funding rounds.
What is media for equity?
Media for equity is an alternative investment model that has been used in Europe since the late 90’s, by many growth companies such as Zalando.
The basic idea of media for equity is simple. In exchange of company shares, a media company – or a fund combining media inventory from several media owners – offers advertising space for the growth company to be used in their marketing. In short shares are not paid for in cash, but in advertising space such as TV ads.
Typically growth companies using media for equity are on their scaling or growth stage - the product is already in the market and paid media is needed to scale the business faster through rapid building of brand awareness.
Media for equity doesn’t have to be limited on traditional paid media, such as broadcast TV, radio or print. One can do media for equity deals with all partners in the paid-owned-earned-partnered media ecosystem, such as retailer partners, bloggers or event organisers.
When does it work?Media for equity isn’t for everyone. Here’s a summary of when to use media for equity to fund business’ growth.
- Product ready and sales started
- There is proof that increased marketing can grow the business
- You have a clear marketing / media strategy in place
- You have additional funds so you can fund other areas of the business
How does it work in Invesdor funding rounds?
These investments are added to the funding rounds just like cash from traditional equity investors. The media-for-equity investment process is fully integrated with our standard investment process and investments are taken into account in the progress bar of the funding round.
Technically the addition of a media for equity investment is done as its own share issue. The terms of the media for equity issue and the normal share issue are identical in all aspects except for the payment terms and subscription period. This is because in a media for equity investment, the payment consists of media space, such as TV ads, which cannot be paid all at once.
At Invesdor, we believe that media for equity type of investments can bring added value to many growth companies by speeding up their growth. Thus, we’ve started to co-operate with media companies, media for equity funds and marketing agencies that can offer media for equity types of investments. Expect to see more of these growth boosters in future funding rounds!