Executive summary and key findings

Media companies have experienced transformation and growth rates higher than most other industries throughout their existence. With the rise of companies within information services and new business opportunities enabled by digital technologies, and after the last twenty years of media and telecommunications convergence, it’s no surprise that we now have media-for-equity investments.

This report addresses these details by examining how the media-for-equity model works globally. The report also contributes to the growing space of research and documentation of the model across all possible regions and media sectors.

Since we published our first insights report, The Rise of Media-for-Equity as an Alternative Investment Model, mapping the landscape of European startups and media funds, we have experienced increasing interest in this investment model from media companies such as CNN Turkey and Sanoma Media Group, global VC funds mainly based in Europe, but also in the US and Asia, and B2C companies, interested in understanding more about the model and how they could apply it in their growth strategy.

The report has been well received and positioned Grai Ventures as a knowledge partner and possibly the only organization to conduct extensive research on the media-for-equity investment model. The findings reached readers from 19 countries and received over 50+ noticeable mentions.

The fascinating effect of the report is that it encouraged other media experts to take the first step toward launching their funds.

Grai Ventures became a trusted advisor to some amazing companies, including what3words, which recently closed a $10mn media-for-equity deal with Brand Capital International and $66mn worth of gross media volume from Berlin-based independent media-for-equity fund German Media Pool VC to expand to the German market. What3words, at the time of publishing this report, is also in advanced conversations with leading media companies from Mexico and Southeast Asia.

NSC Comunicação’s Director of Product and Operations, Brunot Watte, has featured Grai Ventures’ report data in the first-ever published academic paper on media-for-equity, Bruno’s Ph.D. thesis.

While the media-for-equity startup investment ecosystem is on the rise and maturing, knowledge of the startups’ performance and the underlying business drivers is limited.

We believe the time is right for such a project and organization despite the challenges associated with this task. Grai Ventures’ spinoff organization Borderbridge embarks on a journey dedicated to giving media-for-equity a voice and better recognition for the performance in generating sustainable and profitable companies worldwide. Borderbridge’s mission is to empower the media-for-equity model to succeed in any form and reimagine global scaling.

In our second research initiative, one of our findings shows that since 2000, more than 1,000 companies have raised media-for-equity investments. In this report, we documented and analyzed 793 investments. We spoke to founders who completed such deals to understand more about the benefits and challenges of accelerating their growth through advertising in exchange for an equity stake in the business.

This report aims to highlight the media-for-equity investment funds and deals worldwide. We have partnered up with key organizations from specific global regions, and we have built an analysis of the infrastructure of a non-European media-for-equity deal.

‍The Global Media-for-Equity Report is designed to benefit the broader investment space as we reveal global data-driven insights on media-for-equity investments. With the new findings, we hope to ignite further dialogue across the startup, investment, and media ecosystem with equal importance.

This report aims to help later-stage investors, corporate funds, and venture capitalists gain insights into this growing space.

Finally, we hope the report will contribute to adding media-for-equity investments to the global investment landscape, give it the recognition it deserves, and demonstrate why all stakeholders need to contribute to the acceleration of the space.

Why this model, and why now?

In assessing the current state of media-for-equity, you could wonder why a more widespread uptake is hard to occur. Such questions are not new. However, one of our key findings is that 60% of the deals were made in the last five years from the dataset that we analyzed. Solely following this finding, we can claim that media-for-equity is growing in popularity, and the model sees wider adoption.

We agree that the struggle for faster model adoption occurs within the regulatory framework, internal innovation and corporate development strategies, consolidation of media, and, ideally, a single global point-of-media-buying channel.

Although the last few years have been positive for startups, with historically low-interest rates and high investor enthusiasm for digital-driven services leading to an investment boom worldwide, major media companies continue to bet on media-for-equity deals despite the capital markets slowing down. The model has stood the test of time through both bullish and bearish economic periods, as it is versatile enough to be applied in both scenarios.

Today’s trends of diversification in media platforms, media consumption, access to media, legal frameworks, fragmentation of media, and consolidation and centralization of media are macro-changes that continue the positive growth of media-for-equity adoption on a global scale.

We have discovered that by making the model’s performance visible and giving it the press attention, it deserves when the deal occurs, founders and media companies became increasingly interested in learning about it and adopting it. Specifically, raising awareness of the fact that this model has shown great promise and effectiveness in developing international companies, has a great impact in the worldwide adoption of the model.

The model becoming more accessible, marketing executives will have greater flexibility when allocating and optimizing their marketing budgets regardless of their industry, and bring media-for-equity to the marketing mix.

Media-for-equity is here to stay, and it will continue to be a niche investment mechanism applicable to only a few companies in the global economy.

The organizations conducting critical media-for-equity studies will likely contribute to changing and influencing how the private equity and venture capital investment landscape will adopt the model.

So far our study has shown that a media-for-equity round is very much preferred by private equity and venture capital investors, as a bridge round, this leading to better company performance and valuation.

Key findings

01.

Media-for-equity investments play a critical role in generating unicorn-stage companies. We identified 26 unicorns where this model has had a differentiating input in the company’s growth and valuation.

02.

B2C investments are leading at 76.7%, B2B2C at 15.5%, and B2B at 7.8%. There is a high degree of alignment between the 2021 and 2022 report.

03.

Media-for-equity investments are 3X higher than VC investments at the seed and early stage funding.

04.

Seed, Series A, and Series B companies make up the majority of media-for-equity investments, with 62.8% of the total investments.

05.

In the last three years, 10 new media-for-equity funds have been established, representing 20% of the total media capital funds we have identified and documented.

Increase in popularity and adoption: 60% of all the deals were made in the last five years.

07.

40% of companies that have made a media-for-equity deal were between Series A and Series D.

08.

Based on our new data set, the research continues to show that the majority of companies, 84%, founded after 2010 and traded equity in exchange for media, are still active today.

09.

Of 700+ companies, 11.6% have been acquired or started trading publicly, demonstrating positive returns to media investors from media-for-equity.

10.

We have identified 20+ companies that are on the path to becoming unicorns in the next two years due to past media-for-equity deals.

11.

There is a high degree of alignment between the 2021 and 2022 studies on the seven most essential decision criteria attributes, with boosting revenue growth now the most valued attribute, followed by the second most chosen, expanding to new markets.

12.

Media-for-equity investments are critical for upcoming B2C companies to become international brands. With examples such as Glovo, Rappi, Zalando, what3words, Job Today, Alta, and Olist, among others, media-for-equity is a validated and performant strategy to become a global company.

13.

There is still a significant gap between perceptions of media-for-equity performance and those of traditional VC investments, but our evidence proves that this is changing, and the model is finding its place in the investment landscape.

14.

The media basket offered as an investment is becoming more diversified, which is a direct result of the global diversification of media.

Executive summary and key findings.

This report addresses these details by examining how the media-for-equity model works globally. The report also contributes to the growing space of research and documentation of the model across all possible regions and media sectors.

This report aims to help later-stage investors, corporate funds, and venture capitalists gain insights into this growing space.

Why this model, and why now?

Today’s trends of diversification in media platforms, media consumption, access to media, legal frameworks, fragmentation of media, and consolidation and centralization of media are macro-changes that continue the positive growth of media-for-equity adoption on a global scale.

Key findings