Latest research shows European startups who have traded equity for advertising register a 9x higher survival rate than the industry average (press release)
A New Europe-wide study conducted by Grai Group reveals the evolution of “Media for Equity” as an effective investment model to finance “direct-to-consumer” startups and a promising revenue solution for TV broadcasters facing digital…
A New Europe-wide study conducted by Grai Group reveals the evolution of “Media for Equity” as an effective investment model to finance “direct-to-consumer” startups and a promising revenue solution for TV broadcasters facing digital disruption. Media for Equity is an alternative business model where companies trade equity to media groups in exchange for advertising space. Simply put, it's an exchange of advertising for a share in the capital.
- The total volume of “media for equity” deals has increased by 950% in the last decade compared to the same previous period
- The most active broadcasters in Europe include Channel 4, German Media Pool, ProSieben, and Mediaset
- Grai is hosting a global online event on April 27th to discuss Media for Equity as an untapped financial model in Eastern Europe
The growing prevalence of Media for Equity in Europe
34% of startups fail because they lack a product-market fit whilst a further 22% do so because of little understanding of marketing strategies and how the media works*. To advertise their business, founders often rely on digital marketing, as an affordable and accessible medium.
However most “Direct to Consumer” startups need to reach out further to get new customers, and traditional advertising such as TV is too expensive for a young company. The average TV ad for a 30-second commercial on a national network was priced at €100,000 in 2020 excluding production costs, according to a study by Ad Age. A recent Invest Europe report shows that the average VC investment per startup in CEE reached €0.9 million in 2019 but still remained far below the European level of €2.3 million**.
As a result, a new financial model called “Media for Equity” has started gaining prominence. The study reveals that since 2010, 149 startups have adopted M4E as a cost-effective way to gain broader visibility and reach mass markets via TV, Out-of-Home, print, and radio advertising.
The research showcases examples such as Zalando, a German fashion retailer startup, that has made a Media for Equity deal with investment fund SevenVentures. SevenVentures invested in the company in the form of advertising in 2009. Zalando’s sales skyrocketed from $6 million to $1.8 billion by 2013, a 29,900% increase in revenue in a matter of just four years.
Can startups grow without venture capital?
Grai’s report shows that a media for equity deal can yield the best results for both the startup and the media group if done as a complementary financing option to traditional VC. The research reveals that a staggering 87% of the startups founded after 2010 that have traded equity in exchange for “airtime” are still active today.
