DMG Ventures has announced two new $32m funds that will use media for equity arrangements, an increasingly common investment strategy.
DMG Ventures, the investment arm of UK media company Daily Mail and General Trust (DMGT), has announced two new £25m ($32.4m) funds which will invest in European and US startups. Both will make use of media-for-equity arrangements, where the venture fund will offer startups advertising or sponsored articles in return for an equity stake.
The Headline Fund will target startups between seed and series A, while the second, the Scale Fund, is for more established startups. The Scale Fund has already made two investments, into Trip, a UK maker of sparkling drinks that contain CBD, and Blue Stripes, which makes cacao-based products by reusing the fruit that is wasted by the chocolate industry.
Launched in 2018, DMG Ventures has invested in 31 companies, including names such as Zoopla, the real estate company. It was an investor in Cazoo, the used car marketplace that went into administration earlier this year, but the announcement of two new funds underscore’s the company’s commitment to investing in startups.
Catching the media-for-equity trend
The two new DMG Ventures funds come amid growing interest among media companies for offering media-for-equity deals for startups. In August, GCV reported that the media for equity services provider MediaForGrowth had seen a “surge of activity” with media companies and funds adopting the method.
The arrangement can be beneficial for both the investor and the startup. Young companies, particularly in the consumer sector, can use it to gain free or discounted media exposure from their backers, allowing them to save on their advertising budget and immediately reach a large audience. DMG Ventures says its media team provides strategic support for working with DMGT’s media publications, which include the Daily Mail, MailOnline, The Metro, The i newspaper and other titles.
At the same time, the media company achieves two things. It builds a relationship with the startup that could see them develop into a high-paying customer for advertising further down the line. And the exposure generated for that startup encourages its competitors to advertise with the media organisation too to stay relevant.
The flagship Indian newspaper Times of India, which adopted media for equity financing two decades ago, credits this effect with helping it to maintain increasing advertising revenues. In turn, it has used the higher revenues to offer a more competitive subscription price. This is at a time when other traditional newspapers, notably in the US, lose out on advertising revenue to the large tech companies, Amazon, Meta and Google.
