What is Media for Equity?
Media for equity is an alternative investment model used in the world of venture capital. The media for equity model is different from conventional methods of financing due to the fact that it does not involve the direct funding of a startup. Instead, a startup obtains extensive media coverage (i.e., certain forms of advertising in the media space) in exhange for offering shares in the company to investors. Thus, the primary investors in the media for equity model are media companies.
Advantages of the Media for Equity Model
While successful marketing campaigns provide huge benefits to startups by helping build a customer base and raise awareness about the company among potential customers, they usually cost a lot and require professional advice. Thus, the media for equity model is beneficial to startups as it allows them to acquire advertising for their products or services without spending money, as well as providing professional support from the media company to run marketing campaigns.
At the same time, the media company that participates obtains shares in the startup that can lead to lucrative returns in the future.
Note that the media for equity model cannot be used as a primary or standalone method of financing. Instead, the model is often utilized between conventional rounds of venture financing. The model can be used to scale the business operations of a company, as well as to strengthen its performance to attract investors for the next round of venture capital raising.
Who Can Use Media for Equity?
Unlike conventional venture capital models, the media for equity model is not suitable for every company. Generally, the model can be used by companies that already have a product or service ready for sale to customers, as well as stable operations. At this stage of business development, startups aim to scale up their business and build a customer base. In other words, they are looking to attract as many new customers as possible to boost their revenues.
In addition, a startup that is willing to pursue the media for equity model must formulate a clear marketing strategy that determines the exact channels that will be most helpful in attracting new customers.
Finally, the model is suitable for companies that provide business-to-consumer (B2C) services.
Thank you for reading CFI’s explanation of the media for equity financing model. CFI is the official provider of the global Financial Modeling & Valuation Analyst (FMVA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional CFI resources below will be useful: