As startup pitch competition prizes go, it’s not too shabby: €7 million worth of TV ads. But then the sponsor, SevenVentures, can afford it as the venture arm of German media giant ProSiebenSat.1. The lucky seven finalists will compete for the big payoff at the NOAH conference in London later this week.
SevenVentures operates a media-for-equity and media-for-revenue model when it comes to investing in startups, and its CEO Dr. Christan Wegner spoke to Silicon Allee about its plans to take the business model beyond Germany.
Seven finalists, whittled down from more than 300 applicants, will fight it out at the pitch contest on Wednesday: German startups BonaYou, Capsule.fm, Stuffle, wynsh and wywy as well as London-based busuu and Cooliris from Palo Alto. The jury, meanwhile, consists of ProSiebenSat.1 CEO Thomas Ebeling, Sonali de Rycker of Accel Partners, HackFwd’s Lars Hinrichs, Philipp Freise of KKR, seedcamp founder Saul Klein, Jörg Klein of Access Industries and, finally, you the public: The pitch day will be broadcast live online with viewers across the world having the chance to vote for their favourites.
The SevenVentures model sees the investor take equity in large-ish startups in return for providing media – TV ads for the most part. It has been extremely successful in Germany, according to Dr. Wegner, and the company is now looking further afield: “What we have found out over the last three years is that the potential is very good for startups at growth stage to scale fast and increase their margins with a higher-branded product. Now [we want] to bring this model internationally by using the NOAH conference where international VCs and entrepreneurs are participating… That is basically the idea behind this, to bring this German media-for-equity model to a broader audience.”
The model works best with startups which already have a settled product and distribution network, are two to three years old, earning some revenue and have a clear B2C focus. Dr. Wegner added: “They shouldn’t be copycats, and they shouldn’t be incubator-based models – we are looking more for entrepreneurs with really innovative and disruptive ideas.”
Making a Big Splash
The finalists will have the chance to present their business ideas to the audience at NOAH with a short presentation, followed by a Q&A session. Whoever wins will be looking to make a big splash on the German market, as Dr. Wegner explained: “What we are doing and where we make a mark is really bold campaigns – take for example Zalando. It’s a company with a huge advertising [presence] in Germany; I assume you have seen the trailers on TV. And these are the kinds of companies that we push with big campaigns to make them really [stand out].”
SevenVentures has invested in around 40 companies over the last few years, with more than 300 on the ‘long list’ of interested startups. Its portfolio includes preis24 and opodo as well as Zalando, which has been one of its biggest success stories: “They are a market maker that many others online companies are saying, well if it has worked for them, we should also try it.”
The popularity of the media-for-equity model is growing in Germany, with other players including the German Media Pool. And it’s the unique structure of the media market in this country, according to Dr. Wegner, which makes it work: “In Germany we are allowed to sell 12 minutes of advertising per hour. It’s a legal restriction. And then the price is defined for the 30 second spot. That’s why we have idle ad capacity which in the past we have simply not used. Now we use this idle ad capacity for selling the different revenue models for different audiences. That’s why it’s kind of special to Germany.”
But the company firmly believes that it can work internationally, hence reaching out at NOAH. It’s true, of course, that the model only works for certain type of companies, but Munich-based SevenVentures plans to increase the value it draws out of its media while acquiring five to six companies per year with the aim of creating its own ecommerce cluster.
Firstly, however, one startup will be leaving London with more TV ad time than it probably knows what to do with.
Update: London-based busuu won the contest and the first prize of €4 million worth of TV ads, with wynsh second (winning €2m) and Capsule.fm third (€1m).