For some startups, ‘stepping on the gas’ equates to orchestrating a media blitz, but VCs aren’t always happy to see the bulk of their investment thrown at online, print and TV advertising. Instead, they tend to favour other areas of expenditure, such as head count and technical infrastructure. In situations like this, a far less common — but potentially more favourable — form of startup funding is a ‘media for equity’ type of deal where a media company subsidises the required ad spend through the use of its own media properties and the relationships and buying power it has through economies of scale. The UK’s OpenRent, an online renting service that operates as an alternative to traditional renting agents, has secured such an arrangement.
Billed as a “multi-million pound” investment, the London-based startup has received media backing from Northern & Shell Ventures, part of the independently-owned UK media group which operates Express Newspapers, The Health Lottery and OK! magazine (and, until very recently, TV station Channel 5). The partnership sees OpenRent kick off a national television advertising campaign and other media reach via N&S publications, in a bid to significantly increase the number of new landlords utilising its platform.
“OpenRent has been profitable from about Jan 2013 – whilst our margins are extremely tight, we didn’t need cash to expand infrastructure or build a huge team, we just needed exposure to landlords,” co-founder Daz Bradbury tells TechCrunch. “A VC is much less likely to spend money on advertising alone, but more importantly, with this setup we get a substantial discount on the media spent, as our deal is directly with the media owner.”
Founded in 2012, OpenRent provides a full suite of services to landlords and tenants, including property advertising and “tenancy creation and management tools,” as an arguably better-value alternative to high street renting agents. Pricing starts at £29 for its “tenant find” feature, though the service also offers other paid-for features, such as contracts, reference checking, and gas and electrical safety; the kinds of things landlords would normally pay a renting agent for.
Bradbury says the media campaign is designed simply to educate landlords that there is an online alternative to the high street renting agent, as well as helping to continue building the OpenRent brand. “We think a multi-million pound deal will take us a long way in doing that,” he says.
Finally, on how other startups might secure such a partnership, Bradbury had this to say: “If other start-ups are looking to go down this route, they should just reach out to the media partner they are interested in. Northern & Shell have been a pleasure to deal with, and our lawyer even said it was one of the most collaborative deals he’s closed, but unlike with the stories of American VCs, you’re unlikely to shake hands and have money — or in this case media — in the bank a week or two later. It takes a little more patience and perseverance, but the value of the deal speaks for itself.”