We recently highlighted the rise of the corporate venture investor but might the same be said of corporate accelerators and incubators? If ‘disrupt or be disrupted’ is the Internet-age mantra, having a strategic and monetary stake in those who are most likely to cause disruption is perhaps one way of hedging bets. Whatever the outcome, said corporate will at least maintain the appearance of being part of the future.
To that end, the latest to open their incubating arms is Venntro Media Group, owner of dating site Smooch and multiple other online dating, social networking and lifestyle properties. The newly-launched Venntro Ventures division will invest in and incubate tech startups in both the U.K. and U.S. who operate in the online dating and lifestyle spaces.
Specifically, Venntro says it will provide startups who are accepted onto the programme with expertise and advice, office space, capital and, most strategically, access to its member portfolio of 45 million users. The investment focus will include dating startups but also (most tellingly) products that provide value-add after a customer has already found a match online, such as providing ticketing, events or social networking services.
But here’s the kicker: Venntro says that in return for all of the above it will take a stake of “up to 40%” in the startups it invests in and incubates. Even to the most starry-eyed entrepreneur that will likely feel on the high side.
So how does Venntro Ventures justify the terms? Here’s what the company told me (published in full):
When dating or lifestyle start-ups seek investment, a huge proportion of investors’ money is typically spent on seeding their database, with acquisition via channels like Facebook, Google and more.
Venntro is in the unique position to offer something that a lot of other investors can’t. Over the last 12 months, almost 9.2 million members registered to sites in the Venntro portfolio.
We will offer start-ups involved in Ventures the opportunity to cross-sell their product to those 9.2 million members. This is great for us, because it means that we can offer consumers choice and it’s great for the start-ups in the programme because it significantly reduces their acquisition spend while positively influencing their ROI.
Not only are this audience are already engaged with dating products, but we also know from experience that the take-up from cross-selling between different products is typically high. This is because if a member hasn’t found what they’re looking for on one product, they might try their luck with another.
If you hypothetically attribute a £1 cost of acquisition to each of those members (which is actually quite a low acquisition cost for quality leads), then suddenly the value of the exchange for start-ups in the programme is very high.
I also pressed Vennto to be more transparent about the size of investments it plans to make and how long, for example, can incubated startups expect to be housed and supported through the programme. Regarding office space and length of programme, the company says “up to two years”. However, they declined to disclose typical investment amount but said it will be assessed on a “case by case basis depending on the value of the individual startup”.