How to scale a media for equity fund the right way

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ITV is the UK’s second-largest TV broadcaster, reaching 34 million viewers a week, which is nearly 56% of all TV viewers. During the pandemic, the group saw an opportunity in backing direct-to-consumer startups and launched ITV Adventures – a 50 million-pound media-for-equity annual fund. In this episode, our guest is the Director of ITV Adventures – Sheena Amin. She brings a wealth of experience across both investing and TV/media. Sheena began her career as a venture capitalist at Summit Partners and has gone on to hold senior positions at Virgin Media, Dixons Carphone, UKTV and BBC Studios. 

Sheena has direct experience launching and running a media for equity fund prior to joining ITV and she also understands the challenges of launching and growing a business having founded and run a successful startup of her own. She is a passionate ambassador for entrepreneurship having served as a Board Trustee of Young Enterprise for 8 years. Sheena graduated with First Class Honours in Philosophy, Politics and Economics from the University of Oxford.

  • I think your background is impressive, and how you got into the industry is something that a lot of people should hear. That’s actually what I wanted to start with. Tell us a bit more about how you made your way into the media capital industry and what drove you into the media space in the first place. (03:13 – 06:06)
  • First of all, I love your mentality of “why not?”. It’s inspiring to hear that you were able to start a family and take on a new job with one of the largest broadcasters in the UK. You’re right, the media-for-equity space is relatively new, and when you set up UKTV in 2018, there were only a few other funds in the UK doing media-for-equity deals. It was a new model, and you’re starting with ITV recently. Where do you even start? What do you know now that you wish you had known when you started that first fund? What are your learnings from that? (06:48-10:47)
  • I know you joined last year and the fund launched during the pandemic there was an opportunity in terms of supporting consumer startups. It’s a 50M pounds Annual Fund. I’m curious through your lens: What is success, and how do you measure it? What does success mean to you with the fund, and what inspired that? (12:01 – 14:35)
  • When it comes to setting up your own media for equity fund inside the company, how would you make the case to a board for the first time that for example, they have never done a media for equity deal before or a fund? Why should they think of these long-term returns as opposed to prioritizing short-term revenue? (15:51 – 18:36)
  • Let’s talk about ITV and your investment thesis. What would you look for in the founders: stage, sectors? How would you like to grow the fund in the next few years? (19:32 – 22:55)
  • There are different programs within ITV. You sometimes work with a bit earlier stages companies to get them ready for that first campaign or their debut on TV. What else goes in that kind of relationship? I think you work with them so much more in terms of advice and creativity and so on. (23:09 – 26:01)
  • Where have you seen TV work the best in terms of the amplifier effect? What are the channels you’ve seen working best when mixed with TV? Also, is this part of a strategy – partnering up with other funds, or even VCs, that back consumer businesses in terms of making even that cash work harder? (26:02 – 27:27)
  • How does the growth stage VC market right now impact your investment decisions? What are some of the trends that you’ve seen? (28:00 – 32:26)
  • Why should venture capital investors look at working closely with the media for equity fund, for example, ITV Adventures? (33:02 – 35:49)
  • I know we talked about the investment thesis, but do you want to share more on that? (35:55 – 37:15)
  • Six investments – I think it’s a very healthy number, considering the fund has been around for about 18 months. What about this year, do you have a set target in mind? On that note as well, what kind of sectors or technologies or trends excites you most right now? (37:16 – 38:43)
  • Where do you see this whole model going, not only in 2023 but perhaps in the years to come? What could be the biggest opportunities in the space? (38:46 – 41:09)
  • During the previous episodes, we talked about the independent media for equity fund model – a model relatively similar to a traditional VC fund but one that pools together media inventory from various media players to invest the right mix of media in startups. In some ways, surprisingly, we don’t see such a fund in the UK. Why do you think that is? (41:13 – 43:35)

Diana: Congratulations on announcing ITV Adventures’ latest investment. I saw the news yesterday. (01:52-03:01)

Sheena: Indeed, we announced it yesterday. So hopefully it’s very topical. Our first deal of the year was with a company called Resi. They are a leading architectural tech platform, founded by two awesome founders, Alex and Jules. Essentially, it’s an online marketplace model that helps homeowners and anyone interested in doing a home renovation navigate the full end-to-end elements of doing a project in your homes. They cover everything from finding an architect to going through the planning permission approval process, and they have a market-leading 97% approval rate in the market. They also help with finding a builder, contractor, structural engineer, and financing the project, pretty much everything you need to do a home renovation, like a one-stop shop.

Diana: I think your background is impressive, and how you got into the industry is something that a lot of people should hear. That’s actually what I wanted to start with. Tell us a bit more about how you made your way into the media capital industry and what drove you into the media space in the first place. (03:13 – 06:06)

Sheena: My background is in both venture capital investing and media. I’ve worked at Summit Partners, which is an American growth equity investment firm, and I’ve worked in both the VC and private equity teams. I was also at Virgin Media for several years and did various roles there, specifically within their TV division, from strategy to commercial to business development. I got to work on some cool things like launching the partnership with Netflix and other interesting projects.

For me, the media-for-equity model was the perfect role because it blends my media and investment experience. In 2018, I got approached about an opportunity at UKTV, which is the channels business now owned by BBC Studios, to launch their own media-for-equity funding in the space. It was the chance to start something relatively new and entrepreneurial, albeit with all the backing that comes with a big corporation. I’ve started businesses of my own in the past, and elements of this appealed to me. I joined UKTV in 2018 and ran their fund for 4 years. Then, last year, I got a call from ITV saying that they had recently launched their own media-for-equity fund and were looking for someone to come in and grow it into the largest media-for-equity fund in the UK. I gave it considerable thought because I had just had a baby, so it was going to be a lot to change jobs and have a baby in the same year. However, I ultimately decided to take on the challenge.

If I was going to run a media for equity fund, there was no better place to do it than at ITV. I was impressed by the scale of ambition and the importance placed on the model within the company. From a proposition perspective, ITV is the largest commercial broadcaster in the UK, with a compelling offering across linear and regional linear advertising, and with the evolving ITVX platform. With my background, I felt confident that I could make a difference, and I was excited to be a part of such an important initiative. So that’s my journey so far, in a nutshell.

Diana: First of all, I love your mentality of “why not?”. It’s inspiring to hear that you were able to start a family and take on a new job with one of the largest broadcasters in the UK. You’re right, the media-for-equity space is relatively new, and when you set up UKTV in 2018, there were only a few other funds in the UK doing media-for-equity deals. It was a new model, and you’re starting with ITV recently. Where do you even start? What do you know now that you wish you had known when you started that first fund? What are your learnings from that? (06:48-10:47)

Sheena: You’re right, it was back in 2018 and still is now a fairly nascent investment model, which I think fundamentally lacks the same level of awareness and understanding as the traditional venture space and equity.

We’ve come a long way, but we still aren’t necessarily the number one choice for every consumer founder in the UK, partly because they aren’t aware of the model and the players in the space. It’s still a marmite thing, in terms of founders either loving or hating it. Most of them are probably digitally native startups who have built their business on performance marketing and fully understand how that works. TV specifically is somewhat opaque and a kind of black box type of advertising medium that they just don’t understand. So, while the industry has come a long way, there’s still a lot to be done.

There are many learnings, but one piece of advice I would give is to spend enough time getting the internal elements right before launching externally. That includes having a strong understanding and alignment across all relevant internal stakeholders, right up to board levels, as to the fundamental purpose behind the fund, why there is a specific need to launch the fund, and what are the success criteria and how we’re going to measure success. Crucially, what does that look like? How do we define that? And what are the key criteria?

Another important element is getting all the internal processes and systems in place, such as educating the board to think less like a traditional television broadcaster and more like an agile investor. Given our peer set is traditional VCs who are very used to moving quickly and working in an agile way. We need to strike a balance between putting in place the right level of diligence and governance and all the internal checks we need to make to get comfortable doing a deal but also being agile enough to win the best deals in the market. If we take months and months to decide whether we want to do an investment, by the time we’ve got conviction, that deal is going to be done and on to the next. So, it’s crucial to strike the balance and get all of that agreed upfront before even going out to companies and trying to win deals and launching the fund externally. I think that’s important.

Diana: I know you joined last year and the fund launched during the pandemic there was an opportunity in terms of supporting consumer startups. It’s a 50M pounds Annual Fund. I’m curious through your lens: What is success, and how do you measure it? What does success mean to you with the fund, and what inspired that? (12:01 – 14:35)

Sheena: There is a clear and concise purpose behind the launch of the fund, along with measurable success metrics. The main rationale behind Adventures is to generate financial returns for the business, which is a crucial part of ITV’s wider revenue diversification strategy. Every investment made by Adventures is driven by the goal of achieving financial gain on exit.

However, there are other important secondary drivers, including gaining expertise and experience in understanding direct-to-consumer businesses and how media can support their growth. Also, growing the overall advertising market by bringing new brands who may not have been able to advertise on TV earlier in their growth journey is essential. This helps prove the model of why ITV can be an important scaling channel for them, which, if successful, can drive brand awareness and generate new customer acquisition. This, in turn, can lead to earlier profitability and becoming cash generative, allowing them to spend cash with us in the long term.

In essence, ITV Adventures brings a wider strategic benefit to the advertising industry by bringing in new TV brands earlier and growing market in the long term.

Diana: When it comes to setting up your own media for equity fund inside the company, how would you make the case to a board for the first time that for example, they have never done a media for equity deal before or a fund? Why should they think of these long-term returns as opposed to prioritizing short-term revenue? (15:51 – 18:36)

Sheena: I believe anyone making that case today would be in a stronger position than when I first had to make it. The market has experienced a proliferation of media and funds, providing a lot more data points to support such investments. The amount of capital that can be deployed in these deals has increased, as has the calibre of companies we can attract to the cap tables. Moreover, the level of exit and returns that can be generated from such investments has been promising.

Indeed, a long-term investment horizon of 5-10 years is typical in most cases. However, where the value can be demonstrated is in the wider diversification story. TV broadcasters, in particular, are facing the challenge of linear viewing in structural decline and must look to future-proof their businesses by diversifying their revenue streams. Investments like media for equity can play an important role in this diversification, opening up an entirely new revenue stream with the added benefit of boosting the ad market. For companies like ITV, where pricing is a critical driver of revenue, media for equity can be a valuable addition to the long-term diversification strategy.

Diana: Let’s talk about ITV and your investment thesis. What would you look for in the founders: stage, sectors? How would you like to grow the fund in the next few years? (19:32 – 22:55)

Sheena: We focus on investing in mass-market consumer businesses, ranging from Series A to pre-IPO. We typically invest at a later stage than other venture capital firms, given that we are the largest commercial broadcaster in the UK and have the largest reach. Our credentials not only include overall reach, but also a wide range of offerings such as regional advertising, addressable opportunities through ITVX, and bespoke and flexible media plans. With a family of channels that cater to diverse demographics, we can hit most key demos at scale.

From a sector perspective, we are in a unique position to be broad in the types of verticals and sectors that we go after. Our fundamental focus is on businesses that have a consumer proposition that makes sense for them to advertise on TV. Within that, we are pretty broad in our approach. We look for businesses with strong management teams, established product-market fit, large addressable markets, strong unit economics, and those trending in the right direction.

However, what sets us apart from traditional VC firms is the time we spend understanding the media-customer fit. This is about us understanding, before investing, the strong overlap between the target customer base and our viewing audience. We aim to make a meaningful difference in helping founders grow and scale to new heights, and we work closely with the management team, particularly the CMO and their team, to ensure that we can make a genuine difference in the growth and scaling journey of the business. We want to have strong case studies that demonstrate our value and impact on their business. This is a key element of our investment thesis for every one of our deals.

Diana: There are different programs within ITV. You sometimes work with a bit earlier stages companies to get them ready for that first campaign or their debut on TV. What else goes in that kind of relationship? I think you work with them so much more in terms of advice and creativity and so on. (23:09 – 26:01)

Sheena: We view our partnership with startups as a multifaceted, long-term collaboration. Our support goes beyond just media investment. We work closely with each startup, offering a dedicated media planning team to build a bespoke, flexible plan tailored to their needs. From planning to booking and optimizing campaigns, we ensure success at every stage.

We also have a measurement and innovation team that helps attribute TV correctly and provides data to optimize media. Our holistic approach includes brand consultancy to advise on TV as part of the wider marketing mix. We focus on startups with an omnichannel approach, and our team advises on amplifying the benefits of TV across all marketing channels.

Our in-house creative team also helps startups create their TV ads, although there’s no obligation to use them. We’re equally happy to introduce startups to external agencies that are more agile and startup-friendly.

Overall, we offer a comprehensive suite of services to help startups launch and optimize their TV campaigns, and we’re committed to a long-term partnership to help them succeed.

Diana: Where have you seen TV work the best in terms of the amplifier effect? What are the channels you’ve seen working best when mixed with TV? Also, is this part of a strategy – partnering up with other funds, or even VCs, that back consumer businesses in terms of making even that cash work harder? (26:02 – 27:27)

Sheena: I think radio and out-of-home advertising are two other key above-the-line channels where we’ve seen a strong amplification benefit when combined with TV investment. We prioritize collaboration with our partners, such as JC Decaux and their Nurture program.

Another significant benefit of TV advertising is the reduction of indirect costs, as it helps increase organic brand search and reduces the need to bid on paid search terms. This factor should be considered when startups are calculating the overall ROI of TV advertising. It is an important part of what TV advertising drives, beyond just the initial halo effect and short-term multiplier effects.

Diana: How does the growth stage VC market right now impact your investment decisions? What are some of the trends that you’ve seen? (28:00 – 32:26)

Sheena: For us, cash runway is key. We want to invest in businesses that have sufficient vision and cash runway not just over the period in which the media is being deployed. Part of that is also, as I said, we like to invest in businesses where TV is part of a broader omnichannel mix, and so they have the cash to allocate to other marketing channels. That’s even better.

Equally, we also look to invest alongside a VC partner. So, we don’t need rounds; we very much piggyback off a VC we co-invest alongside, who is the one leading the round, setting the valuation, and doing the diligence. For us, that’s a really important part of how we look to invest and make media equity investments.

Now, the market is naturally challenging, given it’s a much tougher capital market, and most VCs are retrenching away from consumer investing and instead going back to the traditional heartlands of B2B and SaaS. But having said that, there are still several funds that are active in this space. Just the model has shifted to, rather than just funding businesses at lofty valuations as we’ve seen in past years, there’s a relentless focus on unit economics and profitability. It’s no longer just revenue or user growth for the sake of growth. It’s a very different type of business. Founders are also shifting their focus on how they’re running their companies to account for that.

The flip side of that is that there’s a real opportunity for the media equity space at the moment because there’s always been a lack of specialists, and consumer funds in this space, specifically ones that understand what it takes to successfully drive brand building and consumer marketing. Coupled with the lack of venture investment in the market for consumer businesses, I’d say that’s a real opportunity for media equity players to come in and fill that funding gap.

Also, I think there’s been a real shift in the market towards more media for equity deals, as founders become more aware of the economic benefits and are more open to exploring alternative funding models. This shift has been driven by a combination of factors, including the lack of alternative funding options, as well as a greater understanding of the value that media for equity deals can bring in terms of capital efficiency. In addition, I think there’s been a lot of education around the benefits of these types of deals, which has helped to build trust and confidence in the model. Overall, I think this trend is likely to continue as more founders look for ways to access the funding they need to grow their businesses, while also optimizing their marketing budgets and maximizing their return on investment.

Diana: Why should venture capital investors look at working closely with the media for equity fund, for example, ITV Adventures? (33:02 – 35:49)

Sheena: That’s a good question. From my observation, as we try to build out our co-investor base, there are several reasons why investors are interested in partnering with us.

Firstly, we offer highly favourable media terms, which present a strong argument for startups seeking capital efficiency and economic value through an equity deal. Additionally, we bring strategic value as co-investors with a focus on our expertise in mass-market brand building. As a well-known media fund, we understand our inventory better than anyone else and plan it like a shareholder rather than a media owner. Apart from media, we provide a range of ancillary benefits, from creative services to media planning and measurement. Overall, we are well-equipped to maximize the success of any B2C business that needs to build a brand, drive brand awareness, and acquire customers to grow and scale.

As a partner, we have developed strong relationships with our co-investors who have seen the value we bring to the table. While we are an early-stage fund that has been operating for only a couple of years, we have attracted a growing number of VCs and funds as co-investors. They have experienced firsthand how our investments can help drive unit economics, increase brand awareness, and generate a wider halo effect from TV advertising. As we continue to deliver value and build trust with our co-investors, we expect to be included in more deals and strengthen these relationships further.

Diana: I know we talked about the investment thesis, but do you want to share more on that? (35:55 – 37:15)

Sheena: Absolutely, we consider our media for equity investments to be long-term partnerships. It’s important to us to be involved in the full funding lifecycle of a startup’s journey, so follow-on investments are a crucial part of our strategy. We’ve already made follow-on investments in What3Words, Feel, and Spoke, and although we’ve only made 6 investments to date, the majority of those have been follow-on investments. Our investment thesis is based on proving to startups that ITV is a powerful acquisitions channel, brand-building, and scaling channel through an initial tranche of media investment, and then doubling down on that success. We’re committed to being part of the journey as these companies continue to grow.

Diana: Six investments – I think it’s a very healthy number, considering the fund has been around for about 18 months. What about this year, do you have a set target in mind? On that note as well, what kind of sectors or technologies or trends excites you most right now? (37:16 – 38:43)

Sheena: I am hopeful that we will be very active this year. We would love to double the size of our portfolio and make more deals happen. Given the market’s current state, I think the timing is right for us to capitalize on the opportunities available.

We recently announced our first deal in Resi, and we are excited to share another one later this month. Our deal pipeline is robust and diverse, covering various sectors such as e-commerce, pet care, fintech, health and beauty, and personal care. We take a broad approach as long as the fundamentals are in place and the business is aimed at a mass-market consumer proposition. We’re always open to exploring new possibilities and making new partnerships.

Diana: Where do you see this whole model going, not only in 2023 but perhaps in the years to come? What could be the biggest opportunities in the space? (38:46 – 41:09)

Sheena: I’m confident that the future looks bright for media capital, especially this year. I anticipate that established funds will be highly active, and ITV Adventures for sure will be. But I’m sure many other players will be able to seize the large number of interesting deals that we’ve been seeing.

In terms of capital deployment, the calibre of the company, and quality of returns, I believe there’ll be some really interesting deals to be done by existing players who are already well-established in the market. I also expect a rising number of emerging funds to enter the market internationally.  The success of media-owned and independent funds is partially responsible for this trend. As the awareness and sharing of learnings and successes grow, more funds will likely enter this space, leading to a proliferation of more funds.

The wider ecosystem will only continue to grow, which is a positive thing. I believe we are generally quite open about what drives success and how to make it work. I hope that the advice I’ve shared today and more broadly will help other emerging fund managers think about how they should set up their own funds and how to structure them in a way that best positions them in the market.

Diana: During the previous episodes, we talked about the independent media for equity fund model – a model relatively similar to a traditional VC fund but one that pools together media inventory from various media players to invest the right mix of media in startups. In some ways, surprisingly, we don’t see such a fund in the UK. Why do you think that is? (41:13 – 43:35)

Sheena: It’s a good question. I think the main challenge with the UK market is that it’s a mature ecosystem of well-established and successful media-owned funds. Getting each of those media owners to relinquish the autonomy and control that they have by starting and growing their own funds to a high degree of success is a different proposition. There is complexity in finding a proposition and structure that works for every media owner with their unique requirements, objectives, and success criteria.

This, I think, is probably the main reason why it hasn’t happened and will be quite challenging in the future. In comparison, a country with a more nascent market would have fewer media owners with their funds, and the barriers to entry would be lower. They would be viewed as a blessing, rather than a curse because they can do all the hard work. Therefore, the UK market is somewhat nuanced in terms of the degree of maturity that the current ecosystem has now.

Diana: I think this is the highest challenge that I’ve seen recently.

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