After several IPOs and acquisitions, Scaleup Mediafund is back in fresh $15m media-for-equity round

Fast-growing vitamins delivery company Vitable, funeral industry disruptor Bare and Hawkes Brewing are the first beneficiaries of Sydney-based Scaleup Mediafund's latest series, with investors committing $45 million since its inception in 2017 with backing from some of Australia's leading media groups such as News Corp (ASX: NWS), NOVA Entertainment, Foxtel, Network Ten and REA Group (ASX: REA).

Paramount Global-owned Network Ten has been struggling financially of late and is not participating the third series, but the fund has been able to secure outdoor advertising company oOh!media (ASX: OML), extending the fund’s reach to its out-of-home network of 35,000-plus locations.

Scaleup Mediafund's investment principal Michael Lamont, who had a long career at News Corp and was instrumental in developing its e-commerce strategy, says the fund helps new brands build their presence, attract consumers and scale effectively.

This means helping startups take the journey from relying on the performance of "search and social" to "one that’s building a brand and becoming a meaningful business that can win its vertical".

"It’s a bit of a journey to go from 2017 to today with Scaleup Mediafund," Lamont explains.

"What’s become very apparent is there’s a lot of money out there for startups and scaleups – the last couple of years have seen the majority of investments targeting existing investees that are continuing to grow, but what there isn’t a lot of money for is new consumer-facing brands.

Lamont says the media-for-equity model is not new, and has a storied history with one of the best examples being News Corp's stake in realestate.com.au operator and Scaleup Mediafund backer REA Group. But Scaleup Mediafund is the only dedicated media-for-equity fund in the country.

Five of the company's first 15 investments have already achieved milestones of acquisition or initial public offering (IPO), and more breakthroughs could be on the horizon.

He points to Scaleup Mediafund's first investment in a company called Better Caring that eventually changed its name to Mable, an online community of self-employed personal care workers which in 2021 received a $100 million equity invesment from General Atlantic.

"That was our first deal we did back in 2017, and that was to fund radio ads so they could promote their service. That was even prior to them getting into the NDIS funded scheme," Lamont says.

In 2020 Melbourne-based in-home sensor startup Billy was acquired by ECH, while another portfolio company, café ordering app Hey You, merged with Drive Yello in 2022. Just last month Scaleup Mediafund investee, mixed martial-arts training platform Alta, listed on the New York Stock Exchange (NYSE).

"Pointsbet (ASX: PBH) obviously IPO’d – we backed that quite early - and Mad Paws (ASX: MPA) is the other one that IPO’d," he says.

"We’ve got an existing business that’s part of our portfolio called Bricklet, which is in the process of merging with a listed entity DomaCom (ASX: DCL). They’re working through effectively a backdoor listing into that business now as well, and then two of our current investees are in a process of potentially being acquired right now."

Lamont says the fund's model helps startups derisk their marketing spend as much as possible, and with a lot of portfolio companies it has continued to back them with more marketing capital in later rounds.

"A lot of businesses look at how they take that big step. How do they grow to be loved? That is something that’s very hard to solve in social; I don’t think you can even attempt to solve it in search," he says.

"And as a result of that, those broadcast formats and publishing formats will always have a role within what's required to build a new brand and new business in Australia.

"I’m incredibly bullish about brand advertising and paid media."

Lamont asserts that when people claim there are drawbacks to advertising spend, they are often "tripping up" on the difference between the strength of a business model versus the strength of brand marketing.

"Search and social are amazing places to start, and they’re very performance orientated so you can really understand the cost of acquiring a customer. All the businesses we've invested in have spent a lot of money (on that).

"With that said, that pool of customers you can acquire out of those audiences is limited to some extent. It’s always capped.

"Those platforms do operate in a way to flatten the market – they want to share out the audience opportunity amongst all of their advertisers."