Why I supported Lord Sugar in firing Dating App “DatePlay” but why it has huge potential
Earlier this year I was asked by the BBC to join the filming of the final episode of The Apprentice as an industry expert to judge the final two candidates, alongside Lord Sugar’s right-hand man, Claude Littner.
Vana Koutsomitis was looking for £250k investment for her dating app, “DatePlay”. With a slick pitch and self-confidence to match, Koutsomitis came across as capable and worthy of investment. A background in investment banking and the success of her portfolio of existing businesses made it clear why she was in the final.
Joseph Valente appeared looking like the lovechild of a Foxtons estate agent and a high street recruiter. He outlined his plan for a national plumbing business — what sounded like a nationwide version of the very successful Pimlico Plumbers. He needed the £250k for vans, staff and mugs of tea. (I jest — he’s an archetypical young entrepreneur who oozes potential).
After the two finalists pitched their businesses, I met with Lord Sugar to offer my feedback on the two businesses and in particular, outlined the risks versus rewards of introducing a new dating app to the market.
If you’ve watched the final episode of this year’s The Apprentice, you’ll know who won. If you haven’t, spoiler alert — it was Joseph Valente. Which was the right choice — and I’ll explain why.
£250k of investment is barely enough to develop and refine an online dating app (because the first version won’t be right) and even with a national television show behind it, a dating app with such little funding would struggle to gain traction in the competitive marketplace.
Over the last two years we’ve seen dozens of new online dating apps come — and dozens of them go. They may win awards, they may get some initial user traction, but unless they can successfully acquire new users at a reasonable cost-per-acquisition then they just won’t last more than 12–18 months.
The fact is that industry-leading sites like JustSingles.com or Match.com (who also happen to own Tinder), will be spending £5–10 to acquire someone to register on their site. If they convert 10% of these registrations into paying members, that means they’re spending up to £100 to acquire a paying customer. Which means they need to generate more than £100 over the lifetime of that member to make any margin (let alone profit!).
In the case of “DatePlay”, if they invested £50k into the product development that would leave them with £200k to acquire members using various channels (excluding the short-term PR burst from The Apprentice hype). At £5 per registration they would have 40,000 registrations for the app. This may be enough to provide proof of concept if all of those members are in a small geographical area, which they would need to be to give members a good chance of finding a suitable match.
Fundamentally though, Vana Koutsomitis would need to raise millions more in funding to enable her to scale the business — which, to her credit, she acknowledged in her presentation. As a result of the fundraising, both Vana and Lord Sugar would likely be diluted to such an extent by future investors that the value of their shareholding really wouldn’t be that attractive.
The “DatePlay” concept is excellent — it would make online dating more fun, it would engage users and it could offer an algorithmic approach to matchmaking on mobile devices. This could be the antidote to eHarmony, whose advanced algorithmic approach doesn’t translate well to mobile due to the limited screen size of mobile devices. This makes it difficult for users to answer personality questionnaires.
But as an investment DatePlay was too high risk compared to Joseph’s plumbing business where cash would go into company assets such as vans and tools, which are secure and have a resale value. And Joseph is certainly an incredibly investable character. Bright, driven, and hungry for success, he’s an entrepreneur’s entrepreneur and I’ve no doubt he will be very successful with the right mentoring. I would back him and so did Lord Sugar. His business was much lower risk with attractive sustainable returns.
However, that is not to say that dating products are not worthy of investment. Our Venntro Ventures initiative is designed to give apps like “DatePlay” a real chance of success by giving them immediate access to millions of online dating customers around the world. We hope to see the first of these apps hitting the market in 2016.
Congratulations to both Vana and Joseph — it’s great to see such a high calibre of entrepreneurs coming through The Apprentice. They’re both great role models for young entrepreneurs and I wish them the success they deserve in 2016.
You can learn more about DatePlay at https://dateplay.co/ and our Venntro Ventures initiative at http://www.venntro.com/venntro-media-group-launch-corporate-venturing-arm-venntro-ventures/