dmg ventures’ investment strategy, and how to knock our socks off
For venture capital to truly work for both start-ups and investors, we believe information should flow both ways, not just from start-ups to investors, which is currently the case. After all, start-up founders should be selecting the optimal investor for their business, just as much as investors should be highly discerning when it comes to making investments.
In this spirit, we will be blogging about who we are, what we do and what makes us tick. We hope that it will be helpful in choosing whether we’re the right investor for your business and, if so, how to connect with us and how to make us feel warm and fuzzy inside.
Who we are
dmg ventures is the VC arm of the Daily Mail and General Trust, a group of businesses in the media and B2B sectors. Despite being part of a large group, we have a small, friendly deal team of three people (Manuel, Rachel and myself), supported by Louise, who works closely with portfolio companies on marketing strategy and campaigns, where we’ve made a media-for-equity investment. We also receive support, input and challenge from domain experts across DMGT.
Alas, I cannot claim any credit for our awesome portfolio of companies, which span:
· 🛒 E-commerce (incl. Cazoo, Bloobloom);
· 💻 Digital services (incl. Napo, Honest Mobile, Zoopla, Kortext, Taboola, Farewill);
· 🗞 Next-gen media (Airmail, Bustle).
Through these investments, we’ve co-invested with the likes of Octopus, DN, LocalGlobe, JamJar and Stride.
We initially write cheques of £0.5m — £3m, split between cash and discounted media credits (where relevant), and leverage the power of DMGT, particularly its media assets, to provide unique strategic value-add (but more of that in a later blog). We also have the rare ability to invest material sums in portfolio companies in each subsequent fundraising round, through to exit.
What we look for
- Sector / stage / geography
We only invest in sectors where we can add significant value.
This means investing in B2C start-ups where we can leverage DMGT’s media assets to accelerate the company’s growth.
I’ll dive into what we look for in start-ups in these two areas a bit later on 🖗.
Given our initial ticket size of £0.5m — £3m, we invest at Late Seed (which we broadly define as post-launch) to Series A.
Finally, geography. Here, we look to invest where our media assets have the largest footprint and can, therefore, add most value. Our home market is the UK and we also have strong readership bases in other English-speaking countries (e.g. MailOnline is one of the largest English-speaking news sites in the world, and has 65m US MAUs). We do look to invest in start-ups from continental Europe, but these would likely need to have a UK strategy.
2. Attributes we look for in all start-ups
Team, product, market, blah, blah, blah…I won’t bore you here with a generic answer to what characteristics all VCs look for in start-ups. There are plenty of resources available online here such as Investopedia’s simple summary.
Instead, here are the key attributes we look for that may be a little different from every other VC on the market.
i) 🤝 DMGT fit — are we uniquely placed to help supercharge the business?
The start-up world is akin to the dating world, where the best results occur when the most suitable parties are matched.
If we don’t believe we’re the right investor for your business, we’ll tell you so.
ii) 🤸 Founder likeability — do we want to work with the founder over the next 5/10 years?
We’re not necessarily looking for someone who can win a personality context, and we want founders who are prepared to disagree and debate with us, but we believe founders with gravitas and likeability will attract the best people (and, yes, we also don’t want to be stuck in a long term relationship with someone we can’t stand!).
iii) 🧠 Founder self-awareness — does the founder know his or her strengths and weaknesses, and are they able to hire to fill the gaps?
An all-action founder is great, but one person can’t run the show if a business is to reach significant scale. This rings true from a workload point of view but also because no-one is the very best in every department. In addition, diversity of thought is essential within any business!
For me, the ability to build teams with complementary skillsets, who are prepared to push and challenge each other, is the most important aspect of being a founder.
3. Attributes we look for in D2C start-ups
Off the bat, we look at all the key metrics that every D2C VC looks at — here’s a handy summary from Camilla Dolan at Eka Ventures.
However, there are some areas that we prioritise more than others.
i) 🕐 Market timing — is the moment right for this business to break into mainstream consciousness?
Being the first to do something isn’t often a good thing. Just ask the founder of Friendster, sometimes heralded as the original modern social network. That’s why we look to invest in sectors on the cusp of major change, where the path has been trodden by a few brave forerunners. Specifically, we look to take a stake in industries where the move from offline to online is just starting to become commonplace. You can see this through our investments in the likes of Cazoo, Zoopla, Farewill and Bloobloom.
ii) ⮮⮭ User behaviour — is the start-up driving new and sustained consumer behaviours?
It’s crucial to see whether the company has built something which is becoming a mainstay of people’s lives, as this shows the potential for both viral growth and longevity.
How you measure behavioral change differs by type of company. For an app, we look at MAUs / WAUs / DAUs and frequency of usage within a day, as well as how cohorts evolve in terms of usage and retention over time.
For a product-led company, the focus is on frequency of purchase and return rate.
iii) 💵 Path to profitability — will this business ever make money?
In amongst the madness of the VC world, long term profitability is still important for us when assessing start-ups. We believe companies have to be self-sufficient in the long run, both for the good of the company itself (especially in downside scenarios) but also for the good of the wider economy.
The vast majority of businesses we look at are loss-making, so we have to make what I call ‘logic leaps’ when assessing the path to profitability. We do this by breaking down current unit economics, looking at what unit economics would look like at breakeven, and then playing out how the company might get from point A to point B.
iv) 🚘 Drivers — no, we don’t look for start-ups which will give us personal chauffeurs (although it would be nice, there are probably more useful things to burn cash on). Instead, we want to know whether the team understands what drivers do and will make the business tick.
During my time as Head of Growth at InPost UK, I realised that management teams must understand and focus on the most impactful drivers of their business. Otherwise, you can end up spending all your time on a driver which moves the needle by 5%, whilst paying very little attention to something which could drive an uptick of 50%.
Founders should be absolutely laser focused on their top 3 / 5 drivers.
4. Attributes we look for in start-ups with synergistic technologies
When it comes to looking at synergistic technologies, we look at a bit of a smorgasbord of start-ups.
Given the assets in DMGT’s group, areas of particular interest are ad / media tech and property. It helps when a start-up is already working with one of the companies in the group, as we will collaborate with our colleagues in other divisions when assessing relevant start-ups.
We like to invest in B2B technologies which are ‘enterprise-ready’, as this is where we can add immediate value through partnerships with DMGT’s divisions, which lends itself to slightly later stage investments than we sometimes do on the D2C side.
In a nutshell, that’s it! If it sounds like there could be a good fit with your company, please reach out to me on LinkedIn.
Before you go!
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🧐 Check out the dmg ventures Medium page for more candid content.
