SV’s Scorecard for M4E Deals

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@SV_writerSamaipata Writer

Samaipata Ventures’ is a VC focused on seed-stage marketplaces and DNVB’s in Southern Europe. If you don’t want to miss out our news and posts, follow us here on Medium, Twitter or suscribe to our newsletter. Today we’re presenting our scorecard for media-for-equity deals after seven years participating in a dozen operations of this kind.


M4E or ‘Media-for-Equity’ is a form of investment model in which start-ups exchange equity for media coverage. Typically a media company invests cash in a start-up and ensures, through a M4E agreement, that the invested capital will subsequently be used for advertising in their available channels.

M4E can apply for all sorts of media, however, we’ll be focussing on ‘TV4Equity’, based on our own experience.

This scorecard is meant to be a thinking path to follow when facing the decision of a M4E deal. Thus, this is nothing more than a tool for a complex operation, to help you see the broad picture and hopefully make reasonable decisions by decomposing the different factors affecting your decision.

Let’s get started with our scorecard:

Samaipata Ventures’ scorecard for M4E deals.


How effective/efficient is TV as a marketing channel for my business?

A month ago Samaipata Ventures led a seed round in 21 Buttons. The startup used a media-for-equity investment model with Spain’s Mediaset to stimulate rapid growth in downloads and DAU. Take a look at the advert!


1.1.1 How is the new channel helping me to acquire new customers?

There’s no doubt that mass media can be a powerful method to acquire customers, the foremost question however is how mass media compares in efficiency to online marketing or other previously used channels.

The most common way to measure the success of your mass media campaign is via CAC (Customer Acquisition Cost) by comparing your pre-campaign blended CAC with your on-air blended CAC (e.g. your ads are running through February → you compare your January CAC with your February CAC). Alternatively, you may look at the post-campaign KPIs to evaluate improvements with regard to the pre-campaign ones.

Rules of thumb:

  • If your ‘on-air’ CAC is more than 2x-3x your ‘pre on-air’ CAC, you should start worrying!
  • Your CAC payback mustn’t exceed the 24–36 months mark, even while your ads are airing.
  • Post-campaign blended CAC should be significantly lower.

1.1.2 How is the new channel helping me to acquire new supply-side units? (for marketplaces)

One of the effects of mass media marketing is that your company will face an almost immediate upsurge in brand awareness, and subsequently in market trust.

Typically, brand awareness relates to demand-generation. However, due to these sudden increases, it’s not uncommon to see a drastic boost in in-bound and conversion rates related to supply-side units (e.g. an increase in restaurants on your platform if you’re a food delivery marketplace). It’s difficult to allocate a part of the cost of airing a campaign on mass media to supply-side generation, but it definitely needs to be taken into account as an independent driver.

1.1.3 Does the new channel help improve my startup’s retention rate?

Acquisition is hard, but retention/repetition is 10x harder; companies need customers to return and spend in order to survive! As stated before, mass media will likely increase brand awareness and trust, these increases can stimulate your startup’s retention rate.

To assess retention/repetition rates is helpful to run your own cohort analysis prior to and after the mass media campaign to truly understand the impact of your campaign on a.o. customer retention. Click here to access our cohort analysis template.

From the Samaipata Ventures cohort analysis


1.2.1 How important is trust in your business model?

In some business models, trust may be your Holy Grial! (e.g. models with high average tickets or sensitive services such as taking care of your children!). By airing your brand on TV and increasing your visibility, you’ll likely experience a corresponding increase in trust, but you need to assess if it’s worth the cost in your case.

1.2.2 To what extent is the market I’m playing in, a ‘winner takes it all market’?

In some markets (very often in marketplaces) we see a local/global ‘w-t-i-a’ dynamic due to the intrinsic characteristics of the market itself.

If so, it might make sense to slightly sacrifice your spending efficiency to acquire customers (or supply side units) at a faster pace and to build barriers of entry via brand building. To what extent this makes sense, can be rationalized through CAC payback calculations.

The intrinsic characteristics of certain markets led to ‘winner takes it all’ structures


How good is the advertising agreement offered by the media company? → A key factor to analyze in a media-for-equity deal are the commercial conditions you’re getting offered by your partnering media company. These conditions will be specified in the advertising contract.


2.1.1 How good is the quality weighted cost per GRP?

The good news are that TV as well as performance marketing can be well measured! Thanks GOD. There’s a way of measuring the so-called “units” you’re buying. In television these units are called GRP’s (Gross Rating Point), which are used to measure media exposure.

Formula: % target market reached x exposure frequency = coverage x OTS. For example, say your advert reached 25% of the target market (e.g. Spanish adults, meaning people older than 16) and it was viewed 5 times → 25 x 5= 125 GRPs (Spanish adults >16).

OTS: Is an abbreviated description for Opportunity To See. This term is used when quantifying how many exposures / average frequency a campaign should be planned to. i.e over the duration of the campaign an average person in our target audience should have the OTS 3 or more commercials. — Nielsen Media

As a rule of thumb, a campaign with > 7-10 OTS per targeted audience can give us sufficient information to coherently understand how a specific target reacts to an exposure.

So when it comes to TV, you shouldn’t view ads as spots, instead you should view them as GRPs, that’s the real measure! Independent companies track the audience data through sample statistics from a few thousand household, they quantify the viewer’s behavior (e.g. in Spain, Kantar Media).

As long as you have a standard way of measuring something, you will be able to compare it to the market price.

What are the key drivers of the cost per GRP?

Think about the week, the day, the channel, the program and the time, to target your audience ;)

There are certain factors that may justify higher GRP prices. Think about the following points to score this side of the deal:

  • Prime Time vs. Day Time: GRPs’ price in prime time can get as high as double the cost of day time.
  • Positioning: the first 3 slots immediately proceeding a show, and the last 3 slots just prior to a show starting tend to be substantially more expensive in comparison the middle slots.
  • Seasonality: depending on the month of the year and the programs airing at the time, the cost of GRPs will differ significantly; for example, August is generally substantially cheaper than December.
  • Spot duration: 10-second spots tend to be more than half the cost of 20-second adverts.

Sometimes the media company will offer the startup a ‘test period’, to validate the media channels involved and the exposure of their advert, before committing themselves into a full-fledge TV campaign and M4E agreement. This would be the best way for startups to learn about all the drivers, etc.

Finally, something to consider as more value delivered by the Media company, may be the potential advise offered in terms of strategy and/or optimization.


2.2.1 How broad is the freedom I have to plan my campaign?

The founder’s/ CMO’s capability of controlling the deployment of the GRPs is a key section to be agreed with the media company. As a rule of thumb:

  • The higher the freedom (meaning flexibility and enforceability over the weekly placing of GRPs), the better. The asset is more liquid, and thus, more controllable.
  • Less freedom equals less predictability of the impact, and thus, less value.


3.1 Economic terms of the investment agreement

How good are the economic terms of the investment agreement? Much like in any other equity investment agreement, we see two types of economic clauses: pre-money valuation and other typical economic conditions.

3.1.1 How attractive is the implicit pre-money valuation?

To assess how good is the valuation the obvious think to do is to look at recent or simultaneous rounds you have done. In case there are none, standard rationals about startup valuations apply. The higher the valuation> the lower the dilution → the better for the entrepreneur (sorry, that’s certainly a quote of “Startups for Dummies”) but keep in mind you need to assure that the valuation is sustainable in the long run.

3.1.2 How reasonable are the other economic conditions?

When it comes to other economic conditions, there are 2 main conditions that typically appear: liquidity preferences and anti-dilution provisions. The former condition gives the investor the right to liquidate his or her shares before anyone else, giving him/her the priority to convert his equity stake into cash. The latter condition prevents the startup from diluting the equity stake of the investor at any given point in the company.

3.2 Political terms of the investment agreement

How good are the political terms of the investment agreement?

3.2.1 How demanding are the political rights requested by the investor?

The key question to ask yourself here is how do the requirements of the media company, in terms of political rights, compare with another investor investing the same amount of capital. You need to try and find a fair balance between requests and capital in order to obtain and maintain a fruitful investor — investee relationship.

To conclude, go through the scorecard as a thinking path for your decision and validate the worthiness of a given M4E deal. As you may have noticed, sections will not be black or white. The decision has to do with having a weighted balance of your interests and looking for a win-win situation. At the end of the day you will be partners.


Other than the characteristics of your supply, demand, operating market, commercial agreement, etc. there’s a substantial amount to do in terms of optimization, which mostly depends on the startup side. Here are some bullet points to bear in mind during the execution of the advertising campaign:

  1. Stay of top of daily or even hourly KPIs during the first few weeks of launching a new mass media campaign.
  2. Manage unexpected reactions (good and bad) and LEARN from your consumers.
  3. Get ready for servers collapse! well, unfortunately not always :(
  4. Be super data-driven combining information from different sources (Kantar, Web, App, etc.) and extract SoWhats on a daily basis.

We hope you’re no in a better position to face a M4E decision. BEST OF LUCK. Any comments/ feedback will be more than welcome.



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