DMG Ventures — the London-based VC firm backed by British multinational media conglomerate Daily Mail and General Trust (DMGT) — is today announcing two new consumer-focused funds: a £25m fund to back seed to Series A startups and another for growth-stage companies.
DMG Ventures’ sole LP is DMGT, which owns the Daily Mail, MailOnline, The Metro, The i newspaper and several other media titles. The firm invests in US and European startups with a mixture of cash and “media credits”, which give its portfolio companies guaranteed sponsored content opportunities via its titles and their social channels.
The early-stage fund being announced today has made two investments to date, into London-based CBD drinks company Trip and New York-based cacao food and drink startup Blue Stripes.
Media for equity
DMG Ventures launched in 2018 and has announced 31 investments including real estate platform Zoopla, buy now, pay later (BNPL) provider Zilch and sustainable electric toothbrush maker Suri. DMG Ventures CEO Manuel Lopo de Carvalho tells Sifted the firm has a team dedicated to helping earlier stage startups work out their marketing and media strategy to make sure “the actual media component of our investment is the most value generating part of our investment, rather than the cash”.
The firm says it it can only guarantee sponsored content coverage via media credits and that it has no influence over what the journalists at DMGT’s titles write, but will try and help its companies get editorial coverage too. Editorial content refers to articles and other media created by journalists — who strive to keep their reporting free of outside influence, financial or otherwise — while sponsored content is labelled as a piece of media that someone has paid to be written.
“On the editorial side, listen, we’ll make the introduction. We’ll put them in front of the right people, but it is up to them to create a story that the editors will want to write about,” says Lopo de Carvalho, adding that it likes to invest in more out-of-the-box ideas that consumers are less familiar with, as they are easier stories to pitch to editorial media.
“[We like to back] something which we need, but customers are not obviously aware of what are the advantages of it. The quirkier the story, the easier, because obviously people like that more. That’s where we can help the most.”
A tough market for consumer VC
As a consumer-focused firm, DMG Ventures is operating in a tough market. The macroeconomic environment of recent years characterised by inflation and high interest rates has reduced people’s spending power, prompting some consumer funds to widen their scope to B2B investments.
VC deals into consumer startups were down 97% in 2023, compared to their peak in 2021, and DMG Ventures’ portfolio company Cazoo — the UK used car marketplace that went into administration earlier this year — was one of the companies hurt by the market pullback.
“This idea very quickly got quite a lot of capital and the mandate for hyper growth and management went for it. They built the building blocks of what could have eventually been the largest second-hand car online car dealership in Europe,” says Lopo de Carvalho.
“This strategy did require quite a lot of capital investment. And halfway through it, markets turned, interest rates went up and suddenly the investor cash, that was there in plentiful supply to help actually build this growth, stopped being there.”
He says, in today’s market, valuations are a lot more “sensible” and founders have “much more risk-adjusted expectations than they had in the past” and DMG Ventures believes it’s betting on growth areas in the consumer space.
One of these is generative AI applications, and Lopo de Carvalho adds he’s particularly interested in education tools: the firm has already backed university textbook summariser Kortext and will soon announce a new investment into a GenAI language learning tool.
Other areas he mentions include “memorable experiences” (the firm has backed padel tournament Hexagon Cup and driving simulator company F1 Arcade), and “sustainable forms of consumption”.
Read the orginal article: https://sifted.eu/articles/dmg-ventures-new-fund-news/
