Ad space for equity
Air for shares
Could an unusual venture-capital model be taking off?
IN AMERICA, venture capital is plentiful.Not so elsewhere.
In Europe, a handful of companies are helping struggling start-ups with an unusual model: investing advertising space in them instead of money.
Start-ups usually get their initial seed funding-a few tens or hundreds of thousands of dollars-from family or friends.
A venture-capital firm won't step in until the firm is ready to raise maybe ten times that amount.
In America, intermediate sums tend to come from informal "angel investors", typically entrepreneurs who have made a decent bit of money from their own start-ups and want to invest some in projects they like.
But outside America's technology hubs, such people are rare.
However, start-ups of that size are often making their first baby steps into the market and need publicity.
Aggregate Media Funds, a Swedish firm started in 2002, pools excess advertising space provided by 15 Swedish media companies that are shareholders in the fund, and gives it to start-ups in return for an equity stake (it also plans their marketing for them).
If the firms do well, they buy back the equity in cash, which goes to the shareholders, with a cut for the fund.
Patrik Rosen, Aggregate's boss, says it has made some 120 investments-in both start-ups and established firms that want to advertise a new product or a stock offering-and completed around 80 "exits", though he won't disclose how much money has been made.
Similar models have taken hold in Germany.
ProSiebenSat.1, a television company, has been offering other firms advertising in return for equity or revenue shares since 2009, and reported making more than