We’re in a huge boom of VC-backed media start-ups with tons of investment in digital media brands that are growing because of the obvious shift of consumer attention from print and radio to mobile and internet. And if you work at one of these, you might be wondering how much your equity is worth or when/what the co’s exit prospects are.
There’s a pretty neat article on Medium called The Art and Science of Online Media Exit Valuations. It’s a simple 101 about how media companies are being valued these days based on interviews with real media investors and detailed research on these types of companies.
If you’re just looking for the so-called “multiple valuation” punchline, here it is:
Digital media companies tend to sell for between 2.5 and 5 times (2.5–5x) revenues from the previous, or “trailing,” 12 months.
Most digital media companies sell for about 8–12x EBITDA.
I find it interesting how investors prioritize different types of revenue. Digital media is generally very TBD in the business model department and part of the excitement to me is how much experimentation we see in this space: loyalty programs, tip jars, paywalls, merch, licensing… but according to Dorian Benkoil and Rafat Ali’s research, four areas add big value. These could kind of be used as a playbook for CEOs and strategists trying to bump their valuations:
- Subscriptions services — because these are much more predictable than advertising
- Paid research
- IRL events/conferences/parties, and…
- Databases of user info (very lacking for co’s in the distributed media world)