Welcoming Bumble To The Rise Portfolio
Why we are investing in Bumble, the dating app where women make the first move.
“Archaic gender dynamics and old-fashioned traditions still ruled the dating world, this led to all sorts of unhealthy dynamics that ultimately disempowered women and created unnecessary pressure for men”, Whitney Wolfe Herd, CEO of Bumble on the dating culture.
Last week was abuzz with news of Bumble becoming a public company. Bumble is an unconventional dating app where women make the first move. It IPOed last Thursday with its price soaring as high as 77% and closed the trading day at $70.31, a 63% gain. Founder and CEO Whitney Wolfe Herd, 31, is the youngest female chief executive to take a company public in the US.
Why we are adding Bumble to our portfolio:
- Solid Growth Potential
Even though our goal is not explicitly about beating the market, we will not invest in a company with no growth potential. We believe in thinking like owners, which means we like to hold onto businesses that show massive potential for future growth. Bumble meets this standard.
A dating app that started in 2014/15 and under 7 years has grown to become the second-largest dating app in the US. It grew from a 10% market share in 2017 to 19% in 2020. A 90% growth between that period. We believe Bumble will continue on this trajectory, which would mean an increase in market capitalization and above-average return on investment.
Analysis by SensorTower
Speaking about what the next direction is for Bumble, CEO Wolfe Herd said: “we’re very focused on aggressive international growth”.
Having won the heart of her users in the US, we are confident that the mission of the company in the international market will meet great success as well.
Bumble’s ambition is beyond dating, it hopes to become “THE global women’s brand.” To that end, Bumble has been improving its product verticals.
In its S-1, under the growth strategy, Bumble said, “our brand and product are designed to encourage women to go after whatever they want, not just in love but in life and work as well.” It noted that this has always been the plan and as such it has built the flexibility required on its platform from scratch and mined data that will give insight and inform product development.
Bumble is in the early stages of building products for platonic friendships and business networking with its Bumble BFF and Bumble Bizz, respectively. Bumble plans to begin investing in marketing and product and to develop a monetization strategy for Bumble BFF, Bumble Bizz and other potential new categories already. It will be exciting watching these ambitions unravel before us.
- Founder Led
Wolfe Herd departed Tinder, the number 1 dating app in the US to found Bumble in 2014, having accused her co-founder at the former company of sexual harassment and discrimination. Her deep understanding of the space and her commitment to a new vision of dating and beyond means she was instrumental in creating the two leading dating apps in the US.
Wolfe Herd, just like CEOs who have made a dent in the world, is hyper-focused on customers, growth, has great experience in the industry and with much more skin in the game. She’s driven by a sense of mission that we like and the clarity of purpose that we look for in every founder that we invest in.
If history is indicative of the future, companies who have towed this line end up winning the market and making a good return for their shareholders. Bumble could potentially 5x from where it is today. Which will bring its valuation to $70B.
“You are signing up for our very long road ahead of us to try and make relationships healthier and more equitable and to build a brand that resonates not just with women but makes connections better for everyone,” she said.
Data suggests that the market agrees with her mission and ready for the long ride as well. In the period ended 2019, research conducted by sensortowers revealed that Bumble is the fastest-growing dating app in the US. Bumble saw a 135% increase in terms of consumer spend on the app relative Tinder which comes second where consumers’ spent only increased by 62%.
Bumble is beyond the dating app. However, its dating app segment turned its first profit in 2019. It made a profit of $86 million on revenue of $489 million. Badoo, its segment which serves the Latin American and European market, became profitable in 2010, long before Bumble even existed.
According to its S-1 though, Bumble generated $377 million in revenue and a net loss of $84 million in the 9 months ended September 2020.
Bumble generates most of its revenue from core service offering via subscription and in-app purchases. Only 3% of revenue is generated from advertising and partnerships.
According to its S-1, for the nine months ended September 2020, their Annual Revenue Per Paying User (ARPPU) fell to about 4% YoY. Although paying customers within the same period increased by 30% bringing the total paying customer to 1.1 million.
Bumble has a lot of years ahead of as Wolfe Herd earlier noted. And with a laser focus on increasing product offering, customer satisfaction and improving operational performance, we expect ARPPU to continue to increase and consequently the revenue as a whole.
Execution risks remain and there are challenges ahead for Bumble in gaining and maintaining market share. But we believe Herd and the Bumble team can deliver the results.
That is why we added Bumble to your portfolio.
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