The final saw dating entrepreneur Koutsomitis competing against plumbing business owners Joseph Valente
to win over Sugar as a business partner and investor of £250,000, but she lost out and had to settle for second place. In his own words, here’s why Ross Williams, the CEO and founder of British online dating firm Venntro Media – which was listed in the Hot 100 with turnover of £42.2m – supported Sugar’s choice.
Earlier this year I was asked by the BBC to join the filming of the final episode of The Apprentice as an industry expert to judge the final two candidates, alongside Lord Sugar’s right-hand man, Claude Littner. Vana Koutsomitis was looking for £250,000 investment for her dating app, DatePlay. With a slick pitch and self-confidence to match, Koutsomitis came across as capable and worthy of investment. A background in investment banking and the success of her portfolio of existing businesses made it clear why she was in the final. Joseph Valente appeared looking like the lovechild of a Foxtons estate agent and a high street recruiter. He outlined his plan for a national plumbing business – what sounded like a nationwide version of the very successful Pimlico Plumbers. He needed the £250,000 for vans, staff and mugs of tea. (I jest – he’s an archetypical young entrepreneur who oozes potential). After the two finalists pitched their businesses, I met with Lord Sugar to offer my feedback on the two businesses and in particular, outlined the risks versus rewards of introducing a new dating app to the market. £250,000 of investment is barely enough to develop and refine an online dating app (because the first version won’t be right) and even with a national television show behind it, a dating app with such little funding would struggle to gain traction in the competitive marketplace. Over the last two years we’ve seen dozens of new online dating apps come – and dozens of them go. They may win awards, they may get some initial user traction, but unless they can successfully acquire new users at a reasonable cost-per-acquisition then they just won’t last more than 12-18 months. The fact is that industry-leading sites like JustSingles.com or Match.com (who also happen to own Tinder), will be spending £5-10 to acquire someone to register on their site. If they convert ten per cent of these registrations into paying members, that means they’re spending up to £100 to acquire a paying customer. Which means they need to generate more than £100 over the lifetime of that member to make any margin (let alone profit!). In the case of DatePlay, if they invested £50,000 into the product development that would leave them with £200,000 to acquire members using various channels (excluding the short-term PR burst from The Apprentice hype). At £5 per registration they would have 40,000 registrations for the app. This may be enough to provide proof of concept if all of those members are in a small geographical area, which they would need to be to give members a good chance of finding a suitable match. Fundamentally though, Koutsomitis would need to raise millions more in funding to enable her to scale the business – which, to her credit, she acknowledged in her presentation. As a result of the fundraising, both Koutsomitis and Lord Sugar would likely be diluted to such an extent by future investors that the value of their shareholding really wouldn’t be that attractive. The DatePlay concept is excellent – it would make online dating more fun, it would engage users and it could offer an algorithmic approach to matchmaking on mobile devices. This could be the antidote to eHarmony, whose advanced algorithmic approach doesn’t translate well to mobile due to the limited screen size of mobile devices. This makes it difficult for users to answer personality questionnaires. But as an investment DatePlay was too high risk compared to Joseph’s plumbing business where cash would go into company assets such as vans and tools, which are secure and have a resale value. And Joseph is certainly an incredibly investable character. Bright, driven, and hungry for success, he’s an entrepreneur’s entrepreneur and I’ve no doubt he will be very successful with the right mentoring. I would back him and so did Lord Sugar. His business was much lower risk with attractive sustainable returns. However, that is not to say that dating products are not worthy of investment. Our Venntro Ventures initiative is designed to give apps like DatePlay a real chance of success by giving them immediate access to millions of online dating customers around the world. We hope to see the first of these apps hitting the market in 2016. Congratulations to both Vana and Joseph – it’s great to see such a high calibre of entrepreneurs coming through The Apprentice. They’re both great role models for young entrepreneurs and I wish them the success they deserve in 2016.
Read more on the dating industry: Romain Bertrand, UK country manager of eHarmony.co.uk, was quoted by Koutsomitis during her final pitch as telling her: “I think it’s definitely possible to launch a first version of the app and operate it without heavy marketing for under £250,000.” He observes the final outcome of Sugar’s choice.
I can understand why Lord Sugar was so tempted with Vana’s business plan – the online dating industry contributes more than £150m to the UK economy every year, and it’s a growing market – our own research predicts that by 2031 more couples will meet online than offline. There’s no doubt that Vana was a wonderful candidate – and in fact possibly the stronger of the two finalists overall. However there were fundamental issues with her DatePLAY app and in the end Vana and Lord Sugar were just not a good match. While we have seen that ‘gamification’ – by which I mean turning the functionality of the app into a game – can be popular, forcing people to actually play a game before receiving a single match is asking a lot of the consumer, and cannot provide the volume of matches that customers want. Even when you match people scientifically, just like eHarmony does with the Compatibility Matching System, people still want choice. I don’t believe that Vana fully appreciated how much investment it takes to get a dating app off the ground. Not only does marketing require ongoing spend, but more importantly you continuously need to invest in making your product the best it can be. From research and development, to evolving our algorithm, we’re constantly updating eHarmony to produce the best possible matches for our members. eHarmony has been profitable since day one, when we launched in the UK in 2008, but Vana’s aim to bring in such a large profit so soon after launch is incredibly ambitious. The main online dating industry brands have spent years growing trust and reputation – this doesn’t come overnight. Vana says that her app uses ‘scientific’ matching, but I’m yet to be convinced about how scientific it really is. Matching is the most fundamental part of online dating and it can’t be compromised – if members don’t like their matches, then they won’t stay around for very long. That’s why eHarmony uses 29 Dimensions of Compatibility which factor in the important things for a lasting relationship, like core values and personality traits, to provide our members with better matches than anywhere else. It’s true that money can’t buy you love, but when it comes to the online dating industry a significant investment is needed to help your idea get the attention it needs, rather than getting dumped.
Share this story