Interview with Chris Sheldrick what3words on raising $80m+ in media capital
what3words has built the simplest way to talk about location by enabling people around the world to identify and share any precise location using just three words.
In a recent fireside chat with Chris and led by Diana Florescu (MFG) at Wolves Summit in Vienna, he talked about how they came up with the idea, the underlying maths of what3words and how they raised media capital by partnering with some of the world’s largest media houses to scale what3words internationally.
Diana: Chris, a lot of people have heard about what3words. Can you tell us how it actually works?
Chris: what3words is pretty well known in the UK, but may not be so well known here. So I'll just explain the concept: we take the whole world, and we divide it into three meters by three meters. There are 57,000,000,000,000 three square meters in the world, and we name each one with a combination of three words. It might be something like ///table.chair.spoon or ///coffee.banana.custard.
If you think about your house - we have a three-word name for your front door, and for your back door - they are unique, they are fixed, you can't change them. Every three-meter square in the ocean, the North Pole, they've all been named. We do this because it is easier than a latitude and longitude, which is 16 digits, which is quite complicated for the average human brain to remember. So just by saying ///index.home.raft, I'm now talking about a three-meter square in the world somewhere and I can use that for my delivery, to put in my car navigation, just like you would do a usual address.
If you live somewhere, like I do, on a farm in the UK where your address points to the middle of a field, we don't get any of our deliveries at my house, no one ever finds my house, it can be very useful for you. In many places, addresses work, and that's okay, but in many places, addresses don't work. And that's why we think that three words for three meters is a nice global solution.
Diana adds: As any other digital startup would do, your team started promoting what3words using digital channels and digital ads. You soon realised that digital ads will only get you that many installs, or that much awareness, and regardless of how much ad budget you have the company will start reaching diminishing returns. So you took a leap towards TV advertising.
Diana: Can you tell us more about your approach to advertising, both digital and traditional? Also, how did you learn about media for growth?
Chris: From 2018 to 2019, we did a bit of a mixture - we did digital channels. We also had a huge boost from our emergency services in the UK: 85% of police, fire and ambulance services, you can call 999, and if someone has a heart attack in a forest, you can say: “I need help now at ///word.word.word, and as they have it in their control room systems, they will come and rescue you. This has generated a lot of publicity for us until the public has this app on their phone. That was an amazing publicity driver, and so were our digital channels.
Right, when we were going really big on digital, as anyone who runs digital ads will know - your costs will rise as you do, and your creatives start to fatigue. So we were thinking: “We need to do more than just digital”.
It was a bit of good fortune that we got an email from Channel4, saying: “Would you consider media for equity?”.
Diana: How did the first TV Ad campaign go?
Chris: When you're used to starting with digital as most of the companies these days are, you get these amazing metrics of all the platforms, you'll know exactly what hours your ads were served to who, how long they watched it for what they did afterwards.
When you look at what TV offers you, your media scepticism goes off the scale. And you have to spend a lot of money to make your ad, then just try it on TV. And if it doesn't work, that's a really expensive experiment.
I think that was our scepticism too. We knew and hoped it worked.
Our CMO and people in our marketing team had been veterans of the advertising industry when TV was a really central part of any consumer campaign.
We had a good feeling it was going to work, but somewhere in our head there was still the question: “Can we make the jump from digital and the amazing stats to TV, where it's going to be more of an experiment?”.
As it was media for equity, we got offered a discount, which is good because the TV channel wants to sell ad space. So we thought: “Great, if it's discounted, we'll work really closely with them, they'll be invested in us, and we can closely monitor this campaign and get some good stats. We'll give it a try.”
And it worked really well.
Diana: what3words raised several media for growth investments. How does it differ from raising more traditional rounds of funding?
Chris: Indeed, a media for equity deal is slightly more complicated than pretty much every other deal you do, not insurmountably, but you're effectively doing two deals.
On one hand, you're selling them the investment, on the other hand, they're trying to sell you ad space. You have these sort of funny phone calls where you're co-selling to each other. Still, the general structure is to make two deals but also link them.
Another thing that might be a bit unconventional is when shares are issued because normally you would do an investment deal: money comes in, and shares are issued. That's not quite the same in media for equity.
And if you've got existing investors who are not familiar with the model, they might need time to look at it, understand how it works and get comfortable with it.
We have done probably 5 of these deals by now and they have 5 totally different contract models for how these are done. It is different in every country, it's different in every case.
Also, something to bear in mind with media for equity: sometimes you get 100% and no cash changes hands. Sometimes it's a bit of both, you might have 80/20, so you have to pay 20% of it in cash, and you pay 80% of it and your shares, something like that.
All of these are slightly different deal by deal.
Diana: At the end of 2021, what3words has raised 10m USD in media capital from Brand Capital International to expand the business in India. How was your experience entering such an enormous market?
Chris: India was an interesting challenge for us - billions of people.
While trying to enter such a market of a billion people, to get a consumer network effect where everyone's heard of you - the starting point is to achieve some good level of consumer adoption, but also interest and awareness amongst our business targets.
So the Times of India Group, which is Brand Capital International, who we did the deal with, has a lot of their media assets business focused. For example, Times of India Newspaper is read by the business community, so we will do a lot of ads in there, as well as stuff which general consumers will see.
Another great thing - airport billboards. We were a bit unsure because we have never done them before. But they've worked great. You can imagine people are sitting normally bored, waiting for their flight. And they'll just be staring at your ad. And our system actually works very well for it because it's quite conceptual. It's like 3 meters, 3 words, people are just staring at it, like: “What is this?”, then they'll take the time to download the app and play around. It's been a remarkably effective tool for us, also taking into account the people who are flying regularly are more likely to be business people.
So once that call comes in from us to a delivery company in India going:
“Do you want to make more precise deliveries with what3words?”.
They’d say: “Yeah, I've been reading all about this. I do.”
And they have a chat with us. And then they say: “How many consumers have you got?”
And we say: “Well, a lot because we've been running consumer ads around the country.”
The campaign and the sheer volume of assets that Brand Capital International, The Times of India have is really good for a company like us, who are trying to do half consumer, half business in a single campaign.
Diana: What were the key learnings when looking back at all the campaigns and media partnerships closed over the years?
Chris: At what3words, out of 170 people - 40 to 50 work in our marketing team, which is a pretty big team. We're making a lot of assets in-house. And so what we will often do before we put it on TV, we will run a few variations of it on digital channels of which you get same-day feedback.
You might think: “Is variant A better than variant B?”. So by the time you actually send your asset to the TV channel you've got some feedback based on how it performs on digital channels.
But if a piece of creative works well digitally, it doesn't mean it will work well on TV or vice versa. You're still just getting some kind of feedback if you've got a good engine that you can go in, straightaway. And if you do good translation and localization, you can even go right.
But for any companies out there thinking about doing media for equity/media for growth, I would say: “Be really experienced at running digital, making creative, and knowing what works for your company. Otherwise, if you get it wrong, it's going to be expensive, especially if you put a lot of money into one TV campaign and you haven't got it, right?
Diana: You mentioned earlier that some media investors had significant input beyond media allocation. Can you tell us more about their involvement with the company?
Chris: I definitely think that they treat you very well, in terms of helping you get the best campaign. And as someone coming into this, who didn't know much about TV advertising before, you can be just given your TV slots. And if you're not sure what you're hoping for, that's going to be difficult, but they'll really try and do get you spots with diverse reach.
What you don't want to do is just be on the same ad break at 11:30 PM, every day, in the same show, where you're going to hit 20,000 people, many, many, many times, who are going to get very bored of your ad.
That's one end of the extreme.
What you want to do is a Saturday night slot, when everyone's on the sofa watching that evening show where you reach a huge part of your population at once. You should really push for those slots and get them.
So I think just having a better strategic relationship with the media owner, explaining to them what are you wishing for: the World Cup, UEFA EURO etc., because a lot of people are watching. They will fight for you, internally, to make sure that their portfolio company gets that spot.
If you're just a cash-paying customer, it is harder to get the same and you might just be having to take that 3 in the morning slot that you didn't really want.
Diana: How does the negotiation process actually work?
Chris: The media owners want to normally do a specific range of money and often as the startup, you probably want to go smaller, to do a test, check if it works, and then do more. However, they may want you to commit more at the start, so you have to try and find a middle ground there.
Another thing to consider is that their deals are structured in a way where you're probably encouraged to do that split, where you choose some TV, some radio, some out-of-home and in a way that suits them.
But you have to then push back if you think that your product is gonna go differently.
In our case, it might have taken me about a minute to explain the concept. In some markets, adverts are normally 15 seconds, so we have to make it very clear that we cannot explain what3words in 15 seconds, it’s not possible. We've tried it, many years, but it’s always 45 seconds or a minute or longer.”
As it is very irregular to run a 45-second advert, sometimes we get hung up on the first call, and the media owners are like: “This isn't unheard of.”
We do often agree on a middle ground, but I think just knowing your own company, knowing what works and not being afraid to be a little bit pushy, like in our case, ad length was one of the key things we pushed for and then funnily enough, in this ad, there is a 30-second version. This was the 40-second version, and all you get in the extra 10 seconds is more British awkwardness. The 30 seconds one, we just cut 10 seconds of awkward squirming, but for me, the extra 10 seconds of awkwardness is what makes the ad and maybe why it won the awards.
So I think fighting for what works for you is important and often you'll get there.