Deep Dive: Bumble (Pre-IPO)
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What do they do? Bumble (the parent company) operates two dating apps called Bumble and Badoo. Bumble is U.S. focused and for a younger audience, and is famous for its “women-first” approach to online dating. Badoo is older and big in Europe and Latin America.
History? Bumble and its co-founder Whitney Wolfe-Herd have a crazy background. Herd was a VP at Marketing at Tinder, but had a falling out with the company (lawsuits are still going to this day). She was then inspired to come up with a competitor to Tinder but focused on improving the women’s side of the equation. Thus, Bumble was born. This doesn’t cover the whole story but Ryan gave a great overview of the history during the episode.
Industry? Bumble operates on the online-dating industry, which is small but growing quickly. Estimates are for $3.2 billion in revenue in 2021, which will mainly come from Match Group and Bumble. Bumble’s main competitor is Tinder. Paying user penetration for these apps is low, at less than 5% in 2020.
Management? CEO is Whitney Wolfe-Herd, the founder. She is 31 years old and still has a 19% stake in the company.
Valuation? Since this is pre-IPO we did the valuation prediction game. We thought fair valuation would be something around $5 billion, but that it will go out at a $10 billion+ market cap.
Earnings? $416 million in revenue first nine months of 2020. It has shown strong FCF margins in the past but has reverted back to around break-even for the past few quarters.
Balance Sheet? Again, tough to evaluate since it is pre-IPO, but it has $100 million in cash currently and will likely have over $250 million post-offering. Bumble also has $825 million in debt and carries $1.4 billion in intangible assets on its balance sheet.
Potential Competitive Advantages? We had the female-first brand, network effects, and the singular focus on improving one app.
Potential Future Growth Opportunities? Growth through acquisition, international markets, and partnering with restaurants or hotels to help with dates.
Highlights? Online dating is a clear tailwind, female-first could differentiate themselves, and impressive pricing power with paying users.
Lowlights? The big lowlight we found was the company paying out large bonuses to executives, including Herd, after breaking from its private equity deal. That was a red flag for us. Also, the tumultuous history between Herd and Tinder does not paint Herd in the brightest light, although with stories like that there is clearly bias from both sides.
Disclosure: The author is not a financial advisor, and may have an interest in the companies discussed.