How Coffee Meets Bagel Bridged Equity Rounds and Became Profitable With Funding From Braavo
Coffee Meets Bagel (CMB) is the well-known “anti-swipe” dating app, where over 90% of users are looking for serious relationships. Since its launch in 2012, CMB has made over 150 million matches, thanks to its personalized algorithm and established brand catering to more serious daters. Though it is one of the most popular dating apps in North America, CMB has become the fourth highest grossing dating app in Southeast Asia, where the company’s mostly organic growth and word of mouth marketing have driven adoption. After appearing on Shark Tank in 2015, and famously turning down a $30 million offer from Mark Cuban, CMB went on to raise over $20M in funding, and grew to over 50 employees.
Pressure from competition and evolving capital markets created the need for a bespoke funding solution
When Quincy Yang joined as CMB’s Chief Financial Officer in 2018, he was bringing with him over 15 years of financial and operational experience working as an executive in high-growth technology companies, investment banking, and strategic consulting. On the heels of CMB’s Series B financing round, it was an exciting time to join the company, when capital was being deployed for hiring, marketing, innovation, and product experimentation. But no one could have anticipated the COVID-19 pandemic and the ensuing challenges that the entire dating industry would experience just two years later.
“By virtue of COVID-19 changing how people work and interact, people were less likely to have serendipitous conversations such as which dating apps you’re using and about your dating life generally,” Quincy explains. “So across the industry, natural organic word of mouth declined, but it’s not like the need for dating went away.”
Faced with heightened pressure from competition and changes in user behavior, CMB knew that effective marketing would be an essential component to its success. “So we doubled down on our marketing efforts and how we think about our brand holistically. We had to rethink our strategy and identity as a company,” Quincy says.
To implement their new marketing plans, they needed additional capital. Not yet ready to raise another equity round, Quincy began exploring options including venture debt and revenue-based financing (RBF) ultimately deciding to accept an offer from a well-known RBF provider. Unfortunately, it wasn’t as straightforward a path as they had hoped: after a year of working with this partner, they suddenly changed their lending model and discontinued providing the funding that had previously been committed. “Everything ended up changing, and it changed at a time when we needed the capital most.” Quincy knew they needed to find another option quickly, but he also wanted to be extremely diligent about their selection in light of this experience.
Flexibility, speed, and favorable terms made Braavo the right choice as a funding partner
While Coffee Meets Bagel has a long history in the dating app market and sizeable revenue, venture debt lenders struggled to understand their business model and growth trajectory, or they had narrow funding criteria, like only working with SaaS B2B products that had naturally lower churn. “I spoke to probably 15 different funding partners of all types, to see what would fit our company and our situation the best,” Quincy says. “We were fortunate to come across Braavo. They designed a solution which was similar to venture debt, but uniquely customized for our business model given their familiarity with B2C subscription apps. For us, we needed the flexibility that Braavo brought, the speed at which Braavo was moving, and the clarity of the terms. Furthermore, the terms that Braavo offered were very favorable relative to other prospective partners.”
We were fortunate to come across Braavo. They designed a solution which was similar to venture debt, but uniquely customized for our business model given their familiarity with B2C subscription apps.
A strong financial plan paired with a reliable funding partner leads to profitability
Since partnering with Braavo, Coffee Meets Bagel has tightened up its business operations, given that profitability is the best way to protect your company against future macroeconomic headwinds, Quincy explains. “We have very strong financial discipline, so we were able to get to EBITDA profitability pretty quickly, which aligned well with Braavo. Good business model, good product market fit, good financial discipline, that’s a good combination for considering a funding product like Braavo.” With the capital from Braavo, CMB was able to continue its marketing investment and significantly increase new user registrations in 2022.
Good business model, good product market fit, good financial discipline, that’s a good combination for considering a funding product like Braavo.
When it comes to exploring funding options like venture debt or revenue-based financing, Quincy recommends that financial operators have a strong 12-18 month strategic plan in place. “You should understand your financial picture very well, and know where to put your investment and what you’re going to get in return. Unit economics for your marketing spend become very important to understand, and how to manage your company’s cash flow accordingly.”
By teaming up with Braavo, Coffee Meets Bagel has remained a category leader among the competitive dating app market, and is another example of how non-dilutive funding from Braavo powers some of the world’s most well-known subscription app businesses.