Chit Chat Stocks - Bumble (BMBL) | Deep Dive

Episode Date: January 21, 2021

Bumble is an application-based dating app. On Bumble female users have the power to make the first connection or contact unlike many of the other application-based dating platforms. Enjoy this week's Deep Dive. Subscribe to 7 Investing with the code "CCM": https://7investing.com/subscribe/ Follow Ian and check out his work on Twitter: https://twitter.com/IanGrayLive Follow Chit Chat Money on Twitter: https://twitter.com/chitchatmoney Subscribe to Chit Chat Money on Youtube: https://www.youtube.com/channel/UCG5Ni-SI-jyrEsoNUhqftNQ Company Background | (2:04) Industry | (6:08) Management & Ownership | (8:30) Valuation | (11:20) Earnings | (14:24) Balance Sheet | (17:08) Competitive Advantages | (19:24) Growth Opportunities | (22:24) Highlights & Lowlights | (27:48) More or Less Interested | (36:08) Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. On this show, hosts Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investment. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are not financial advisors. Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guest is not formal advice or a recommendation. Now, please enjoy this episode. okay welcome in this is the thursday deep dive uh my name is brett schaefer i'm here with ryan henderson and ian gray ian how are we doing today down in arizona yep doing well yeah both our uh nfl teams are out of the playoffs so not much sports to watch over the next few months it's

tragic it's going to be all investing all the time right uh but first before we get started we're talking about bumble today pre-ibo company but one that i think a lot of people are interested you wanted to talk iac i did yeah i made a uh last second audible and you weren't happy you made a strategic decision we can talk iac another time uh but first we got to talk about our friend at seven investing what analyst do you want to talk about today we want to talk about someone like matt you know he's the one we know the best sure yeah i mean he's we call him i think a pbf podcast best friend yeah he's been on the podcast the most times uh but yeah he's like a fintech expert he really knows that industry well uh i always look forward to it i mean i look

forward to all their analyses but uh i really look forward to his because that's sort of an industry that i usually like to follow it's exciting definitely fintech expert and more of a standard he leans more towards the standard value yeah it's hard to describe someone with on that spectrum, but you know, kind of more towards the value on that spectrum. And if you want to be a member of set investing, you can get $10 off with our code CCM at checkout seven bucks for your first month. All right, Ryan, you want to talk about Bumble? Sure. So currently in Bumble just filed their S1. So they are not public. What are we doing? Like guesses for valuation? Yeah, so I have the two questions on valuation are, what will the valuation be that you would

be interested in? And what valuation do you think it will go out at? So two separate questions should be fun to talk about okay uh but currently bumble operates two separate dating apps actually so it's bumble and badu uh i think i'm saying that right maybe it's badu but uh bumble itself is a woman centric dating app so women have to make the first move and there's actually 30 more women than men on the app i don't know if they just put that on the s1 so that more men would join but uh yeah maybe yeah yeah that's a good free customer acquisition yeah and uh but do on the other hand is more popular in europe and latin america and it's actually been around for a long time they were really one of the pioneers in online dating but but they're they're sort of

more mature now bumble's growing much faster uh than badu and combined the two have more than 40 million monthly users and they monetize those users through a freemium model so the app is free to use but there are certain in-app features that cost money and that can they say it can provide a higher chance of connecting with someone um there and there's subscriptions which can give you easier access or more choices that kind of thing but then there's also these a la carte features so if you matched with someone and then you like unmatched uh you can pay like one dollar 99 cents to go rematch that's kind of the in-app one-time features that i'm talking about but the history about the company is actually really interesting uh kind of an intriguing story it was originally

founded by Whitney Wolf Hurd in 2014 after she left Tinder. She was the former VP of marketing at Tinder and an early employee, but her departure was pretty messy. And after leaving the company, Whitney filed a complaint with California courts citing she was sexually harassed and discriminated against at work. Honestly, from the outside looking in, it seems like Bumble was built as a counter to Tinder. Spite. It sounds like it was born out of spite. And she even took some shots at tinder in the s1 i have a quote here it says bumble was founded because we noticed two different yet related issues in our society antiquated gender norms and a lack of kindness and accountability on the internet we observed that women were often treated unequally in society

especially in romantic relationships at the same time social networks created possibilities for connections but they were focused on connections with people you already know and lacked guard rails to encourage better behavior online sounds a bit like a shot at tinder uh maybe dating apps in general. But Bumble was a success and it grew really fast. It seems like she's really good at marketing. And it also just happened to have really good product market fit. I'm sure she was probably thinking about this while she was at Tinder. And in January of 2020, there was a merger between Buzz Holdings and Worldwide Vision Limited, which it looks like are just the parent companies for Bumble and Bidu. And the two are now incorporated under the Bumble brand, but it

made the financials pretty messy and it looks like there were a lot of expenses related to that merger that contributed to their switch from profitable to unprofitable over the last nine months because if you're looking at that you see the full year stuff for 2019 you're like oh that was a hell of a year and then you look at the last nine months very unprofitable um and another red flag that i thought was red flag was it said on october 26th they uh changed their auditor yeah uh but turns out they brought that was for that they use ernst and young uk that was just for the 2018 and 2019 numbers of the do uh and then they used ernst and young us uh for the combined financials and for bumble so it kind of it made sense it just looked like a red flag on

the surface but yeah that's pretty much all the history what they do does that all make sense i I mean, it's pretty intuitive, but yeah. Fascinating tale. And maybe they'll have a documentary one day, see who actually wins and becomes the number one app. But I'll talk about the industry landscape and competition. You know, you can group the company within the online dating sphere. You know, there's web-based things and there's app-based things. They've essentially merged into one industry over time.

Online dating as a whole is growing quite rapidly. I think we all know that. uh all other forms of meeting people for dating uh at least according to surveys are declining and online dating is the only one that's totally skyrocketing so it's taking the entire market by storm at least over a longer period of time i think i mean if you look back over the last decade you can see just tremendous growth rate and the market is estimated to be around 3.2 billion dollars in revenue in 2021 with the majority of the revenue going to match group so they're very dominant in this space match group is bumble's biggest competitor and

tinder is the bumble apps biggest competitor so bumble as a whole they're competing with match group but bumble versus tinder the two apps those are kind of the big competition i know hinge gets tossed into there but it's a little different yeah i think it's tinder one uh bumble two and hinge three at least here in the u.s yeah and that's a big uh it's a wide gap between two and three, at least right now, although hinges going quickly, but that's not what this is about. Market penetration is pretty low overall. So at least for paying users, I think it's below 5%, even the United States, which is the most mature market. And that is expected to grow at about 10% for the foreseeable future. Although again, you know, we always take these with a grain of salt,

just because someone projects that it's going to grow, it doesn't mean it's going to actually grow. And lastly, it should be noted that a lot of people use multiple dating apps. So just because someone has tinder does not mean that they won't also have bumble a lot of people have both it's just what everyone has the better value proposition at the moment um and it's it's unlike a like a spotify subscription or other subscriptions where it's you only want to get everything you know there's value people have for going to both i think it's a bit like gaming like most people don't only play one game uh at a time i mean at the exact time they do but usually they're filtering between multiple games. You can't play all the games or you can't be on all the apps

just because it's a little too time consuming. But yeah, most people, I imagine if you're on the dating scene, you have multiple apps at once. Definitely. All right. Ian, you want to talk about management and ownership? Yep. So like Ryan mentioned, Whitney Wolford is the CEO and founder. She founded the company back in 2014 after the fallout from Tinder. She originally was actually looking to do like a female only social app, which is kind of interesting, and then ended up talking with someone who became an investor and converted it to this idea of a dating app. She's about 31 years old, definitely a younger founder, but she's also very accomplished in the industry with her success with Bumble and also her career at Tinder for a couple of years.

She said that the model is based on the idea of the Sadie Hawkins school dances where the girls ask guys to the dance and just that that's kind of the that's been popular in schools and thought and she thought it would be popular as an app as well. One thing to note about the ownership structure is that in 2019, I believe Blackstone took a majority stake in the company from a previous majority holder who had about a 79% stake in the company after he had allegations of misconduct. And so that's when private equity entered the picture. And like I said, Blackstone took a major piece of the company as part of kind of an effort by them to diversify into higher growth opportunities through private equity. So it has this PE backing at this point, which will

make, which will be important as we look at the balance sheet as well. But she received about $125 or sorry, $125 million payout as part of the sale to Blackstone and part of a kind of a recapitalization of the company. So again, I'll get more into that in the balance sheet. But she seems like kind of a great example of a mission first founder, and how that can sometimes lead to a company that's really lucrative for shareholders. So just that there's some companies that you think are really mission focused, but don't really generate profits. This is a type of company that I think its mission and trying to be woman led and woman first really leads into creating a little bit of a competitive advantage for the company yeah she tells a good story or

they they tell a good story yeah it also it kind of feels like stakeholders over shareholders right now uh at this point in their life cycle just because which isn't necessarily a bad thing sometimes when you're really focused on stakeholders you can uh get good returns but yeah and i just add one thing to that i think that's this is an interesting situation where sometimes we hear stakeholders over shareholders and that makes me a little bit skeptical But in this case, I think putting stakeholders first really generates those generating potential returns for long term shareholders. Yeah. And it looks like, I mean, it helps with the quality of the business and their unit economics or whatever, you know, all that stuff. Their margins look pretty good. I mean, very similar to match groups. So no complaints there.

All right. I'll get into the valuation. We're pre IPO here and it should go out in the next month unless they, you know, see some sort of not enough demand or too much demand or they don't want to price and actually go public so we don't have real valuation numbers but we'll play the prediction game after this i just want to do a quick comparison with match group so bumble has about 2.4 million paying users match group at the end of the same time period had 10.8 million so that's about 22 percent of the total users for bumble uh it's not apples to apples because there's you know growth that has to be priced in or the type of apps matter, ARPU, stuff like that. But if the market gave Bumble the same subscriber multiple for paying users

as it does to match, it would have a market cap of around $8.5 billion. And after that, what do you guys think? What valuation would you be interested in Bumble at, if at all? And what valuation do you think they will go out at? Ian, do you want to go first? Sure, I can go first. So I think I'd be very interested in the company if it got out at about a $5 billion dollar valuation um you know that puts it at about 10 times sales um and i think you know

bumble's growing quicker than that but it's uh or sorry bumble's growing quicker than the overall business but i think that's a fairly fair um valuation i think it's probably going to get out somewhere closer to 20 times sales and kind of the 10 billion dollar range but yeah right yeah uh i mean i think it will get like a very similar similar multiple to match because this is like one of those businesses that has a very direct comp for people to look at and so they're like they're just gonna price reference off of match uh and the growth rates for the combined entity of bubble bumble so badu and bumble or whatever over the last nine months i think has actually been pretty similar uh to match group yeah i wouldn't i would be surprised i'd be surprised if we got a premium

overmatch considering the match is a little more profitable over the last nine months um i don't know i i would i'd be yeah i'm probably in the same category as ian below five billion is exciting to me but yeah i'd agree with that too i think it might go out at a higher valuation no i think i predicted like 12 billion just because people see that bumble growth right Sorry, Bumble's revenue growth at like 70%, which Ryan will probably get into, but that's on its own, right? It's not 70% anymore. It's like 30%. Oh, for 2019, sorry, right? Yeah. I guess if you do the 2019 numbers at 70% over the last nine months versus the nine months prior, it's like 30-something percent, I think.

Okay. Yeah. I mean, that's growing faster than Match, so they might put that as a premium just because they think that Bumble could, you know, it's going to be the majority of the revenue soon. But I don't know. I'm also kind of just thinking with this market, with this IPO market, I would not be surprised if it went out at $12 billion. Yeah, I mean, yeah. I don't know. I'm not going to be able to predict the valuation on day one, but should I get into the earnings? Yeah. Okay. I'm going to get the last nine-month numbers, but remember the merger was completed on January 29th of 2020. So that first month, the month of January, was not the combined entity, but I'm taking the combined numbers, if that makes sense. So they had $416.6 million in revenue for those nine months, up 15% year-over-year. 61% of the revenue is from Bumble.

39% is from Bidbu and other revenue. Bumble specifically was growing revenue at about 25% year-over-year over the last nine months. So a significant slowdown from that 70% number. The combined company had a net loss of $116.7 million for the period. That's a gap, obviously. and then versus $69 million in net income from the prior year or the prior period. Big difference between their net gap numbers and adjusted EBITDA because of those one-time merger-related expenses.

They had about 26% adjusted EBITDA margins. Take that with what you will, but that's sort of their adjusted EBITDA numbers. For the last nine months, I know that seems like a huge difference between that and gap, but pretty much cash flow break-even for the period. In 2019, though, if you're looking for a normalized year, they had about 20% free cash flow margin. So it's a high margin business, naturally. But there were those one-time expenses that really hurt them this year. And then as of the last reporting date, the combined company had 42 million total MAUs and 2.4 million paying users, most actually coming from Badoo.

But Bumble's average revenue per paying user is like twice what Badoo's is. So that's why they make up so much in revenue. I would say it's worth noting, don't compare apples to apples paying users when you're looking at Match Group and Bumble because Bumble includes anyone that purchased a subscription or an a la carte feature. And a lot of people just purchase like a la carte features,

one-time things without actually buying the subscription. Match Groups are average paying or average subscribers. So it's only subscribers for that period. Yes. Not a la carte features. And they do their ARPU differently. So you're going to see their ARPU for Match Group be below a dollar. And that is because they put it over their entire user base and they have like over 500 million or whatever it is.

You know what I mean? So theirs is less than a dollar and Bumble's is over like 25 or something like that. That's just because they're using it too differently. I'd assume that Match Group with their paying users would be quite similar. Right? Yeah. Does that make sense? I mean, I'm not on Bumble, but I assume the subscriptions are similar cost.

Yeah, very similar price. All right. Ian, you want to hit balance sheet? Yep. So with these pre-IPO companies, we've done a few of them now, but you always are going to want to check these balance sheets again once they make their first report post being public because there's a lot of restructuring involved and things that go on when a company goes public. But as of now, they have about $100 million in cash, a little more than that. once they get the proceeds from the IPO, that's likely going to be between $200 million and $250 million. They have a significant amount of debt on the balance sheet, about $825 million of debt.

And that's partially due to a payout to the owners, including Blackstone and then also the CEO. She received about $125 million payout related to kind of the merger. So So it looks like, this is a little bit of speculation for me, but it looks like they did basically a dividend recapitalization. And so they took on some debt to pay out some money to the shareholders, which oftentimes happens with these types of PE deals. And so, again, you're going to want to take a look at this balance sheet once they go public to see exactly how it all shakes out.

One other note I'll make is they have a significant chunk of intangible assets on their balance sheet, including they're valuing their brand at about $1.4 billion, which seems a little bit, um, it just seems a little bit high. I don't love to see stuff like that on a balance sheet because it seems like, do you really need to put that on a balance sheet? I assume they put it there because of this, um, debt they raised so that they could do the payout and that it made the balance sheet look better. They said, Hey, we can get a fair value on our brand and then we can, uh loan money out against that but um anyways not a great not a huge red flag but just something that um like i said i assume it's due to some of this debt financing that they were doing but

um not something i'd love to see yeah that does seem a bit aggressive uh for 1.4 billion especially when if you compare it to match match has a lot less that's like more than bumbles all-time revenue yeah it's it's definitely aggressive uh and yeah the balance sheet is probably not as healthy as that you know would make it out to seem right once you guys agree yeah yeah yeah for sure all right we're gonna hit an ad break and then we're gonna get right back and to the second half of the show cox panoramic wi-fi includes advanced security to help protect all your connected devices you'll get real-time alerts oh like this one so you don't have to worry about malware or when your kid downloads a song from a shady link and now all your computer can play is

red color red color where are you all blocked thanks to advanced security included with cox panoramic wi-fi advanced security must be enabled in the panoramic wi-fi app restrictions apply okay welcome back first up will be competitive advantages uh ian what do you got yep so one is kind of an obvious one but they have scale they have some network effects with apps like this that these networks and these dating type apps you have to have enough people on it that people actually can match with the right people and that it's a good experience and all that type of stuff so it creates a little bit of a barrier to entry for um or at least it makes it hard for new apps to really enter the market and gain a lot of market share and they've already reached that point where

they have network effects so it's a competitive advantage against incoming players not necessarily against the incumbents yeah they don't have that advantage versus someone like tinder uh but it's really hard to replicate bumble unless you put a lot of investment into it yeah and to ian's point the marketing strategy is focused around college campuses and people like well so is tinder that was uh whitney wolf heard who deployed that marketing strategy at tinder i think that and or she's the other early employees yeah she started it or whatever yeah yeah i mean she's had a lot of success with that i think that's definitely the way to i mean that's the target market almost. So, uh, yeah, that's definitely the way to grow. I'd say that. All right.

Yeah. You got yours first. All right. The female first brand. Um, that's, they've really be, they've really built the first one. Uh, it's really just female centric all the way around. There's 30% more female users than male women message first female co-founder 73% of the board members are female. I think this is, hopefully, if you're using the app, you feel less exploited on an app like this if you're a girl or a female than on something like Tinder. But at the same time, I'm not sure users really care what the board of directors looks like. I would say it's hard to replicate that. I don't think people could just come in and say, well, we'll be woman first also.

So I think Bumble is the first one to it, and they can kind of keep it. Yeah, I'd agree. I'd agree. All right, I'll hit my competitive advantage. You know, I think they might have a focus one. We talk about that a lot when people are competing with big tech. But, you know, you look at someone like Match, they have a diversified set of apps. They don't need them all to succeed,

but they're not focusing all their resources on one. Bumble, you know, they have that focus on one app that I bet the majority of their resources are going into Bumble itself. uh you know they have the narrative around them being female or female friendly and then they have the founder ceo to tell the story which can be helpful because match group you know is a part of iac um it's kind of uh yeah i mean i think their management team is good over there but it doesn't have that same i don't know people fall in love with the founder ceo story and i think that can be helpful you know sometimes yeah i mean there's something to be said for focus i guess

Yeah, but I mean, again, they have to get Bumble right then. Yeah. Future growth opportunities. Ian, you want to go first? Yeah, I can hit it first. So I think they have some potentially unique monetization opportunities, particularly, and I know they've dabbled in these, but like in-person events or experiences, even stays and trips like at hotels or vacation experiences. Because as I was thinking about it, who has more data on dates and relationships than Bumble and Match Group? Right. They just have a ton of data there. And so I think there could be a lot of unique ways to leverage that data other than just their primary matching function on these for these dates and relationships.

Kind of a comp I was thinking about, and I know it's always hard to compare things to Amazon, but Amazon has expanded into many different markets because it has a lot of consumer data. I think the same potential may apply to something like Bumble or Match Group as well, that they have all this information on relationship data, and that they could use that either to sell it to other third parties, partner with like, you know, booking.com and say, hey, if we get someone to like, take one of your hotels, we get a little referral fee, whatever it is, right? Like, I think there's some unique opportunities because of how much data they have. Yeah, that's a good idea. I never thought of that before. Discounted one night stands. Yeah. Well, it seems in general that a lot of these dating apps, yeah, they've gotten the matching part right. They've gotten the communication part right. But the innovation seems very low to me. It seems like there's a lot of experiments they could be doing, right? I mean, not like, you know, something with like restaurants, you know, you could do a partnership with a restaurant or locations or movie theaters, right? right anything a booking you could create bundles for sure right like say hey you match with this

person maybe you even pay up your service on bundle uh bumble to get like these bundling services where then you're able to get um you know dinner for a reduced rate a movie for a reduced rate dessert whatever it is but i don't know yeah that is uh i i think the idea of like a bookings discount is a really good idea and uh we saw a match group by open table and try to go that way so like you could schedule a date and then maybe eventually if they combine those is that integrated into tinder yet because if it doesn't integrate i don't know but without uh i would just say that a bookings discount seems like it would be much better than a table reservation for tinder yeah or airbnb and too right yeah that could be cool that's interesting ryan what do you

got for future mine's growth through acquisitions which i seem i know that's not super that's not as exciting as maybe a bookings discount but it should be high on the list and that's for me what makes match group so appealing is they have this diversified set of businesses and i mean online dating lives and dies by network effects and virality i mean we saw it with match.com however however popular what that was at the beginning it's not as popular now or maybe it hit stall speed i guess maybe it still has the same users but it's not yeah it's stalled out stalled out which is just as useless as an investor as something dying, I guess. So yeah, I just going in, buying businesses when they're young,

buying other dating apps, buying, I mean, I don't know, taking, there's nothing wrong with implementing the same match group strategy. Yeah. And I think, I think a lot of these dating apps could go more niche, especially if they can use the, you know, Tinder or Bumble to their advantage to try to leverage users. like all right if you're into blank blank and blank or you know maybe just one thing there's certain groups of people that you know like to date each other and that's a big requirement for that if they could go more niche with that i think that could you know i could help a lot

some people yeah it's good you probably don't have as much scale that way but there might be more monetizable like uh the trump fan dating site like america date again or whatever whatever i I mean, say what you want about that. That's very monetized. Definitely could work. Definitely could work. What's your future growth up? Yeah, so this is, I mean, it's a very simple one, but the international markets.

So Bumble has not really invested heavily into the international markets yet. Tinder has done very well internationally. They've expanded. I think I was reading one time some transcript that it took them a long time. It took them a few years because each market is different. The culture is really important for dating. So, you know, whether it's even India or Bangladesh or some other place in Southeast Asia, you might think that group, you know, the dating culture is similar, but they are actually quite different. So Bumble does have a lot of green space to go after.

They said they really haven't started investing internationally yet. And that might be just something they have in their SEC filings to get people, you know, thinking about, oh, there's a lot of growth ahead of ourselves. But I do think they have a lot of green space to go after. however tinder is very established there they know the in you know the cultures locally or at least you know better than bubble and they may have some headwinds um and have to spend a little bit more if tinder has kind of you know i don't know a lot more users but but do probably knows it as well as tinder like the european and latin american markets so uh you know maybe leveraging that knowledge because you're right i think dating across different areas of the world is very

different um but highlights and lowlights ian you going first sure so i think the highlights for me is just i'm impressed with how the app has grown and especially to take on the incumbent particularly after kind of her fallout from uh tinder to kind of be able to take what was a pretty negative thing and i think pretty devastating in her mind to her career and turn that into uh tinder's top competitor um it's pretty impressive that's a that's a crazy story and like um you know some people have talked about and i think we've mentioned it too is uh you know could be could be a great movie could be a great story someday but um kind of i was also impressed i guess by the average revenue per paying user of about 25 on bumble specifically and so that just seems like

if you're going to give once you get people paying if they're paying you 25 a year that's pretty good for an app like this i think um it's the they seem to be monetizing fairly well the low lights for me are, um, the private equity backing just makes it a little more complicated with the debt. Um, and just understanding exactly how the ownership structure is going to be post IPO, but we'll get some more clarity on that in the next few months, probably. And then also just the large incumbent, it's hard to battle against someone like match group, I think with all the brands they have and all the data and the capital. Um, but interesting business. Yeah. The ARP numbers seem strong especially when you think you know like what do they have 2.4 million paying

versus 40 million total monthly active users if they can slowly convert more people to paying uh i mean i don't know they have a lot of room to run i hate using the term room to run with you know paying users or something like that but i mean if they can get people to pay 25 bucks that's pretty good is it 25 a year in arpu or is it oh i don't know per quarter it might be quarter it might be quarter yeah i think it might be per quarter but either way it's still good yeah i'm just thinking of like the subscription price on dating apps it's higher than like 25 for the year yeah but all right ryan you go yeah my highlights they've got great product market fit and online dating is people use this all the time this term but it's it's the rising tide lifting

all boats uh they it's not a winner-take-all market in my opinion i think there's going to be a lot of successful apps a lot of niche ones and bumble could succeed and tinder could succeed can succeed because users are using both um so yeah i like that um another stat that i found and everyone's seen this chart but it's roughly 40 percent of couples met online in 2017 versus about 20 percent uh in 2010 so pretty good it's growing fast um what do you guys think about Sorry, before we get to your lowlights, what do you guys think about getting them into more of matchmaking, where they try to get more specific? You know how there used to be – I don't know how old this practice is. It's probably a few decades old, so matchmaking, instead of just having a supply of one side and a supply of another side, they actually try to match people together.

Oh. Like the app does it themselves. Like using the data? Yeah. What do you think about that? Do you think they will get into it, or should they? Ian, I don't know. I don't know. It's, it's kind of like in some ways there's some obvious benefits to that for the company, but I think it also gets into some kind of murky scenarios about, I don't know. I just, I think that there may be some questions that they don't really want to have to answer about how are we matching people? You know, is there any sort of discrimination going on? Things like that. I think it just opens the door for some potentially kind of sticky situations for them.

Yeah, the net benefit might not be as good as any downside there. There's massive tail risk. That is – it starts to infringe on the – it starts to make me think of Facebook. Sorry, continue. My lowlights, and some people might disagree with me about this, but TechCrunch wrote a pretty damning article about Whitney and the falling out at Tinder. And so based on – there was a lot of witness accounts of what went on. So the author interviewed a lot of people and it really seemed like Whitney had sort of an obsession with credit, like receiving credit. There was this, she kept referring to herself as co-founder, which whatever, this was like seven years ago, but it just kind of makes me question where the priorities lay of like credit versus returning shareholder value.

Yeah. and also bumble biz seems like a waste of capital uh just seems like a waste of money it's where you find like business partners via bumble i don't see how those two overlap at all that's that's i mean that's twitter really yeah or linkedin twitter and like i don't know how you go from like here here's female centric dating to let's add a linkedin competitor definitely seems like a waste and i agree with you on the ceo i think there's a few red flags with their One, the thing that Ian mentioned earlier with the cash payout of $125 million under the corporate reorganization. You're 19%. Why do you need that?

Yeah, I don't know if they had to do it because the PE guys wanted it. That could be true. But there was also a time, I think it was in 2019, when the company sent over $100 million to a Delaware limited partnership that is controlled by Tilson. What's Tilson? Is that her name? Sorry. Whitney Heard. Heard, sorry. Heard.

Sorry, I was thinking, I don't know. There's a Whitney Tilson, I think. Sorry. The CEO founder is who they sent it over to with that $100 million. I think there's a few red flags there. Yeah, there were some management concerns for me. Yeah, definitely. That's my big low light.

I don't know. And I encourage anyone that's considering investing in this to go read that article because it has some witness stories. um and some of them were kind of well i mean they kind of yeah it's also people might be biased so true into account well i kind of you know think about it as what would you put her on at a one to ten like erlich bachman scale from silicon valley you know i feel like she might be without looking from the outside like a you know a six on that um and and higher is is not better you know the the obsession with credit thing was just a bit concerning for me yeah i'd agree and i guess the entire business model felt like it might have been developed out of spite which seems like a

strange motive yeah but it's powerful probably like you know and and i understand the concerns about um about some of their you know it was a tough situation i think at the end of tinder and i think there's some faults on both sides potentially um but i think there's the thing that i look at and that's impressive is the fact that she's built a viable competitor in the last you know six years basically seven years since that happened like it's pretty remarkable to think to take that as a 20 i think she was 24 when she left tinder and to turn that into this huge competitor um like i don't know like the credit thing i agree i think that's somewhat concerning but the fact like i care i would care more about that if she hadn't done anything but the fact that

she's actually built this whole thing um kind of proved to some extent that she does put in the work and um she cared about credit enough that she actually started her own thing i guess and so in this in this case it may have been a benefit to her but who knows it's an it's a interesting situation for sure that might be a chip on the shoulder that makes it the number one app i guess yeah i mean the track record is no doubt impressive and i mean she's you know young enough where i don't know she's got the experience of someone that might be you know a lot a lot older um she can really use that to her advantage uh i'll get my highlights you know i think the bumble app at its core is a great idea and i think we all know that the unit economics are strong

they're almost exactly the same as match group right in 25 20 to 25 free cash flow margins like 30 35 operating margins um let me see i lost my point uh yeah i mean they're riding the online dating wave the tailwind behind them overall is huge and it's worth a lot of money uh and the founder founder-led thing you gotta put some points to that although we did all talk about the red flags and um yeah that was my that was all my low lights is really just the management stuff you know the pre-ipo payouts stuff like that all right then are we more or less interested ian you want to go first yeah i'd say i'm and this is the bad answer but i'm just about exactly as interested as i was um i think this if i was going to invest in a um in a dating

application i think it would be this versus match group um is my impression but i'm not super interested in the space actually all right that's good uh well what valuation i guess you said five so if it you're going to be interested maybe take a deeper look at like a five billion dollar valuation something something close to that yeah probably if it was down in that range i'd say okay i should take a closer look at this it's just not for me it's not an industry i necessarily am really excited about being invested in um and so uh you know it would have to be a very attractive valuation okay ryan what do you think i'm actually less interested i wanted to like this business like pre s1 all that stuff i really wanted to like it i wanted to be like all right

this is the match group 2.0 rumors were great all the rumor stuff you know numbers and all that stuff was good yeah and there was definitely a sense of virality around like my college town uh people use this all the time but the balance sheet and management red flags are making me less interested um and yeah the capital structure seems wonky and uh i guess maybe that's just stuff you got to dig through but i don't know i guess just less interested than i was hoping to be yeah i'm on yeah the same boat i mean it's tough with no valuation right now obviously at a low enough valuation we'd all be interested but from what we know it's going to go out at probably at like 8 to 12 billion dollars or something around there uh yeah i'm just less

interested i i like match group a lot better yeah i think that's that it's just that simple i like their management better um even though we've talked about the management a lot on here i don't know and there's just the like what if bumble goes out of favor you know um there's always that risk and they really have sort of a key app risk right now but do i wouldn't buy but do on its own yeah I mean, Badoo is an interesting example of almost every dating app that's been around that has scaled. It does stall out. Tinder hasn't gotten there yet. It's probably getting close, potentially.

They're the only ones that have potentially had the Facebook level of breaking through that barrier and having that sustained runway of growth. But you would be going against the base rates if you think that Bumble can continue to grow, I don't know, indefinitely. I know we're going long-winded, but I also just thought about this. Maybe some of that new last nine month numbers has to do with limited people on college campuses as far as user growth, because they are so viral on college campuses. Interesting. Yeah. Some of the 2021 numbers will be important. Yeah. All right. Ian, anything else for you? Nope. Nope. I think that covers it. All right. Well, that's going to do it for this episode. As always, make sure to use our promo code CCM at checkout to get $10 off. excuse me, your first month at Seven Investing. Remember, we are not financial advisors. Anything

we say on the show is not formal advice or recommendation. Thank you all for listening. We'll see you on our next episode.