Not held.
I briefly covered Grindr earlier this year. Naturally, without a single share lining my portfolio, it has rallied 45% since. As a former, and potentially future, President of the United States once remarked: ‘many such cases’.
The crux of my initial interest in the company was the following:
A couple of characteristics jumped out at me straight away. Firstly, the product is widely derided - some might even say hated - by its users, despite the fact that it is still ubiquitous. This kind of cognitive dissonance has been a hallmark of other great, durable products - mostly in technology. Secondly, the product has seen little material changed since its initial commercial breakthrough in the 2000’s. The lack of meaningful innovation is partly explained by its corporate history (more on this later), but also by the fact that it doesn’t really need to do much to maintain its hold on users. Finally, mismanagement has resulted in the platform being poorly commercialised. In other words there are opportunities for significant value creation (sometime) in the future. It’s my opinion that the company resembles more of an online classifieds business rather than a traditional online dating app.
Grindr’s recent Investor Day, along with prodding from a friend on Twitter, has occasioned me to take a deeper look.
My initial resistance to viewing Grindr as investable was a quadruple reluctance based on:
Management (question marks abound),
Capital structure (the company has a significant debt load),
Capital returns (or the lack thereof), and
Predictability.
It appears that they are making progress on the second and third point, which affects my view of the first somewhat. I always want to give props where props are due, and when the delta of change is accelerating it’s important to take note.
As stated above, I do find the core product perfectly investable, and I believe this is no less the case today then it has ever been. As is often the case, however, many things hinge on the economics of management’s proposed growth strategy.
What is striking about the Grindr property is its apparent ubiquity in the gay community coupled with its ability to grow users with little, or even no, product innovation or reinvestment. This unusual characteristic begs the question: what is Grindr?
It’s probably safe to say that an outsider’s understanding of it is as a dating app. As I argued in my last piece, this is not quite the correct definition. A little scuttlebutt was helpful. In this regard, all I can say is that it’s a very different experience from the likes of Hinge, Tinder, and Bumble. Certainly, I was not accustomed to strangers propositioning me within minutes of creating a profile. There were no suave lines, no impressive profile pictures, and definitely no hours of monotonous swiping necessary to arrive at the possibility of an imminent encounter. I’m quite certain that the formality of a date was all but moot.