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Tinder, Bumble & Grindr: A Risky Love

“The best way to predict the future is to create it”

– Whitney Wolfe Herd, Founder of Bumble

arvy’s teaser: The digital age has changed the way we find love. Match, Bumble and Grindr dominate the scene, but their IPO journeys reveal a harsh reality: the thrill of the ‘Next Big Thing’ often leads to overpriced risks. At arvy, we favor stability over hype – because in investing, boring is good.


Tinderella.

The term is an online phenomenon that emerged with the launch of Tinder in 2012.

It is a playful mix of the classic fairy tale Cinderella and the popular dating app Tinder. So, what exactly is a Tinderella? It is an attractive person on Tinder who you accidentally swipe left on (swiping right means “like,” swiping left means “reject”). In other words, while quickly swiping through profiles, you might unintentionally reject someone you find attractive – and just like that, they become your Tinderella, a missed match.

It is not as romantic as the Disney fairy tale or your beloved Hollywood romance. But it reflects today’s world well because with the advent of the internet and technology, the way we interact with people has changed significantly, especially how we meet new people (chart 1).

Nowadays, we find our Prince Charming or Cinderella mainly through one source.

Online dating.

Chart 1: How couples meet in the US

Source: “How Couples Meet and Stay Together” Study

Ménage-à-Trois

As the rise in the way couples meet shows, the online dating world is growing fast.

The main players in this area are Match, Bumble and Grindr (chart 2):

  • Match: Targets a broad audience seeking serious relationships, offering a variety of platforms including Match(dot)com, Tinder and Hinge, which emphasize compatibility and long-term connections.
  • Bumble: Focuses on empowering women in dating, allowing women to make the first move and appeals to younger users interested in dating, networking, and friendships. Fun fact: Whitney Wolfe Herd co-founded Tinder, left the company after controversy and founded Bumble, which focuses on the female perspective on dating
  • Grindr: Specializes in the LGBTQ+ community, particularly gay, bi, trans, and queer individuals, offering location-based connections and a focus on casual dating and social networking.

When using a dating app, you most likely will not be able to get past one of these three companies, as they are the top dogs in the dating app space. If we stick to dating terms, you are part of a ménage-à-trois.

This makes it an attractive business model and has captured a lot of attention from investors in recent years. That is why Bumble (2021) and Grindr (2022) have also decided to go public alongside Match, which has been on the stock market for a while.

Excellent timing…

Chart 2: Tinder, Bumble and Grinds and how their users differentiate

Source: Grindr, Annual report 2023

IPO – Initial Public Offering

The basics come first. Do IPOs matter?

The initial listing of a company’s shares on a stock exchange is known as an IPO. It’s critical to keep an eye on them because, on average, 80% of the most successful stocks are those that have gone public in the previous ten years.

Why?

  1. Scale economies are put into effect
  2. Growth is made possible by IPO proceeds
  3. The first few years following the IPO are when growth is at its highest
  4. The management is demonstrating its entrepreneurial excellence and is on fire

In this terrain, vigilance is necessary. Recall that the objective is to set the IPO price as high as feasible to maximize the amount of money raised for the firm and its founders while requiring them to give up the fewest shares possible.

One major concern, then, is that most IPOs occur at risk-on times, like 2020 and 2021, when investors were prepared to pay high valuations and assume a great deal of risk, respectively (chart 3).

Then they are deliberately given a different name.

It’s Probably Overpriced”.

Chart 3: Timing is everything: The IPO class of 2020/21 has struggled since going public

Source: Yahoo Finance, Chartr, as per Feb 2023

Next Big Thing

Observing the IPO landscape, new technologies and hypes is important.

You can glean a lot of information about the risk appetite of market participants and the evolution of the economy, and of course it is simply interesting to see how the world evolves.

However, this is not the case when it comes to investing in these emerging trends, as can be seen in the online dating companies (Chart 4: Match -77%, Bumble -91% and Grindr +9%). Typically, a stock goes through a rollercoaster ride, especially in the beginning, as many eyes are on it, every news or headline is thrown into the balance and price movements are unpredictable.

We are not looking for the ” Next Big Thing” because we do not know what the future holds and expectations are often exaggerated. That is why we focus on companies that have already won. The philosophy is simple: winners possess a remarkable ability to sustain their winning streak, often surpassing even the most optimistic expectations.

Therefore, we follow those companies that contain a lot of excitement but are not interested in owning them.

In our next The Market NZZ article (scheduled for the end of August) we will look at why we do this, and we will show you one thing.

That boring is good.

Chart 4: Match, Bumble and Grindr since IPO in 2021/2

Source: TradingView

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