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Here’s a simple fact: It’s super hard to get a dating product funded by mainstream Silicon Valley investors, even though it’s a favorite startup category from 20-something entrepreneurs.There’s a large swath of angels/funds who categorically refuse to invest in the dating category in the same way that many refuse to invest in games, hardware, gambling, etc.A similar challenge is that these products aren’t “social” in the same way that Skype or Facebook might be.Although the stigma is quickly passing, it’s not like consumers want to sign up for a dating site and then invite their friends family to join them on the site.Every churned customer is a new customer you’ll have to acquire just to get back to even.When you look at a successful subscription service like Netflix or Hulu, you might find a churn rate of 2-5% per month, and you can calculate the annual churn through the following: If you have an 70% annual churn rate, you have to have a strategy to replace almost your entire customer base each year, plus a bunch of percentage points to drive topline growth.Obviously, anyone starting a new company in dating should try to understand investor biases in this sector.
However, the market size might be much smaller than the others.Christoph Janz, a venture capitalist and initial investor in Zendesk wrote a great essay on this topic, called Five ways to build a 0M business that talks about market size as an issue for this. It’s one of the oldest businesses known to man-and-woman-kind and with the boom in all kinds of dating sites, it’s obviously a service that has been pulled into the Internet Age.Here are the reasons usually given for why investors don’t do dating: Let’s break it down.Built-in churn Churn sucks, and the better your dating product works, the more your customers will churn*.
Another way to say this is the dating has “intent” the same way that shopping might, especially when you are talking about a paid subscription service.