While he notes that there are very exceptions to those points (like Tinder and Coffee Meets Bagel), the majority of dating startups are affected.
Here are six reasons why investors don’t fund dating startups: According to Chen, dating startups have churn rates (the rate at which users stop subscribing to or using a product) of 20 to 30 percent.
Similar to buying a car, refinancing your student loans, or moving into a new house, the reality is that being “in the market” as a single person looking to meet others has a limited time window.
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.
Paid acquisition channels are expensive Dating products have historically depended on paid acquisition channels to build their customer base, and other subscription products have generally done the same.
In order to make the ROI work, you have to calculate your customer acquisition cost (CAC) versus your lifetime value (LTV) and make sure you are making enough money to support both the marketing as well as operations.
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.
“With dating products, the better you are at delivering dates and matches, the more they churn!
So what do the churn rates look like for a dating product? Let’s calculate that: 20% monthly churn = 1-(1-0.2)^12 = 93% annual churn You read that right.
And that means at 20% monthly churn, it gets very hard to retain what you have, much less fill the top-of-funnel with enough new customers to grow the business. With most subscription products, the more you improve your product, the lower your churn.
Again, one of the ways that the new generation of mobile dating products solve this is that they are free plus focus more on casual dating.
Both factors open up the market to a wider audience, reduce churn, and create opportunities for viral growth.
We’ve written previously about how dating startups simply don’t get any love from venture capitalists.