Who said word of mouth is dead? Not venture capital firm Draper Esprit, which has just led an $18.5m funding round into Verve – a company which sells tickets to some of the UK's biggest music festivals through friendly referrals.
Verve allows anyone to become an “ambassador” for a particular event, and sell tickets to their friends. Its app tracks how much a person makes, and rewards them with anything from a free ticket to a backstage pass to their own personal festival loo.
With the new funding, Verve plans to invest heavily in research and development and expand, moving into new product areas such as travel and sports events.
“Today’s audience is becoming immune to traditional advertising and increasingly prefer to discover through friends and people they trust. Verve has already proven word of mouth is a scalable and powerful tool for live entertainment,” said Draper Esprit's chief executive Simon Cook.
Former investors Kindred, Frontline Ventures and Backed will also contribute to the funding.
Verve has already sold more than 500,000 tickets for events including Bestival, Reading Festival and concerts run by Live Nation.
Callum Negus-Fancey, Verve's co-founder, told City A.M. that he believes traditional advertising still has a place in raising awareness of a product but that encouragement or advice from a friend is invaluable in stimulating a person to buy.
He added that the “rewards” feature for ambassadors, rather than payment, gives the app a more “authentic” touch because a potential buyer can be assured that the seller is a true fan.
“If I said to you: 'Buy this ticket, I'm saving up for a laptop,' it doesn't sound as genuine as: 'Buy this ticket – I really want to go!',” said Negus-Fancey.
The company began in the UK, but now operates in North America and has just launched in Europe.
Lead investor Draper Esprit, one of the few listed venture capital firms, has previously backed companies including snack box delivery company Graze and sportswear website Sportpursuit.