The online dating market is projected to be worth $12 billion by 2020, with 310 million active users worldwide. Despite those vast numbers, user growth at mainstream dating apps including Tinder and Bumble is expected to peak this year and then plateau as the market fragments into sites catering to users’ interests.

Niche apps, especially those catering to LGBTQ+ communities, are among those benefiting from the demand for preference-specific apps. LGBTQ+ sites have consolidated rapidly over the last two years.

“Dating apps built with specific communities in mind have a unique angle, because they can highlight the flaws of mainstream apps and offer a solution that’s tailor-made to their demographic,”  Scott Harvey, editor of the online dating trade publication Global Dating Insights, told Karma. 

Dating apps are popular with the LGBTQ+ community, because members find in-person dating more freighted with safety, compatibility and secrecy issues than is the case with heterosexuals. A study from University of New Mexico and Stanford University researchers found that 65% of same-sex couples met on a dating app.

Last week, Perry Street Software, parent company of the popular gay dating app Scruff, acquired GBTQ+ dating app Jack’d. The deal makes Perry Street Software “the largest fully LGBTQ owned-and-operated software company” in terms of both revenue and market size, with a reach of more than 20 million members.

Grindr, the largest LGBTQ app, was acquired by Chinese gaming company Kunlun Group Limited in January 2018. However, Kunlun has since agreed to sell the app by June 2020 after the U.S. Committee on Foreign Investment raised security risks based upon Grindr containing personal information of users, including location and HIV status. 

Another popular gay dating app, Growlr, recently sold for $12 million to The Meet Group, which owns MeetMe and Tagged. Members of the LGBTQ community criticized the acquisition  because Growlr previously was LGBTQ+ owned and operated.

LGBTQ+ apps are attracting private equity investment. In February 2018, Chinese gay dating app Blued raised $100 million in a Series D round led by alternative asset manager CDH Investments, while Reddit founder Alexis Ohanian and former Y Combinator partner Garry Tan are investors in Her, an app targeted at lesbian and bisexual women.

Investment activity is not exclusive to LGBTQ+ options, though. Niche dating apps that target a specific community outside of sexual orientation, such as age bracket, religion or ethnicity, are also piquing investors’ interest.

“Singles often have multiple platforms on their phones, and this gives niche operators a great chance to stand out side-by-side as the quality, targeted option,” Harvey said.

In April 2018, East Meet East, which connects English-speaking Asian people, secured $4 million in Series A funding, and the U.K.-based Lumen, which focuses on users ages 50 and older, launched with a $4.4 million fundraise in September 2018. 

Even apps aimed at seemingly trivial interests are receiving funding, though smaller in total. Harvey notes that these companies are succeeding “despite having fewer resources than Tinder or Bumble because they understand their audience.” 

According to Pitchbook, Hater, an app that connects users based on topics they mutually hate, has raised $200,000 to date; dog lover-targeted Dig has leashed $750,000; and MeetMindful, an app for wellness and mindfulness enthusiasts, has secured $2.8 million.

As consumers become fatigued with mainstream apps like Tinder, Bumble and Hinge, niche alternatives targeted at underserved communities will likely continue to emerge as attractive opportunities for investors. 

“The giants aren’t going anywhere,” Harvey said, “but there is a lot of opportunity for brands that don’t try to go head-to-head with them as mass market offerings.”

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