Based solely on the numbers, the Green Bay Packers shouldn’t exist. Its stadium, Lambeau Field, has a max capacity of 81,435 people, almost large enough to seat every single person in 105,000-resident Green Bay, a tiny city compared to the major markets enjoyed by most NFL teams. The team owes its longevity and success (it’s the 25th most valuable sports franchise in the world) in part to its unique ownership structure: It’s the only community-owned nonprofit team in the NFL. Rather that have one owner, it has over 360,000 of them, all of them highly invested in the team’s success.
Berkeleyside, the seven-year old Bay Area site and one of the standout local digital news orgs in America, thinks a similar ownership model might be key to its own future. A few weeks ago, the site announced plans to offer a direct public offering, or DPO, an investment method that lets outside investors both large and small buy shares of the company. (It’s also known as investment crowdfunding.) Berkeleyside has offered up to $800,000 in preferred stock as a part of the DPO, letting California residents with at least $1,000 buy into the long-term future of the site.
While companies such as Ben & Jerry’s, Annie’s Homegrown, and Real Goods have used DPOs to generate capital, Lance Knobel, one of the founders of Berkeleyside, said he wasn’t aware of the technique until two years ago. A reader, impressed with the site’s coverage of local Black Lives Matter protests, emailed the Berkeleyside team to suggest the idea, for which he felt the site was an ideal candidate. “As soon as it was explained to us, it struck us how absolutely natural and organic it felt to the site,” said Knobel. “It was a really good fit.”While Berkeleyside could have chased investment from more traditional financiers, there was something symbolically compelling about giving readers the opportunity to have a direct role in the site’s future. Around 1,200 readers already pay an average of $70 a year to support the site as members, but letting readers invest directly into the site takes that relationship to the next level, giving readers a real financial stake in Berkeleyside’s future growth. (The DPO promises investors a 3 percent annual dividend, a higher return than current 7-year U.S. Treasuries — so long as Berkeleyside maintains its financial strength.)
Chasing investment capital from readers might seem odd for a local news site that, from the outside, already seems to be doing so well. Berkeleyside attracts 220,000 unique visitors each month in a city of 110,000 people. Its business is healthy and comparatively diverse: Only 60 percent of its revenue comes from advertising, with the remaining split between its membership business and cash from its annual event, Uncharted: The Berkeley Festival of Ideas. Berkeleyside owes some of that success to the city of Berkeley, which is large enough for a small local site to focus on it, but not so large that its daunting to cover. Berkeley, of course, also has a long in tradition of activism and high interest among residents in local politics.
And yet despite that seemingly rosy financial picture over the past few years, Berkeleyside as a business is not at the point where it is sustainable for the longterm, according to Knobel. While the site pays its contributors well, it has just one full-time reporter, despite being around for seven years. Likewise, the site’s three partners have taken very little out of the company, opting to use that cash to continue investing in the business. In other words, while the DPO will indeed help cement Berkeleyside’s relationship with some of its readers, “the root motivation is we need capital to invest in this business to get it to the point where it feels sustainable in the longterm and where we have some breathing room,” said Knobel. “We see the path to sustainability, but we need capital to get there.”
Berkeleyside plans to use the capital from the DPO to create a mobile-friendly site redesign (“desperately overdue,” said Knobel), develop a mobile app, and increase its investment in video, which will let it tell the kinds of stories it can’t do with text alone. It also wants to deepen its coverage in key areas such as education, urban development, and crime, which will benefit from deeper, more investigative reporting. (That, of course, would mean hiring more staff, which doesn’t come cheap.) Berkeleyside is also looking to hire someone to help market Uncharted and its membership program.
While Knobel says that the success of Berkeleyside’s DPO could make it a promising model for other local news sites looking to follow in its footsteps, the path will only be viable for those sites that have managed to create strong relationships with readers.
“We’ve proven to our community for seven years that we do a great job and that we are an essential part of the fabric of our city,” Knobel said. “We’ve taken virtually no financial reward for it, but the psychic reward has been immense. People are very attached to it, they care about it, and they believe in it.”