Venture funding and digital news don’t mix

“In 2017, we saw what happens when you affix the venture model atop a journalism business. Enter: the flash sale of Mashable and layoffs at Vocativ.”

A restaurant is not a venture-scale business. A factory is not a venture-scale business.

A digital news platform, as many have hinted of late, is not a venture-scale business. And that’s not a bad thing.

In the past several years, we’ve seen digital news platforms hedge against Facebook and Google by converting niche audiences into paying subscribers. The favorite children of media analysts — The Information, De Correspondent, and yes, Stratechery — have achieved sizeable revenue by building and personalizing their products around fragmented audiences who pay. Indeed, it’s no coincidence that The New York Times announced hitting the 3.5 million subscriber mark only a week after tightening its paywall for the first time since 2012.

Yet these endeavors have succeeded in spite of VC funding, not because of it. Whereas today’s digital news platforms must abandon ad sales for small-scale audiences who read, donate, and subscribe, VCs must bet on businesses with the potential for not just large-scale, but exponential growth. (It’s not just publishers who are competing against Facebook and Google.) In 2017, we saw what happens when you affix the venture model atop a journalism business. Enter: the flash sale of Mashable and layoffs at Vocativ.

In 2018, rather than repeat this mistake, digital journalists should seek out alternative sources of revenue. In anticipation of a saturation point for news subscriptions, journalists should prove they can grow businesses not only through tiered offerings but also through events, exclusive reporting, and audio stories. Just as well, in the coming year VCs must learn to distinguish between investments in digital media and investments in digital journalism. Though the needs around growth in journalism-based businesses are incompatible with venture capital, content-based media companies like The Skimm can take off and look to journalism as a model for audience-centered editorial. In this way, VCs and publishers can learn from one another without relying on one another for financial gain.

No, digital news does not make for a venture-scale opportunity. Neither does the overwhelming majority of mobile apps, marketplaces, AI assistants, AR/VR games, and mattresses. But journalism — unlike most traditional tech products — does not need VC to have impact, cultivate audiences, and make money.

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