Ken Doctor: Yeah, it’s been busy — balancing it with the, you know, necrological work that you and I have both been doing, building this thing, brick by brick by brick. Like, this week, dealing with how we’re going to do employee benefits, and hiring a professional employer organization, and setting up accounting services, and all this stuff — to try to do it right and try to do it at a high level so that we can recruit talent and people are well treated.

Doctor: And all the tax stuff. We went the route of being a public-benefit company because of advice from our friend Jake Shapiro — which has turned out to be a very good idea so far, but even more complex in some ways. The structure dictates, like, which attorneys to use, which accountants use, how you set it up, how you get started. But then, also, how do you set up something that can be strong and continue and not taken over by the wrong people if it succeeds the way you want it to?

Doctor: Well, it has seemed to me that what I consider the nonprofit orthodoxy in the startup journalism world is an overplay. There’s great nonprofit journalism being done, but it’s not the only way to do it. And I believe that — especially for local news as compared to national and regional — there’s simply not enough philanthropic money out there. So that led me to thinking, okay, a for-profit company.

But then I talked to Jake, about a year and a half ago. And he said with his latest startup, they’re doing a public-benefit company. I talked to him at length and others at length. It’s a for-profit company whose reason for being is mission-oriented, and that gets the best of both worlds. It’s not just building a business, it’s a way to do journalism.

So public benefit allows you to protect the company, in the sense that it’s right there in the incorporation and the bylaws that the purpose of the company is to serve the news and information needs of the communities that it serves. So that in the case of success, the board cannot disregard that in who it decides to sell to or merge with, unlike with any other for-profit company.

Doctor: Right, they have a legal responsibility to, as opposed to all the stuff that we’ve covered, where it’s basically the Revlon rule, that you have to optimize shareholder value. And that kind of capitalism has not served journalism well over the past 10 years.

So why did I want to do a for profit? Several things. One is that we want to be part of the local business community. I think, while it is reader-revenue driven, that advertising is a really important, at-least-secondary support. And being part of the business community, rather than being a nonprofit asking for support, is a position that I think makes more sense. So this week, we joined the chamber, the local chamber of commerce.

Also — this is really important — funding. The idea here is to build a model that is transportable to other communities, other markets, and that will take capital, cash. So how do you get the right kind of capital? And it turns out a public-benefit company allows the widest choice: We can take in grants, we can issue equity, we can issue debt. So it has the widest possibilities for capital raising, especially for the future.

And then there’s our goal is to be the primary news service in the places where we launch. One thing I learned by doing journalism over the years was that ability of a newspaper to interview candidates for office and to recommend them is a really important function in small communities. And you can’t do that as a 501(c)(3).

Doctor: It’s Santa Cruz County, importantly, not just the city.

It’s a county of 275,000 people, which is a really interesting size. It’s diverse. It’s got the traditional split between north county and south county — south county being heavily Latino and left out of the public discourse in the county to a great degree. So it’s important that we’re a county-wide news source.

We’ll launch here in late fall. We’ve hired Jed Williams as chief revenue officer, and that’s a great hire. And we have a strategic partner, which is the L.A. Times. We’re using the L.A. Times’ Graphene platform, which they developed after Patrick Soon-Shiong bought it. We’re building the Lookout product on that platform right now, and we’ll have a content-sharing relationship with them. And we’ll also experiment with subscription — in our case, membership,

That’s an interesting partnership. Clearly, the technology part of it, we’re very excited about — it allows us to get a state-of-the-art system without a major staff investment. We don’t have to do development over time. And it’s very powerful.

Doctor: I agree with you. That’s what I’ve said to Patrick too. I think that position as the beacon, as the newspaper of California is very attractive to them in such a huge state. Your point about Silicon Valley — take the Bay Area, which is all Alden other than Hearst in San Francisco. But at the same time, they know this isn’t 1980 — you don’t say, like, “Oh, we’re gonna put a big bureau there and we’re gonna claim the territory.” The strategic partnership is an interesting model. So we’re both taking a step-by-step view of it. But right now we’re the beneficiary of that technology, which is important.

Doctor: Yeah, it’s all about reader revenue.

Doctor: I think it will be, in our parlance, a leaky paywall. When you launch something new, you need discovery. So put it up there for free, get sponsors and advertisers to pay for it, and tell the community that advertisers are paying for it. So that’s what we’re doing. It’ll be open for some time, probably a couple months or so, sponsored by advertisers. And then we want to balance of course, especially in a county this small, the discovery that we know we need and the monetization that we’ll need over time. So leaky paywall I think is the best way to describe it.

Doctor: One is the product itself. We’re very product-focused, not just content-focused, so we’re putting a lot of effort in there. We hired Charming Robot, a national design company to work with us. We’re interested in the presentation of news, but also the enjoyment of city life, and to balance all that in a mobile-first product. So I think first they’ll see a product that feels and looks very modern, very browsable, very lively.

Then the content itself is lively and visual and then the content itself. is going to be pretty deep. So we will have a staff overall of at least 14 to start — which is a lot in a community this size. And it’ll be 8-plus, probably 9, in editorial. So there’s gonna be a lot of locally written content. We’re calling them correspondents — not in the Dutch correspondent sense, but that they are evolving experts in health, education, government accountability, food, et cetera. And they’ll be pictured on the site — you’ll see a lively site with a lot of local content that’s brought to you by people that you’ll actually see in the community, post-COVID times.

You will also see, while it’s relentlessly local and fronted by local news, it’s not parochial. That goes back to my Knight Ridder days. Take the homelessness problem, which is a huge problem in Santa Cruz. The idea of saying, like, “Okay, what could we do?” with the whiteboard, ignoring what many many other communities have tried to do, would be silly. So we are bringing in national content partners, including Kaiser Health News, CalMatters, The Marshall Project, Chalkbeat, and others. So the idea is to supplement that local reporting with the kind of national, especially single-site stuff that is appropriate to the local audience. Not a firehose of content, but what’s appropriate. So there’ll be a lot of content.

And I think people will notice a very strong focus on community betterment on the site. I believe that civic groups — terrestrial civic groups, not just Facebook groups — are really important to local communities solving their own problems as we get into the 2020s. And so you have in a place like Santa Cruz — and as is true of many places, blue or red — a lot of civic groups, working groups, kids groups, rotary groups, environmental groups, social justice groups. We will focus on these groups and give them exposure on the site at no cost. And people in those groups, I think, should be a core membership group.

And then there’s commerce. So we’ll have no programmatic, no intrusive advertising. What I have discovered and really didn’t understand before this is that, while Santa Cruz County is a news desert, it’s also an ad desert.

When I talked to major institutions in education, finance, health, and other areas like that, I’ve told them, “This is what we’re doing, we’d appreciate your consideration. And I know you have a lot of choices for advertising.” And they’ll interrupt me and say, “No, actually we don’t. We have no way to reach an educated audience with our messaging.”

So while advertising generates, we anticipate, a third to 40 percent of revenue over time, we’re kind of surprised by the fact that we have what should be premium advertisers who don’t feel they have good ways to reach educated, civically oriented readers. And so they will see on the site a sense of these institutions as advertisers, which I think is really important.

Basically, to sum all that up: It’s not a list of headlines. It’s a city site that gives you all the issues that are going on, all the pleasures of city life, that involves you in the commercial life of the city and the civic life of the city. We’ll put it on your phone. I think that, with all of that combined, people won’t have seen anything quite like it.

Doctor: It’s a good comparison. I’d say that’s probably 75 percent of it.

I would throw in two other models that are important to us. Charlotte Agenda — their sense of the city is a lot like Billy Penn in the way you’re describing, but it’s also in a smaller city than Philadelphia. And the way they do commerce on Charlotte Agenda is the smartest I’ve seen of any local site.

And the other thing, I think, is a sense of the old daily newspaper — meaning we will be, I think fairly quickly, the news medium, the news company, of record here.

Now, that doesn’t mean we’re going to do, you know, 14-inch meeting stories. But it means that we’re saying to people: We are intending to be your primary news source for what’s going on in Santa Cruz County. And to me, that’s what’s needed.

When I look at LION sites, when I look at INN sites, I see hundreds, thousands of people, some of them doing incredible work, most of them doing very good work. But most of these are supplemental. The losses in local journalism have been far greater than the gains. And so when I started that whole process, it was like: Okay, what do I need to do to make this successful in a way that can actually replace failing newspapers? Or, in the case of the Santa Cruz Sentinel here, a suicidal daily newspaper? The Sentinel is the only daily newspaper, and I believe they’re down to only two non-sports reporters for the whole county. That’s it. So we want to be a primary news source for people.

In raising money and building this whole model, some people said, especially since we’re on the edge of Silicon Valley, “Just start small — start with three or four people and see if he can build it up.” And I said no, that’s what I’ve seen other people do. And I don’t think you’d get there — because you don’t offer enough of a value proposition for paid membership or to advertisers. And you’re just kind of twirling around. So I was steadfast in raising the money that we were building something that could be a primary news source, built on a very solid technology and a really good product.

Doctor: Yeah. When I’ve talked to Eric [Barnes, CEO of The Daily Memphian], he was the only person that I had talked to over all these years, who steadfastly said, “Yeah, we want to be the primary news medium for Memphis.” I’m really buoyed by their success with subscriptions. The Colorado Sun’s doing well, Block Club Chicago is doing well, Charlotte is doing really well on advertising. They’re models that are growing, and they’re all learned from The New York Times and the FT and everyone else.

The other distinction that’s important here is we’re not aiming this at a metro area. A lot of the principles, I think, would work in a bigger city, but it makes sense to prove it out first in a community that is a news desert. For a lot of the country that lives in cities and decries the loss of local journalism, they see the loss in their daily newspapers, but they still have a dozen, two dozen, three dozen real reporters. In counties like Santa Cruz, and there’s a lot of them, there’s practically nothing left in terms of that daily report.

Doctor: There are two TV stations that consider Santa Cruz a market, but they’re both both based in Monterey County. They do some reporting here, but not a lot. Yes, we may work with them.

Santa Cruz a highly affluent, educated place. There’s the one daily newspaper, Alden-owned, that has, as I said, two cityside reporters. There is an alternative weekly, which is a good alternative weekly. And that’s it in terms of newspapers. The public radio station is in Monterey County and does very little local news.

I’ve been civically involved since I moved back here 10 years ago from San Jose, and it’s like 17th-century England — it’s all word of mouth. If you want to know what the government did, it’s like, “Well, I trust my friend Ashley, she follows that, she knows the county commissioner who told her this happened.” I mean, it’s ridiculous.

So yeah, this is a news desert. It’s weird to start up something new here. I describe this to people and they’re like, “Oh, that’s cool — so it’s a blog.” No, no, no, it’s not a blog. “It’s a podcast? Or a website or something?” No, it’s a news company. And I’ve found some people cannot get their heads around the idea of a new news company. They get having a new restaurant, right?

Doctor: Yeah, blackletter nameplates, right? It’s been totally weird to say I think we become the primary news source, because there isn’t a primary news source right now. I take that responsibility very heavily. But having done it, you know, for Knight Ridder all those years, I kind of know what it’s like. But I think that that’s the case.

Doctor: It’s a very interesting question. I’ve had a series of very fun debates with my friend John Thornton about these topics. So that plays out on several different levels — let’s just take two of them, access and coverage.

So access. In the AJP model, one of the principles is no paywalls. [The American Journalism Project, co-founded by Chalkbeat’s Elizabeth Green and Thornton, provides venture philanthropy to promising digital local news companies and says grantees’ core product “must be free to the public.” —Ed.]

And I’ve said to them: That’s great, in principle. Yeah, we want everybody to have access to it. I want everybody to have access. But tell me any model that’s going to actually sustain a news company and allow it to grow that isn’t heavily based on reader revenue. And show me any reader-revenue model that is strong enough to do that that doesn’t have a paywall as a foundation. And there is there isn’t one; public radio is its own thing and it’s 40 years old.

So the access model, to your point, is do a paywall, get those who can pay, and there are many of them, to pay — and then provide as wide access as possible to those who essentially can’t or, in some cases, won’t. So we have used, essentially The New York Times’ model there. We want students to have access to Lookout. We believe that’s key to their civics education and democracy. And so we are finding benefactors who will help us get access to students and schools. Students throughout the county is our goal — we’re about halfway there on that.

In terms of coverage, that’s where the mission orientation comes in. It’s got to be a strong business to sustain and grow the journalism we want to do — but we don’t evaluate coverage areas, coverage topics by how much money they’re gonna bring in. We will be very data-centric in following what readers are actually reading and in terms of membership funnel and all of that. But we are committed to covering this whole county, of having at least some of the staff being bilingual. And I’m already working with leaders in south county — for instance, there’ll be a whole series (made hard by the pandemic) of listening sessions. What does that mean, to cover an area that hasn’t been covered? Watsonville is the major city in the south part of the county — how do we get Watsonville and Santa Cruz to understand each other, actually putting together a project on that in addition to the way we assign beat reporters. So I think it’s both access and coverage, and it’ll evolve over time, but we have a very strong commitment to it.

Doctor: Yeah. We’ll see what we do virtually. There’ve been some interesting examples. There are only four or five key event sponsors here right now; we will do co-sponsorships. Then over time, we”l look at our own events and bring in our own sponsors as well.

And some of these are going to be solutions-oriented forums. The way I would hope this works, post-COVID, is, for something like homelessness, we do a kind of project reporting on it. That gives readers a new baseline of fundamental information, what’s true and what’s not about the homelessness problem. And we also bring in examples from other places — that could be through the reporting of one of our content partners. People who can help this community inform itself on the topic and debate solutions. And then of course there’s that circle of reporting — reporting on the forum and keeping a focus on an issue.

The most important revenue there clearly is advertising revenue — essentially sponsorship revenue — as opposed to participant revenue. But as much as revenue at the beginning, for something brand new, is just brand building. I think over time, events will probably be 5 percent, 8 percent of revenue.

Doctor: To some degree. I’m recruiting for a top editor — my role here is going to be as CEO of the company. I want that person to have a major hand in the hiring and assembling of the staff. But probably a couple of editors, with also the flexibility of hiring people who are both reporters and have done some editing for sure. Reporters will be largely topic-based — so in an area like health or education, we’re looking for people who have maybe three to five years’ experience, at least, covering that topic. And although this is a higher-cost-of-living area, we will pay will pay good salaries well above what dailies are paying in California. In addition to that, we’ll have a two-person Lookout product hub looking at visualizations, graphics, photos, and that’ll be a partnership between the hub and and the editorial staff.

Doctor: It’s mostly grants, including from Google, Knight Foundation, Lenfest, and then individuals through the Silicon Valley Community Foundation. All of those are just key players in this, and that’s been important as I questioned nonprofit as the only model out there. I’m not anti-philanthropy — in fact, philanthropic support is great for startup capital. I just don’t want to be dependent on it longterm. And so these grants have really helped us get to the scale that I wanted to get to.

Doctor: Yeah — that’s clearly number one on the list right now. You know — hiring people by Zoom. Selling advertising by Zoom.

This whole idea is based on relationships — authentic relationships with people, the community. I wanted to go talk to every civic group, you know, and stamd up there at lunch over some bad chicken and tell them about Lookout. I’ve talked to a lot of these groups in the past about the problems of journalism, and I was really looking forward to doing it. Well, you can’t do that now. So the No. 1 thing is how much COVID makes this harder.

You know, there’s just a void in the community. Companies like Alden are stripping newspapers down to the point where a lot of them don’t even have a publisher to go give that talk at the Rotary.

At the same time, since I am a congenital optimist, there is no doubt that one of the community’s biggest needs right now is health information. And as we get into 2021, especially if we have a vaccine and the beginning of a recovery, the chance to be a primary media source, a partner in the right way with the community in this recovery is a wonderful opportunity. And I’m trying to focus on that part of the COVID opportunity.

Other than that, I think the major thing is just discovery. I know we will create an excellent product and excellent content. And what the adoption curve is, in terms of engagement and in terms of in terms of membership, doesn’t worry me — but I know that it’s it’s always harder for the first six months. We’ve got enough money, we have enough talent, we’ll have enough connections — just really good support in the community — that I think it will work very well. But those are the two things, COVID and just the adoption curve. And we’re looking at how how we use earned and paid media to really assert ourselves right out of the gate.

Right now, I’m really focused on the idea that the 2020s have got to get better — in a lot of ways. Instead of complaining about what’s been lost, or following the fortunes of Ferro and Freeman, I think it’s much healthier for those of us who care about local journalism to build — to go do what we think needs to get done and see if that works. Because otherwise, it’s just going to get worse and worse. And we know the toll that has on democracy. So I’m thrilled to be able to do this, even if it’s harder than I thought.