The New Era of Media Companies
For many years now, VCs have absolutely “hated” investing in media companies. If you were starting a blog or a newsletter, it would be very challenging to raise money from traditional VCs unless you had proven out a ton of traction (with a fast growth trajectory).
But I think it’s important to understand why, because we’re starting to see an inflection point that will shift the entire industry.
Side note: my view on this topic is fairly strong and comes from working with a lot of newsletter companies over the years in running my startup, which was an email ad network.
What’s wrong with media companies?
VCs typically have not liked these criteria about media companies:
Low exit multiples on ad revenue (often 1-2x on annual revenue)
Hard to acquire users quickly & scalably (CAC is too high at scale)
In a recession, companies reduce ad spend – especially brand advertising
All of these things have been traditionally true — especially if you’re looking to sell your business in 5 years.
But what if you thought more long-term? Not a 5 year horizon but 10-20 years or even 20-30 years out? How would you think about your business differently? What would your strategy be?
Regardless of your business, you might do something like:
Gather an audience – maybe start a newsletter to get loyal fans
Launch a product to that audience
Launch many products to that audience to upsell them etc..
And maybe you sell ads or event tickets in (Read more...)