Now that Bleacher Report is in the rear view mirror, I am planning to launch another content company. It’s a “when” rather than an “if”… And I couldn’t be happier to be in this much-maligned business of creating and distributing original content.
In my opinion, it is probably the single best venture sub-sector to create, and one that venture capitalists should be scrambling to invest in. In fact, I’ll wager that the venture community is going to have to start putting money into content companies, because they are going to be one of the best performers of the 2010 decade.
Here are just some of the reasons why any VC who says “we don’t really do content investments,” is out of their mind…
1. They are among the least risky investments
Look at the major venture-backed content websites of the last decade. How many of them have truly “failed” after receiving meaningful venture investment?
There are the three that have sold for nine-figure exits — DailyCandy, Bleacher Report, and Huffington Post. Then there are the many that are almost certain to sell for nine-figures one day — BuzzFeed, PopSugar, Vox Media, Refinery29, Curbed, Mashable, Gawker, BusinessInsider, Thrillist, etc.
And what else do you notice about the dozen companies that I just mentioned above? They are all experiencing record traffic and revenue. Every single one. Not one of those sites has ever seen better days.
That’s the amazing thing about content companies. They don’t really disappear. In fact, even when they have a “bad year,” they still usually grow.
And even the ones that don’t achieve big nine-figure exits can still have great returns on relatively small capital investments. My cousin’s company, College Humor, experienced a terrific eight-figure exit after raising exactly zero dollars in venture capital. Same with TechCrunch.
While it’s true that many VCs hesitate to invest in unlaunched or very small content websites, the ones that have any modicum of critical mass have performed really well. It is unlikely to yield at 100-times return, but a 10-15-times return is very real.
And, let’s face it, if you asked ten VC’s to choose between a high-probability 15x return or a long-shot 100x return, they will all tell you that they prefer the latter — but everyone knows that they are lying. Including them.
2. They have far fewer systemic risks than anything else
Did you hear about the Evernote hacking, that has caused massive damage to the company’s relationship with users? Does Dropbox need to employ innumerable security whizzes in order to prevent more bad press about account breaches?
How often do you hear about credit card numbers being stolen?
It’s a good thing that content websites don’t have to worry about that crap. Most of us just tell you to log in via Facebook, and we don’t even know how to collect your credit card information.
And you don’t even need a team of 20 engineers to run a content company, even one worth hundreds of millions. I plan to launch my next startup with two engineers, and it may stay that way for quite some time.
The only real risk that I can think of is some sort of lawsuit or libel accusation, but the good news is that the United States Government has seen fit to, well, basically ignore that libel exists.
What other startup can claim that the federal government arbitrarily decides never to enforce their largest source of potential lawsuits?
It’s so nice running a content company.
3. There is room for many victors in this space
There could be only one great social network for you and your friends — and so Facebook ate MySpace, Friendster, High5, etc.
The world only needs one micro-blogging platform, so don’t even try to encroach on Twitter’s turf.
But there is plenty of room for multiple victors in the content space. Even within the same content verticals. Heck, look how Bleacher Report and SBNation co-existed for years. I never cheer for my competitors, but they will probably have a nice lucrative exit one of these days, and we co-existed the whole time.
That’s the thing about content companies… there is so much pie to eat.
And with the decline of the publishing world, and the implosion of companies like Conde Nast and every newspaper company known to man, we’re all taking share.
Users like going to multiple websites. That’s why Gawker and Jezebel both thrive within the same ownership portfolio. And even a slightly different editorial voice can make a site viable amongst its competitors. Think about how Refinery29 has carved a large following even amongst Vogue, InStyle, etc.
I will resist discussing PandoDaily in this article, but they have proven that you can separate yourself even within a niche’s niche… I mean, how many Silicon Valley tech startup journals did we need after TechCrunch, VentureBeat, etc.
Evidently we did need another one, given Pando’s quick ascent.
4. They have their revenue system all figured out — and it works
I’ve already written about how great advertising is as a business model, but I want to reiterate how nice it is to have a business model on day one.
One that works.
One that can easily get you to $25 million per year in revenue — with profit — in five years of operation. And, in some cases, many times that figure.
And it also scales up quite nicely. You don’t have to be one of these “all or nothing” businesses where if you fail to capture the market, you’re screwed.
Even a reasonably small content company can bring in a few million dollars per year early in its existence, to keep itself healthy.
Finally, let’s admit it — the Internet doesn’t have that many revenue models. Far fewer than we thought it did even two years ago. With “daily deals” and “digital goods” being largely discredited, that still leaves us with advertising and ecommerce. Which are often the same thing.
And while the iTunes app store has made some developers wealthy, you have to sell a ton of 99-cent games in order to match the impact of those juicy $500,000 advertising buys that you can garner on a weekly basis as a large-size content site.
In short, the content universe continues to grow, and the venture-backed companies in this space are thriving like never before. Sure, they see nine-figure exits rather than IPO, but that may also change one day. Who knows which one of us will be the first to get that ten-figure valuation.
It’s only a matter of time.
I am thrilled to be in this space, and I can’t wait to launch my next site. It’s going to make me rich(er).