SHOW ME THE MONEY Notes From the Front Lines of Media Entrepreneurship

1. SHOW ME THE MONEYNotes From the Front Lines of Media Entrepreneurship Mark Potts KDMC Boot Camp May 18, 2011

2. Show me the Money • Getting started • Finding a business model • Raising money • Making money • Measuring success • Failure • Lessons learned

3. A Cautionary Tale So You Want To Do a Web Startup

4. Why journalism startups aren’t like journalism • Math is required • You have little or no control • Mistakes are tolerated; failure is celebrated • If you’re VERY lucky, you can make a lot of money

5. Getting STARTED

6. What You Need • A great idea • However: “Execution matters more than the idea” — Union Square Ventures’ Fred Wilson • Great people • “Talent attracts capital, not the other way around” —NYC Chief Digital Officer Rachel Sterne • Money • Optional, but preferable • A business model • Not optional • Gumption, fortitude and patience

7. Finding a business model

9. BUSINESS Model vs. business plan Business Model Business Plan An exercise in creative writing Your business model, in presentation/written/spreadsheet form Where do the numbers come from? You make them up! Still: An important exercise, to think through and present your idea • How an organization creates, delivers and captures value • A series of educated guesses about a customer problem and the product solution • Ideas and assumptions you can test over and over

10. Developing your BUSINESS Model • Your business model is just a set of hypotheses • They need to be tested and verified (preferably with customers) • Ask yourself difficult questions • Listen to the answers! Your worst, nagging fears are invariably correct • Take time to think through alternative possibilities • Odds are, where you wind up won’t be where you started out

11. Questions You Need to Answer(Adapted from Business Model Generation—Osterwalder & Pigneur) • Who’s your customer? • What’s your value proposition? • What problem do you solve? • What’s your basic model? • For-profit? Non-profit? Eyeballs first? Revenue first? • Where’s your startup capital coming from? • Investors? Loans? Grants? Revenue? Bootstrapping? • What skills do you need besides yours? • What other resources do you need? • How are you going to get the word out? • Who are your competitors? (Honestly) • What could possibly go wrong? (Honestly!)

12. For-profit? Or Non-PRofit? • Non-profit is a tax status, not a business model • Either way, you have to break even. At least • Successful non-profits are run just like businesses • There’s no free lunch—or free money

13. For-profit? Or Non-PRofit? For-profit Non-profit Raise money from foundations, donations Beholden to funders (just ask NPR!) Regular trips to the fund-raising well Fewer sources of revenue You can’t keep what’s left over • Raise money from investors • Beholden to customers, subscribers, advertisers • Have to answer to investors • Revenue provides working capital • You get to keep what’s left over

14. The facts of business model life • No business model survives the first customer contact • Don’t build your company until you’ve verified your business model • Adapt and iterate your business model until it works • Try, try, try again. Rinse. Repeat.

15. THINK BIG (ENOUGH) • Properly assess market size and potential • Plan for growth • Dare to dream • Don’t undersell—or underprice • Think like a businessperson, not a journalist

16. Turning A business model Into a Business Plan • Tell your story • Keep it direct, clear and simple • Highlight your strengths • Be positive: You’re selling yourself and your idea • Don’t overhype • Cover all bases (and beware gaping holes) • Where possible, show, don’t tell • Demos/screenshots are worth 1,000 words • Prepare for rejection • Iterate and fine-tune

17. Raising Money

18. Sources of startup Money • Bootstrapping • When you love it so much you’d do it for free • Family and friends • Remember, you can lose their money • Loans • Grants • Government funding

19. Sources of startup Money • Incubators • Angels and seeds • Venture capital • Find the right VCs • Prepare for rejection • Prepare to be micromanaged (not a bad thing) • The art of keiretsu • Wall Street • IPO!

20. A Hard Fact:Raising Money AIN’T EASY • Find the right people to pitch to • Connections help. A lot • What are the odds? • A VC’s week: • Hundreds of plans • A couple dozen pitches • 98% rejection rate • Knight News Challenge, 2007-2010: • 10,000 plans submitted • 50 funded • Prepare for rejection • Constantly revise and hone your pitch

21. Making Money

22. A Field Guide to Revenue Sources The Usual Suspects Subscriptions Memberships Syndication • Advertising • Ads you sell • Self-serve ads • Google AdSense/contextual ads • Ad networks • Directories • Sponsorships • Deals of the day/coupons

23. A Field Guide to Revenue Sources OTHER REVENUE STREAMS • Advertiser services • Data • Website/Social media help • Mobile advertising • Conferences, events, classes • Selling stuff • Donations

24. MEASURINGSuccess

25. Pop Quiz: Which of These are Successful Businesses? • The Washington Post • HuffingtonPost • YouTube • Twitter • Patch • Facebook

26. What is Success? • Not buzz • Not Twitter followers • Not Facebook fans • Not scoops • Not even a devoted audience • (though all of these are components of success)

27. What is Success? • Success is still being around in five years…and beyond • Success is building a sustainable business

28. Be Sure You Know How to Measure Success • Covering ALL costs • Paying a living wage (and benefits) • Reaching a loyal audience • Satisfying customers (advertisers) • Providing value • Turning a profit • Satisfying investors/funders

29. FailURE

30. In Journalism,“Failure” is a dirty word • You got scooped • You blew the story • You missed a deadline • You misspelled a word in a headline • You missed a key detail • You screwed up somebody’s name

31. In Startups,It’s OK to Fail • It happens 90 percent of the time • Failure is a teachable moment • In Silicon Valley, failure is a badge of honor • “This one didn’t work out. That’s OK—the next one will.”— Legendary VC John Doerr • VCs often prefer to fund failed entrepreneurs rather than newbies • Learn from failure and mistakes

32. How to Fail • Fail fast • Fail smart • Fail graciously

33. Startups:Lessons Learned

34. 10 Things You Need to Know About Startups • Startups are really, really hard work • They’re not for everybody • It’s a constant roller-coaster • Things never move quickly enough • Prepare to be discouraged

35. 10 Things You Need to Know About Startups • Listen to what people tell you (but don’t believe all of it) • Have a sense of humor and play • Get comfortable wearing many different hats • Be flexible about EVERYTHING: something will always change—radically • Startups are really, really hard work

36. Mistakes I’ve Made • Hiring the wrong people (and not firing them) • Moving too slowly • Inflexibility • Not asking for help • Being too early to the dance • Not enough runway

37. “Why do you keep doing this?” • It’s a great challenge • You get to call your own shots • The chance to create something new • The (slim) chance to make a lot of money • It’s great fun

38. The future of journalism belongs to entrepreneurs • They’re more innovative • They’re more flexible • They’re passionate • They’re not encumbered by legacy thinking and problems • They’re fearless

39. Michael Corleone on Startups(from Godfather II) • Michael:[about the unrest in Cuba] We saw a strange thing on our way here. Some rebels were being arrested, and instead of being arrested, one of them pulled the pin on a grenade he had hidden in his jacket. He took himself and the captain of the command with him. • Guest: Ah, the rebels are insane! • Michael: Maybe. But the soldiers are paid to fight; the rebels aren't. • Hyman Roth: What does that tell you? • Michael: They can win.