How funding influences a media company’s operations

The views expressed in this column are those of the author and do not necessarily reflect the views of the Reynolds Journalism Institute or the University of Missouri.

Dorian heads Teeming Media, a thought leadership communication consultancy focused on media technology, as well as The Verticals Collective group of media company founders and operators. He teaches media business at Columbia University’s J-school and the Zicklin School of Business at CUNY/Baruch.

My previous column explored how the types of revenue a media company earns — from advertising or subscriptions, for example — can deeply affect the journalism that it produces. This time, let’s look at the effects of funding the company takes as it launches and grows.

How a news organization is funded — whether by investors, philanthropists, bank loans, or the founders’ own pockets — can determine how it’s run, what it produces, and even what’s considered success.

Venture capital

When it comes to startup funding, venture capitalists seem to get disproportionate levels of attention. Fictional dramas, mainstream news coverage, and reality TV shows like “Shark Tank” make it seem as if venture capital is the path to success in America.

It can be. There are examples of venture-funded media companies that have gone on to financial stability for their founders. Vox, Axios, Politico, and Business Insider are a few that come to mind.

Yet, the structure of venture capital can prove to be a heavy burden. Simply making a profit — being a viable business — is usually not enough. There tends to be big pressure to scale fast, and show outsized returns. Most venture-funded media companies have to increase audience and revenues by many multiples, regardless of any journalistic merits.

Producing well-reported news, meanwhile, is labor-intensive and expensive. It is not scalable in the same ways as many tech products or consumables. To do more and better reporting, you need to pay more skilled journalists. Buzzfeed and Mashable are poster children for venture capital-fueled media companies whose news operations proved unable to meet financiers’ expectations.

In his essay, “How We Got off the Addiction to Venture Capital and Created Our Own Way to Profits,” friend and colleague Rafat Ali wrote of the contortions his travel industry news company, Skift, went through to try to get venture funding. They positioned themselves as a data business, rather than as a company serving a community with news and information. 

“We told investors what they wanted to hear,” he wrote, insisting to them that Skift could “scale to a venture-returns-friendly business.” Later, feeling “dirty from lying,” he and his team decided to forgo venture capitalists  and instead work from whatever cash they could generate on their own.

Private funding

Sometimes private individuals or firms put money into a company, expecting a share of returns. News organization founders accepting such funds should understand both explicit and implicit expectations, and know that the people with the money can exert a say over what is covered, and how. The recent turns taken by Jeff Bezos’ Washington Post provide a prime (sorry) example. Alden Global Capital has taken over many news organizations and restructured them with lower levels of staffing and resources, creating at least short-term financial gains by cutting expenses.

An intriguing model of private funding comes from Hunterbrook Media, a news organization funded by sister company Hunterbrook Capital. Hunterbrook Capital takes financial positions, going short or long on companies, ahead of articles’ publication by the media arm. Due to regulatory requirements, Hunterbrook Media can use only publicly available data and sources and must avoid many typical investigative techniques such as off-the-record conversations or culling through undisclosed documents.

Foundations and grant funding

Grant funding almost invariably comes with expectations that a specific mission be fulfilled. A foundation usually requires that its funds be applied toward its stated goals.

Katherine Bagley, editor-in-chief of environmental news site Grist, recently told one of my media business classes that she keeps funders in mind while running her multi-million dollar operation: “One of the things that I do in my job is syncing the newsroom with funder priorities,” she said.

She said she also much prefers “unrestricted” funding. Grant funding is often restricted, meaning that the news organization has to track — and show — that the money was spent on specific areas of coverage. The organization may also have to demonstrate some impact, such as reaching certain numbers of people in a desired community.

Bagley also prefers to have multiple funding streams to minimize risk. “A lot of what you’ve seen in the past is if there is a nonprofit news site that maybe relies almost solely on a single funder or a single foundation,” she said. “Funder priorities change, and then all of a sudden … that publication is in real trouble.”

Loans

When a company borrows to fund its business it has to pay interest. That’s debt that needs to be serviced to stay in business. And it creates the requirement of generating extra cash, which, again, can distort the operations beyond any journalism produced.

Self-funding

Launching from founders’ assets is another way to go. Doing so will limit the activities to whatever can be afforded. It also brings some liberation — as with Skift, above — in knowing that management can decide where to apply any extra income that comes in.

None of the above is to say that any type of funding is better than another. It is a way to reinforce that all funding comes with strings, and to know what those strings may be.

There are recent examples of both successes and flameouts for news organizations supported by all of these methods. Houston Landing is a notable example of a well-endowed not-for-profit that shut down, fast. The Daily Memphian and Lookout Local are foundation-funded not-for-profits that seem to be doing fine while fulfilling their missions.

The types of money founders choose will depend on their mission, needs, community, resources, likelihood of generating revenue, levels of expertise, contacts, and more — all of which you can find plenty about on this very website. Speaking of which … 

This is my last column here, for now. I’ve greatly appreciated the chance to share with the RJI community, and look forward to more. I hope to hear from you.

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Cite this article

Benkoil, Dorian (2025, May 20). The effect of money (Part II). Reynolds Journalism Institute. Retrieved from: https://rjionline.org/news/the-effect-of-money-part-ii/↗