Stephanie Cook August 25, 2016
Venture capitalists invested just $279 million into media companies last quarter, the lowest amount since 4Q 2012. At the same time, the total number of media investments reached a five-year low of 56, down 50% from the same quarter last year. This slowdown indicates that, increasingly, VCs are tightening their purse strings and shifting their focus to more mature companies (with proven business models and strong growth trajectories) rather than on high-risk, high-reward early-stage startups.
To gain an inside view, we’ve asked our friend Jessica Lessin, founder of The Information, to share her thoughts on the digital media landscape:
As a Wall Street Journal reporter and editor for eight years, it was clear to me that the business of quality journalism was broken. Reputable outlets had succumbed to chasing traffic and page views. Instead of offering quality journalism, the media was wasting talented journalists’ time and readers’ attention. I believed the answer had to start with the business model. Instead of valuing clicks and eyeballs, we had to value the quality of the reporting, and deliver a product that people are willing to pay for. So we embraced the subscription business.
By and large, I think it is still broken, and readers agree. According to Gallup, trust in the media is at an all-time low, hovering at around 20 percent. News and entertainment sites are still not focusing enough on delivering content that is exclusive to them—that their audiences will seek out and come back for without being tricked into clicking on something. Outside of news, I deeply admire HBO as a company that is doing it right and others are trying to emulate. But there is a lot of inertia, and everyone is still addicted to the traffic drug, even when they say they aren’t.
It starts with the fact that we don’t waste your time with thinly sourced stories you’ll find elsewhere. This seems like a marketing line, but it isn’t. Our day begins every day with our reporters talking to our editors about new information they’ve dug up that isn’t out there—and we verify it. We have incredibly high sourcing and quality standards which serve readers because they get the real story.
What also makes us different is that we aren’t writing for every reader out there. We’re writing for our subscribers who are informed decision-makers inside and outside of tech. They’re 9 out of 10 of the founders of the most highly valued private U.S. companies, for example. That allows us to provide original, in-depth reporting that caters to that smarter audience.
Knowing what percentage of companies are squeezing in which terms, and whether that term is trending up or down, is of huge value. I think perhaps the greatest value is to employees and investors deciding whether to join or invest in specific companies. For employees in particular, this data is not known. But an employee deciding whether to join a company like AppNexus, should know that some VC investors have IPO protections that could prevent them from losing their money at the expense of common shareholders, as this story shows. Snapchat, for example, doesn’t have that. That’s priceless because it informs real decisions.
In addition to the above, it just helps us go deeper. When a company’s fundraise is in the news, you can get the headline but you don’t know what’s really going on. PitchBook data can tell us what terms earlier investors have to see how they might be affected and to also know what to ask our sources about. PitchBook’s overall market data is also wonderful for seeing what’s happening quarter to quarter and year to year.