Bay Citizen, a non-profit news startup, blows $5 mil in one year(sfppc.blogspot.com)
sfppc.blogspot.com
Bay Citizen, a non-profit news startup, blows $5 mil in one year
http://sfppc.blogspot.com/2010/12/bay-citizen-to-spend-5-million-in-one.html
7 comments
It's amazing how much money is like time.
If you have a ton of excess time, you are far less efficient and it simply takes you longer to complete relatively simple tasks.
Having tons of money before you can prove product-market fit just leads to misallocated spending and inefficient uses of money (because people force themselves to spend to justify the amount of money they've raised.)
This is the reason programs like YC & TechStars work - it doesn't take a ton of money to build an early product and prove your model works.
Once the model works - then you should spend like crazy to scale - but because you've spent the time with very little money - you understand the value of each dollar and the positive affect of each additional dollar.
Edit: For examples, check-out most of the startups that blew up in the late 90s. They raised a ton of money because they could, but it was spent on domain names, really expensive office space, executive talent, and building proprietary software for non-core functions.
My favorite example is the story of the Industry Standard - Check out "Starving to Death on 200 Million" by James Ledbetter if you want to learn more.
If you have a ton of excess time, you are far less efficient and it simply takes you longer to complete relatively simple tasks.
Having tons of money before you can prove product-market fit just leads to misallocated spending and inefficient uses of money (because people force themselves to spend to justify the amount of money they've raised.)
This is the reason programs like YC & TechStars work - it doesn't take a ton of money to build an early product and prove your model works.
Once the model works - then you should spend like crazy to scale - but because you've spent the time with very little money - you understand the value of each dollar and the positive affect of each additional dollar.
Edit: For examples, check-out most of the startups that blew up in the late 90s. They raised a ton of money because they could, but it was spent on domain names, really expensive office space, executive talent, and building proprietary software for non-core functions.
My favorite example is the story of the Industry Standard - Check out "Starving to Death on 200 Million" by James Ledbetter if you want to learn more.
This just kills me. I run a nonprofit building open tech for the music industry. While we're not without reach or connections, but it's still challenging as hell. No investors, a long road to true 501(c)3 status, and the reality is that finding millions from a wealthy benefactor doesn't happen for most.
I guess my point is that most startup nonprofits don't get the benefit of healthy salaries or even seed money. It's a labor of love — not unlike any entrepreneurial venture, but without the potential payout at the end of the road. I think new and innovative nonprofits have a real place in our economy, but hearing about $400k salaries for unproven CEOs at a first-year nonprofit doesn't win new people over to the side of innovative philanthropy.
If they blow it and don't make it past this first year (and it sounds like there's a good chance of that happening) then it could be a real black mark on new model nonprofits...
I guess my point is that most startup nonprofits don't get the benefit of healthy salaries or even seed money. It's a labor of love — not unlike any entrepreneurial venture, but without the potential payout at the end of the road. I think new and innovative nonprofits have a real place in our economy, but hearing about $400k salaries for unproven CEOs at a first-year nonprofit doesn't win new people over to the side of innovative philanthropy.
If they blow it and don't make it past this first year (and it sounds like there's a good chance of that happening) then it could be a real black mark on new model nonprofits...
You have to understand that it is mostly one guy and one extended family that self-funded Bay Citizen. Those hefty salaries just signal that their approach is to give some of the core group they've hired some breathing room to experiment and incubate. It's just not a good comparison to a grass roots NPO.
That might be true, but $400k is a whole lot more than breathing room.
But regardless...my point is that this doesn't help instill public trust at all — especially in a massively down economy. My worry is of the double-edged sword: if they fail with a big cash influx it's easy to point to them and say that new thinking in/around nonprofits interfacing in mainstream industry is a failure.
They were given enough capital to last beyond one year...I just hope the gamble pays off so we don't see experimentation in the space end with them.
But regardless...my point is that this doesn't help instill public trust at all — especially in a massively down economy. My worry is of the double-edged sword: if they fail with a big cash influx it's easy to point to them and say that new thinking in/around nonprofits interfacing in mainstream industry is a failure.
They were given enough capital to last beyond one year...I just hope the gamble pays off so we don't see experimentation in the space end with them.
$400K in the Bay Area for a CEO is average-low. It's not a paltry sum, but it's certainly not anything a truly Tier-1 CEO would work for unless they either had some upside (equity) or had ulterior motives (Labor of Love).
Are you suggesting that $400K is reasonable, and that it is because this person has the title of "CEO" and is located in the Bay Area?
We are talking about someone who:
1) is leading a startup journalism non-profit.
2) has no prior experience as a CEO
3) has never worked in the journalism industry
If this were a tech startup, the salary range for this CEO would be $0 to $100K. To be fair, since as a non-profit there is no equity upside, one could argue for a hefty year end performance-based bonus. But a guaranteed $400K salary is beyond absurd.
We are talking about someone who:
1) is leading a startup journalism non-profit.
2) has no prior experience as a CEO
3) has never worked in the journalism industry
If this were a tech startup, the salary range for this CEO would be $0 to $100K. To be fair, since as a non-profit there is no equity upside, one could argue for a hefty year end performance-based bonus. But a guaranteed $400K salary is beyond absurd.
Correct, I am saying that $400K is reasonable for a CEO of a venture of this sort only if they do not have extensive experience and/or if they were doing this as a labor of love (Not-for-Profit). If they had significant experience, or knowledge of this industry, they should be making much more.
Someone decided that his background would make him an effective CEO - and once they did, the salary should be commensurate with the responsibilities.
If this were a tech startup, the salary range for a CEO in the valley (for a Series A/B Round startup) would be $250K-$300K with an upside ranging in the 10s of millions.
A guaranteed $400K salary is really not a very decent salary for a CEO. I'll see if I can find some stats to back up my claim.
[EDIT: http://www.siliconvalley.com/salary-survey/ci_12523817?nclic...]
In 2009: The median pay package the valley's boards of directors awarded their chief executives dropped 5.6 percent, to $2.2 million.
Someone decided that his background would make him an effective CEO - and once they did, the salary should be commensurate with the responsibilities.
If this were a tech startup, the salary range for a CEO in the valley (for a Series A/B Round startup) would be $250K-$300K with an upside ranging in the 10s of millions.
A guaranteed $400K salary is really not a very decent salary for a CEO. I'll see if I can find some stats to back up my claim.
[EDIT: http://www.siliconvalley.com/salary-survey/ci_12523817?nclic...]
In 2009: The median pay package the valley's boards of directors awarded their chief executives dropped 5.6 percent, to $2.2 million.
You are using CEO salaries of publicly traded companies as comps for the "CEO" of a startup journalism nonprofit (with NO employees to manage, as of the CEO's first day on the job). You don't see anything wrong with that?
If you think tech CEOs in the bay area make under 100k you are either not from here or they've all been lying to you to pay you beans.
Yup, all those YC CEO's are sure rolling in the dough.
Understood. But we're not talking about a Tier-1 CEO, and we're not talking about an established company.
Rather this is someone with no journalism experience at a nonprofit startup. If we were talking about a first-year startup in a failing industry with $5mil in total funding there wouldn't even be a suggestion of a CEO salary close to that.
But my larger point is that this is an organization that needs public support to succeed. Burning through all of your funding in the first year while paying top-level executive salaries in a down economy doesn't build public confidence.
Rather this is someone with no journalism experience at a nonprofit startup. If we were talking about a first-year startup in a failing industry with $5mil in total funding there wouldn't even be a suggestion of a CEO salary close to that.
But my larger point is that this is an organization that needs public support to succeed. Burning through all of your funding in the first year while paying top-level executive salaries in a down economy doesn't build public confidence.
(I run a 501(c)3 non-profit startup)
The Bay Citizen is taking in nearly all of its revenue from one source. As a 501(c)3 organization, you can't do that for very long or you'll end up being classified as a Private Foundation (and lose the ability to take in tax-deductible donations). In order to survive for more than just a few years, Bay Citizen will need to diversify their revenue stream. So a shift toward membership-based fundraising doesn't mean they are hard-up on cash or think their burn rate is too high -- this is just something they have to start doing.
There's a bunch of information here if you're supremely curious: http://www.sharinglaw.net/npo/PublicSupportTest.htm
The Bay Citizen is taking in nearly all of its revenue from one source. As a 501(c)3 organization, you can't do that for very long or you'll end up being classified as a Private Foundation (and lose the ability to take in tax-deductible donations). In order to survive for more than just a few years, Bay Citizen will need to diversify their revenue stream. So a shift toward membership-based fundraising doesn't mean they are hard-up on cash or think their burn rate is too high -- this is just something they have to start doing.
There's a bunch of information here if you're supremely curious: http://www.sharinglaw.net/npo/PublicSupportTest.htm
ceo is a ex-mckinsey partner who draws a $400k salary. what do you expect the internal culture is like?
It's important to distinguish journalism from the business of journalism. Journalism is doing well thanks to the internet. The business of journalism is doing poorly, also thanks to the internet.
1999
[aside: I have a really clever start-up idea for a journalistic venture in Berkeley, CA and would like to find some partners. (lord -at- emf.net) Here's some back story to the linked story, though.]
In the Bay Area, the journalism industry has crashed pretty hard. Papers have failed, others shrunk considerably. A lot of government operates under far less scrutiny than T any time in living memory.
Historically, news moguls have had enormous political power. The movie Citizen Kane gives a cartoonish sense of the Hearst news / political machine. (The S.F. Chronicle is currently a Hearst paper. The real world Hearst castle that corresponds to the one in the movie is in these parts. Etc.)
The Hellman's (Bay Citizen's main benefactors and instigators) qualify, in this region, as "old money". The first Hellman to rise prominence here was a major player. If you read the society pages (what's left of them) you'll sometimes see the Hellman's and branches of that family like the Dinkelspiel's come up. They are Big Shots in these parts.
Thus, Bay Citizen could be characterized as "old money" swooping into to fill a journalistic void, in part motivated by a recognition of the political power represented in that void. I want to be clear that I'm absolutely not saying that Hellman is an egotistical power-grabbing Kane type or anything so cartoonish or anything so ethically simple minded. I'm just saying that it's not so surprising that when the regional journalism industry collapsed... one of our prominent and well established families would step up and try to get something going in that area. If it wasn't Hellman money, why, then, there's a short list of other family names that would have been next in line.
I won't comment on the editorial politics of Bay Citizen or some of their partner sites because I'll both get myself in trouble and bore most HN readers with too much insider Bay Area politics but I will skip to a prediction:
Bay Citizen isn't about to go under. The highly paid execs, I bet, mostly won't be tossed (if any will at all). Or if it gets rebooted and lots of people tossed ... it'll still be booted up and resume. Some funding will be renewed and the experiment will continue a few more years. The political power stakes are too high to just walk away. The money amounts are very low relative to those stakes. The tentative successes of Bay Citizen (e.g., a modest amount of syndication, etc.) look promising on paper. Nobody seriously expected a self-sustaining operation at the end of one year (especially given the peanuts they said they pay stringers).
Right now, Bay Citizen --- journalistically disappointing as it has been, in some of our views --- is nevertheless one of the loudest journalistic voices in a news-starved region. $5M was a bargain, so far. The project is an easy to make fun of tentative success, as far as I can tell, in the eyes of its main sponsors.