More blogs are raising venture capital, we’re hearing from people they’ve pitched. Newcomer Silicon Alley Insider is looking for a $3 – $5 million round, if reports are correct. And PaidContent is pitching for a second round in that same range (PaidContent raised a round of “less than $1 million” in 2006). We’re also hearing that PaidContent is trying to sell the company for $15 million or more, and just bail out with some spending money.
These rumored deals come as funding for bloggers is heating up in general. Just a month ago VentureBeat reported a $320,000 raise. In 2007 we saw Sugar Inc. ($10 million), GigaOm ($1 million), Xconomy, Blogher ($3.5 million) and The Huffington Post ($10 million) raise venture capital. That’s at least $25 million in 2007 invested in blogs and blog networks.
2006 was a mild year by comparison – SeekingAlpha raised an undisclosed round, as well as B5Media ($2 million), PaidContent ($1 million) Sugar Inc. ($5 million) and GigaOm ($325,000). That’s just $8.5 million or a little more, about 1/3 of the amount invested in 2007.
As far as we know, no significant investments were made in blogs in 2005. Weblogs, Inc raised around $300,000 in 2004, but before they got around to spending it they had sold themselves to AOL for an estimated $25 million. The investors, including Mark Cuban, received 15x on their initial investment.
But apart from that first 2004 investment in Weblogs, Inc., there haven’t been any sales or liquidity events to suggest these investments will be a success. And back then blogging was a cake walk. Most bloggers linked to eachother constantly in a state of brotherly or sisterly love. No one was making any money or getting much attention, so for the most part people got along (with notable exceptions like engadget/gizmodo, who play to win).
Those salad days are long gone. Writers suddenly want to be paid market wages, far above the $5 per post that they received two years ago. No, we’re talking a big salary, with benefits, and stock options. There went half your margins at least.
And writing good content is only half the battle. You have to figure out the complex, dynamic web of politics between bloggers and mainstream media before you post to know where to get support. And you’ll need support in the form of links from other prominent bloggers. An early push can take a post and make it a headline on TechMeme, which leads to page views and notice by sponsors. But since blogging is almost by definition a conversation between bloggers, fights tend to break out over emotional issues. Cliques develop. Can you count on them to support you down the road?
Personally, I’ve found that if a fight is necessary, fight clean and fight hard. Make it as bloody as possible and end it fast, with no loose ends dangling about. Leave no lingering emotional stone unturned. When everyone gets up and dusts themselves off, the issue should have been resolved one way or the other, and both sides should be happy to shake hands and tango another day, even if the handshaking is done privately. Those that aren’t capable of doing that tend to push themselves to the outskirts of the blogosphere, where their main job is to lob in attacks at random intervals, pursuing long forgotten insults.
So today, at best, I’d describe the blogosphere as a frontier town with no lawman (I mean, O’Reilly has a badge on, but no gun and no jail). You can do just about anything you want, but the politically savvy folks tend to arm themselves to the teeth and gang together to protect their property. Everyone else is in the middle of chaos, either fighting blindly for attention or politely asking (by linking early and linking often) if they can join the big Gang.
And now that the big guys in the Gang are being injected with capital, hiring tens of employees and expanding their businesses, they suddenly have a lot more to lose. Linking is never done just because. Rather, links are your political capital that must be expended appropriately. Don’t link at the right time and in two weeks when you’re pushing your own headline, you’ll wish you had. When you stop seeing other blogs as people you admire and want to discuss things with, and start to see them as your competitor, your brain shifts and you stop linking the way you had previously.
Luckily, the newbie bloggers are there to fill in the links when they’re needed. That’s why, if you are a mid-level blogger, you are likely courted by the bigger blogs looking to get your support. If you know what’s going on and are willing to play the game, you can see your blog rise very, very quickly. Choose the wrong blog, though, and you may find yourself alone and lonely in your forgotten blog.
As an aside, when I see a young but promising blogger, I’ll start linking to him or her constantly to build them up (others, like Winer, Scoble, Jarvis and Rubel did that for me). The goal is to help move them up to a position of influence as quickly as possible. The more non-crazy influencers in the game, the easier it is to ignore the noise generators and the better the overall conversation becomes. Over the last year, for example, Silicon Alley Insider, CenterNetworks , LouisGray and Mathew Ingram I’ve been pushing hard. These guys rarely agree with me, but when they talk I listen because they’ve put some thought into what they are saying and how they are saying it. Those guys haven’t hit the big politics yet, and tend to link out a lot to everyone. They are a very important part of the ecosystem – pushing their link votes towards stories they find interesting and helping those other bloggers get headlines and maintain their place in the Gang.
So what’s the point of this rant? Well, all this money flowing into the blogosphere is disrupting the complicated and emotional, but also stable way things are done. Bloggers with money and employees and health care programs and boards of directors and shareholders have to play politics with a whole new group of people, splitting them away from what they do best – Fighting the Blog War. Their behavior can become erratic as they have to decide to tone down their writing to get a certain type of sponsor on board, which in turn lets them make payroll. Investors want to see growth, so more and more blogs are launched, but perhaps without the right talent to grow it into a long term business.
In short, I believe the money is being, for the most part, wasted.
If a VC hands you a check, their intention is not to hang around for 20 years while you build a nice lifestyle business for yourself. What they want to see is an exit, preferably a 10x or higher exit, within 3-4 years. But something tells me that few of these networks are going to be able to grow quite as easily as they think and reach those liquidity events. The talent is, increasingly, locked up. Even when new talent is discovered or trained, every niche has serious heavyweights already there with page views and advertising dollars to back them up for a long fight.
At some point it’s going to become painfully obvious that the only way to get to a massive valuation is for the top talent to band together in a company where they each have an equity stake and therefore a reason to work all night on that next great story. They’ll each have their own space to stretch their legs and let their personality run around a little. Someone needs to pony up a big round of financing around an existing blog, or perhaps a new entity, and then start rolling them up into a big fat CNET crushing $200 million/year in revenue business.
It can happen. In fact it’s almost certainly going to happen. But if you bloggers go out there and raise $3 -$5 million on say a $10 million valuation, you’ve just priced yourself out of the rollup. That option will be closed to you, and you’ll be stuck out in the cold, taking life support payments from Federated Media or another ad network, and having a generally awful time running your business.
What I’d like to see, and even be a part of, is the blogger equivalent to the 1992 U.S. Mens Basketball Dream Team. That team could take CNET apart in a year, hire the best of the survivors there, and then move on to bigger prey.
Just the thought of being a part of something like that has held us back from raising any outside capital at all. I believe we have the beginning of a team that can play a role in this new Dream Team.
So think twice before taking that venture money, guys. You may be shutting more doors of opportunity than you realize.
Well said!
– First–
agreed
Does the dream team include Louis Gray or Duncan Riley?
Michael, I think you are right, but that what you are envisaging could actually happen after either the bubble has deflated and/or a lot of these blog ventures have run out of cash – and talent becomes a buyers market again. Think Google`s position after the crash viz lots of engineering talent that was out on the street post bubble. Not only could it happen, but I think that you/TC would be in the best position to take advantage of this when it does happen.
So i take it Mike is the Micheal Jordon of the team?
Raising outside investment too early and too big can always hamper a business whether it be a blog or not. Putting a huge valuation on initially and then trying to acheive the 10x the investors wants and expects is impossible and youre doomed to failure.
Keep going using advertising / selling products and if you cant survive on that – your business probably isnt that good in the first place.
good post and points for credits to the likes of centernetworks and alike instead of doing a JC and caling them nonames….
Well summarized.
So your Dream Team would take CNET apart in a year?
Congratulations. I didn’t see it like this and still don’t believe it. You have to take into account that CNET is an international company with great media in markets such as Germany and other countries.
There you have nothing yet. A Techcrunch Germany is awfully missing. The world is bigger than the US.
Interesting blog, but I wonder how many of your readers are even aware of all the blogger politics and goings on in the close nit community of yours. I come here for the journalism; the reviews and news on tech companies, and for some of your well put opinion pieces. I don’t really care much for the flame wars and links to other blogs, in fact aside from news.bbc.co.uk and some gaming websites techcrunch is the only news (blog) website I read daily.
Personally I believe this would be the same case for 80% of your readers, whether they are service providers, investors, mainstream journalists or entreprenuers, were for the journalism first.
I believe you are right however about a CNET squasher; if you all banded together to become one entity I’m sure it would put up a huge fight against any of the other mainstream websites especially if you got all the lead blogggers in other categories such as video games, even poker bloggers, (even celebrity gossip?
) and become the definitive one stop shop for opinionated, rumour based and factual, first to print news.
think we should start raising blogs
So with this said, when do you see selling TechCrunch?
Mike, I take on board all your points here and agree with your master plan.
However, I want you to just sit down for a few seconds and consider the independent startups that are competing for your attention here, who suffer with exactly the same challenges as you have highlighted with VC cash flowing into to in most part copycat, me too, services and products, which distorts the playing filed and makes it much more difficult for unfunded players to get any sort of foot hold.
>So think twice before taking that venture money, guys.
Agree — absolutely.
I agree with your master plan.
However, I would like you to pause for a few seconds and consider the independent startups that are competing for your attention here, who suffer with the same challenges as you have highlighted with VC cash flowing into to in most part copycat, me too, products, which ultimately distorts the playing filed and makes it much more difficult for unfunded players to get any sort of foot hold.
Good blog. And this just confirms that I have been doing it right since 1995: publish original content and be nice to everyone, and the readers will stick around.
this is a great post
probably why I read this blog as well
there is some actual thought behind these posts
and getting a sense of direction where we are heading
not about the latest financing post or me too post
Easier said [of pulling bloggers together]… though TC could probably do it [very well].
And in that regard, Weblogs, Inc. was incredible indeed.
more rants please
Hi, you forgot the $4.5 million raised by UK network Shiny Media in spring 2007. The cash enabled us to build a more solid infrastructure and double the number of readers in a fairly short space of time.
Ultimately blog networks are in a strong position should they choose to exit through sheer economies of scale. Though I think the idea of bloggers getting together Dream Team style is an amazing ones. Not sure how all those egos would work together though.
How fair is a fair wage to pay bloggers? Is content worth more these days then two years ago?
I agree with the post. The more the money in the blogshere the more the mini-wars. Cliques are now everywhere. If you aint part of that you wont eat. Even if they gang together most of these cliques do not have meaniful networks except to only keep out other players. Hence you wont see new CNETs out there. But you guys at TechCruch you already have some great network of sites there but suprisingly you dont push CruchGear to the forefront as much as you do with your flagship site (gizmodo, engadget) . CruchBase is an awesome asset you building there-> great resource for VCs and financial instutitions alike. With your 2008 Dream Team, Mike you can have your CNET there.
A large chunk of your lead is wrong — we may raise some money but not the range you mention and we most definitely are not for sale. Rafat’s response is here: http://www.paid...-on-all-counts/
Beyond that, lest people get the wrong idea — not all blog economics are equal. ContentNext Media, our parent company, has never been on the $5-a-post plan. We have always believed in paying our journalists a fair wage.
Wow , you guys really rate yourselves ?
There are tens of millions of blogs outhere, its easy to create content and easy to start a blog.
You have nothing that is unique and just as techcrunch was hot in a short time some kid can do the same.
Its always amazing who bloggers think they are superstars. All I can say is enjoy your moment of fame and don’t believe the Hype. Sure people suck your knee caps right now for your attention but its simply for coverage. Those same people will drop you just as easily as they love you.
I think, blog companies to internet companies are what internet companies are to software companies; or what software companies are to hardware companies. Assets decreasing, revenues equal or decreasing but profit margins significantly increasing. Reminds me your interview at your house. So… yes I believe we’ll see at least 1 IPO here, but I have no idea if we will see roll-ups or not.
Great post and a well-summarized one.
Great post.
Some serious CNET envy there. Wow, reminds me of the nerd gets left out of the highscool dance storyline. Arrington, you’re posts are amusing. Still nothing like the brothel queens at valleywag.
Sounds like you’re telling people to avoid the “unintentional moonshot” – http://redeye.f...nintention.html
“Rather, links are your political capital that must be expended appropriately. Don’t link at the right time and in two weeks when you’re pushing your own headline, you’ll wish you had. When you stop seeing other blogs as people you admire and want to discuss things with, and start to see them as your competitor, your brain shifts and you stop linking the way you had previously.”
That’s the whole article.
This could be one of the most self-serving posts you have written yet.
But what is disappointing is that you dont list any of your own investors in TechCrunch as part of the story.
As well, trying to use some “scare tactic” for people who are looking to taking $3-4M with at $10M” valuation is also self serving for you because lets face it, anyone can come into this space with a lot of money and be disruptive and that could mean greater competition to you which in turn would mean you either comepte or lose market share.
Very disappointed in the article.
Looks like some are greatly underestimating TCs stats. Go for it, Mike.
i will agree with this post. I watch the 2.0ish world and see that this company made this much, that company made that much and the fight that ensues because of it.
I am happy at the fact that there are still those “smaller” sites and blogs that will take a chance and work to make a difference in what ever niche they choose. I started my site to help them get their sites out into the public and will not look to financing from outside sources to build it even more because of the fact that i will loose the control that i have when writing my posts.
That aside i will say that these sites that start small, gain mainstream and sell out have forgotten why they created their sites to begin with and my worry on this is that these new age script kiddies will look at WEB 3.0 as the “how much” instead of the “what can i do” stage in the internet.
You’re probably right Mike.
However, it seems you haven’t clocked onto what Om is doing with his network. Raising $1.35M shows he’s not raising for the money. I don’t read his blogs (FoundRead, only now and again), but I can tell you from a financial perspective it looks like he is doing some strategic positioning to be able to BE the gang all by himself.
I think thats the way you should play it as well. Never count on anyone. Build your empire by yourself. Dictatorships are best for business. This whole Gang thing would only be a stepping stone for one of you who will be eyeing up to be THE top dog!
Oops I’ve let slip your strategy….Sorry.
verrrry interesting. part reality-check, part marketing pitch, part gauntlet thrown.
the piece is logical in and of itself, but if i were another prominent up-and-coming blogger considering your proposal, i’d be listening for the other shoe to drop. you’ve put the fear of god into them on raising too much capital, but i’m not sure you’ve laid out alternative options.
soo mike: based on the above, sounds like TC is positioning itself to lead the way on the rollup. has TC already raised some capital to do that, or do you just plan to do tuck-unders for stock?
seems like there’s more to this story that has yet to be heard…
sorry, meant to link to the CrunchTron mashup i did earlier for the Crunchies.
seems like the CrunchTron is just one blogger short of the TC Blog Dream Team you’ve got pictured above… who’s the fifth player mike?
What’s wrong with CNET?
Good perspective. No real comment except to say thanks for the (first ever) mention of b5 and to note that even with a “dream team” it’d probably take more than a year to pull CNET apart. Not that I’ve been thinking about it or anything
Seriously, though, it’s a fantastic industry. While the amount of cash going into small ventures without real traction surprises me, I’m still a firm believer that real content by passionate people is what folk demand.
That “dream team” is called Writers Syndicate.
Bloggers are journalists / commentators who at one time enjoyed doing their craft for free. But like all people, they eventually want to make a living doing what they enjoy.
This is why old media will never die.
Barriers to Entry are discussed at length, but what about how easy it is to quit a blog?
Last night I deleted the link to joelonsoftware after the weird apologist piece for IE and Microsoft. A year or two and blogging could be as popular as buying dog food online.
PS — If O’Reilly is a badge without a gun, does that make you a Realtor who sidelines in Undertaking?
interesting post. agree on raising cash. cash is not a panacea and it’s true for bloggers and many web 2.0 companies. but it makes me wonder why techcrunch leans so heavily towards reporting companies who have just been vc funded.
So .. Mike … would you link to my blog?
This is by far the most fascinating post I’ve ever read here.
Mike,
You are absolutely right. Without a doubt, one of the best posts I’ve ever read here, one that I don’t disagree with at all. That’s rare.
If the blog was worth its salt, there is no way they’d need six figures to get it up, going and producing revenue. I’m not saying a blog needs no money to expand, but we only needed a five figure advance to get a series or them going – and that advance obviously came from our personal pockets and not investors – which also meant we made it go a lot farther since it was our money that was being burned.
Meant to add – and we answer to no one but our own integrity and consciences.
You are correct. Although most bloggers are never going to have this problem, it sure will be tempting to take the money and think that somehow you are going to make for a big exit. The most telling part of the situation is, as you point out, there have been no exits.
Absolutely right. This is a BIG reason why I went to FastCompany, instead of trying to do my own business.
This post is exactly why I switched my home page from TechMeme to FriendFeed, by the way. That way I’ll see more “new” voices who are trying to shake things up, rather than just the professionally-done journalism that is making up more and more of what I see on TechMeme.
Great post Mike. I fully agree there’s too many people out there these days looking to turn their blog into a living. I started a blog recently because I wanted to share my opinions on the music industry, an industry in ‘chaos’.
I’m not looking for a payday. In fact, i have little interest including advertisements. I just want to express my opinions on an industry not in chaos, but one prime for new opportunities. If I could use a blog to attract people that share similar passions and views, that would mean the world to me.
Once politics become involved, the quality of the material suffers tremendously. Keep up the good work at TC and you’ll have me coming back for a long, long time.
Why isnt anyone talking about AOL’s hijack installs? These things are positively evil! I’ve got AOL shit running rampant throughout my machine on an install I never agreed to! Please someone call them out and get them to quit this evil, evil crap! I know AOL suxor, but this is simply the desperate thrashings of a company that can’t get users the old-fashioned way…
Lots to think about thanks Michael. Bottom-line success of social media/blogs goes back to the roots of this industry (yes I believe it is an industry) of what Jeremy said – great content written by real peeps and relationships .. or to paraphrase you – the power of links. I’ve found this to be true in every ‘village’ of social media from tech to beauty bloggers.