5 strategies for media looking for external funding partners

By Brie Logsdon

INMA

Nashville, Tennessee, United States

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Finding the right external funding partner can be a tricky thing for news media companies. Some investors are only interested in businesses that have high commercial returns, but some have keen interest in supporting companies that have social impact.

During the INMA Latin America Conference in August, investment experts from Luminate and MDIF shared insights into the unique proposition news media companies offer investors commercially and socially.

Patricia Torres-Burd, managing director of Media Advisory Services at MDIF, talks with Felipe Estefan, investment director at Luminate and Kevin Brockland, principal investment officer at MDIF.
Patricia Torres-Burd, managing director of Media Advisory Services at MDIF, talks with Felipe Estefan, investment director at Luminate and Kevin Brockland, principal investment officer at MDIF.

Financial strains make it difficult, if not nearly impossible, to do independent journalism, which is why companies often look for support from external sources. Searching for stakeholders to provide private capital poses its own challenges, as some investors are only interested in high-yielding commercial outcomes.

This point-of-view is a mistake, said Felipe Estefan, investment director at Luminate, because there are several cases where independent media have created business models that are profitable but also provide key social outcomes.

Estefan shared five lessons he’s learned from working to provide funding for independent news media companies. 

  1. Money is crucial, but it’s not the only thing that matters. Having more funds without a strong institutional core could lead to fund mismanagement, Estefan said. His team looks for organisations with a strong board of directors diverse in skills and knowledge: “Money is not a magic solution. But to have access to money, they have to show that they have a very strong institutional capability.”

  2. To sell, we need sales people. It’s very difficult for journalists to be as passionate about selling as journalism, he said. “That sounds obvious, but many in the organisation are looking to sell services or agendas or editorial aspects. They almost always did that with journalists themselves.” 

  3. Trust is a key factor that determines people’s willingness to pay for news. Working with The Membership Project, Luminate did study last year that suggests a direct bond between editorial independence and the willingness for people to support them financially.

  4. Consider hybrid models. Membership models are only one possibility. Some media companies have been successful with events and creating spaces for conversation, finding ways to capture new parts of the market. 

  5. When one invests in social impact, one should not only be thinking about commercial and financial returns. The correct way to invest in media requires a consideration of commercial viability and the return on social impact. 

“The truth is that protecting and enhancing the financial independence of media in our region is essential for quality journalism to continue to exist,” Estefan said.

Kevin Brockland, principal investment officer at MDIF, explained that both commercial viability and social impact are key.
Kevin Brockland, principal investment officer at MDIF, explained that both commercial viability and social impact are key.

Kevin Brockland, principal investment officer at MDIF, agreed, adding that independent media companies lack sources of capital and are in a bad position to compete. Now, in the middle of a global pandemic, some countries are cracking down further on media.

“This editorial independence has a profound impact in the democracies in the countries and also other impacts in the economies,” he said.

For private equities/venture capitals, news media companies often do not offer the pure financial return these stakeholders seek. There can be a lot of uncertainty for this investor, but there are some that calculate the potential political and social impact of the investment. 

“Generally, it’s not about looking at the return of investment, most of these investors are looking for social impact,” Brockland said. “It’s about how you can tell this story about both commercial viability and social impact.”

About Brie Logsdon

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