It seemed like an opportunity too good to pass up, a chance for a young online startup to pounce on a news niche that has proven popular across the country but was virtually abandoned by one city's legacy media.

All across the United States, community newspapers and local websites alike seek readers by covering high school sports. In theory that makes a lot of sense, partly because it's not just the players who want to read about their games, but parents and friends as well. And in many areas without a professional sports franchise, even people without a connection to the schools avidly follow local teams.

But in San Francisco, three-year-old online startup San Fran Preps recently shut down after finding local sports to be popular but too economically difficult to cover there.

What went wrong? What are other news organizations doing that makes them sustainable when other outfits fail?

The way things were supposed to go

Jeremy Balan/Photo by Tom Prete

Three years ago, Jeremy Balan looked at San Francisco's prep sports scene and realized it was an open field.

The San Francisco Examiner and the San Francisco Chronicle both once covered local sports, but that was many years ago. The modern-day Examiner's sports coverage consists largely of wire copy and columns, with maybe a brief freelance piece if a local team made it to the playoffs. The Chronicle has a blog about high school sports, but it covers a broad geographical area and San Francisco stories are few. And there weren't any blogs or online news outlets of note picking up the slack.

It was during a citywide high-school football semifinal game that Balan first noticed how empty the San Francisco prep sports niche really was. While at the game as an Examiner freelancer, Balan said in an interview with Poynter that he realized he was the only person covering it.

A student wrapping up his journalism degree at San Francisco State University, Balan thought he had hit on a great opportunity. If he could pull it off, he'd be able to put his journalism training to work covering sports he loved, and make a sufficiently decent living that he could afford to stay in San Francisco.

He needed money to do it, but Balan said he knew he was no ad salesman. He wanted to concentrate on the content, not sell ads or go to potential donors asking for money to support a product he hadn't yet built. So he concentrated on covering games, building a crew of writers and photographers, and going beyond the fields and courts to report on larger issues affecting schools and athletes.

Balan said that in 2011, he began the process of incorporating San Fran Preps as a nonprofit organization and raised about $60,000, primarily from a handful of large donors including some parents of student athletes.

It was enough to pay his freelancers, and to pay himself for running the operation. And San Fran Preps was turning into a popular source for serious local sports news, with stories often generating dozens of comments from readers.

“It never was a blog,” Balan said. “It was like a local daily newspaper covering prep sports.”

Things were looking up.

What went wrong

Balan's fundraising for the newly incorporated nonprofit San Fran Preps was enough to keep the site operating and growing for a year. His plan was to look for grants from major journalism organizations to supplement that funding, and to guard against a drop in donations.

But his applications to grantmakers didn't get any traction. Equally as bad, local donations fell. By early 2013, it was clear that there wouldn't be enough money coming in for Balan to keep operating San Fran Preps, and in February he pulled the plug and now plans to move back to Southern California.

When Balan talks about why things didn't work out, frustration bubbles up in his voice: frustration with an environment in which people have become used to free content, and even publications that know how much it costs to produce quality news aren't paying enough to actually do it.

“Everybody likes the ideas,” Balan said. “Everybody wants it for a freelance fee.”

But when Balan acknowledges that the challenge also was bigger than he thought it would be, he sounds more weary than frustrated.

“I could have tried harder. I didn't hustle for the money (over the past year),” he said. “I did two full years of hustling to keep the website alive. I just wanted to be a reporter.”

What's working for others

San Fran Preps had a niche with little competition, a passionate founder and official nonprofit status (which can sometimes be difficult to get). Many potential founders of independent online news organizations perceive the nonprofit route as the best path to sustainability. But is it?

Scott Lewis, chief executive officer of the nonprofit Voice of San Diego, has no doubt that it is. The reason comes down to a diversity of funding sources open to nonprofits.

“You need myriad sources of revenue,” Lewis said. “What we call 'revenue promiscuity' in our little world.”

The Voice of San Diego's nonprofit operation is built on a membership model, but Lewis said the Voice also gets funding from foundations, corporate sponsorships, benefit events and a partnership with the local NBC affiliate.

The Tucson Sentinel's support comes from a different blend of sources, mostly local business sponsors with a handful of events and virtually no foundation grants. Editor and publisher Dylan Smith, who's also chairman of the Local Independent Online News Publishers trade group, says the Sentinel's nonprofit status frees the organization from having to deliver big returns for investors.

That doesn't mean local online news publishers can't pay the bills with their publications, though.

“The reason we went as a nonprofit is we figured nobody's going to get rich running a local website any time soon," Smith said. "We did think there would be a decent living in it."

Still, some for-profit online news publishers believe the nonprofit structure brings too many hoops to jump through and requires publishers to focus on a mission that's just too confining.

“A nonprofit has to have a really narrow mission in most cases,” said Tracy Record, editor and co-publisher of the long-running West Seattle Blog.

Record says that in her view, nonprofit funders like to support work in particular subjects that might not fit with the needs or interests of a local publication's readers.

“Maybe that's a great topic area, but that's maybe not where your goal was,” she told me.

Beyond the matter of methodology is the question of whether some sites start out with the cards stacked against them, regardless of how they're structured.

In the case of San Fran Preps, both Smith and Record question whether the level of community enthusiasm for local sports found in many smaller towns is present in a city such as San Francisco.

“The first thing I would say to anybody [starting a local news organization] is be sure you're solving a problem or filling a need,” Record said.

Lessons learned

Record, Smith and Lewis have different views about what makes a sustainable online news organization. Here's their advice for startups searching for sustainability.

Record

  • Make sure your publication fills a gap that's important to other people, not just something that interests you.
  • When applying for funding from national grantmaking organizations, don't just ask them to pay for local news. Show them they'll be funding work that other publications can draw upon to improve their own coverage or operations.
  • Always operate within your means. Don't hire people or buy things based on money you expect to raise later.

Lewis

  • Constantly promote your publication and explain its value to the community it serves.
  • It's unlikely any publication can get by with only one kind of funding.
  • Be careful of limiting yourself when setting a fee or price for something, including subscriptions. If you ask people for a set amount, that's all they're likely to give you.

Smith

  • You don't have to take a vow of poverty, but you probably won't make a ton of money.
  • Find the structure and blend of funding sources that works for you. Grants and events may work in one place, and events and advertising in another.
  • If you think you're going to be able to just do the journalism, think again. Solid business skills are vital. “It's not just about writing the cool stories, it's about keeping the books straight.”

Do you work for a startup news site? Share your advice/experience with us in the comments section.