Knight Foundation finds a foothold in for-profit tech startups
You read here with some regularity about Knight Foundation grants and Knight-funded research projects. But in recent years without notice, the leader in journalism philanthropy also has established a modest beachhead in the for-profit world.
The Knight Enterprise Fund, organizationally part of the unit that manages the foundation's $2.5 billion endowment, has a $10 million kitty and has made 40 venture investments over the last three years.
It has a dual purpose, director of venture investments Ben Wirz told me in a phone interview. Make money, yes, but also keep the foundation up to speed on promising digital tools and trends, the better to inform its grant-making.
Wirz, who spoke at Poynter for our Media Innovations Tour earlier this spring, was a journalist early in his career, reporting for Japan's Asahi Shimbun. But before joining Knight, he had spent a decade at venture capital firms.
How did he and Knight come together? Various editions of the Knight News Challenge and other grant programs had long focused on developing shareable digital tools, Wirz said. "A huge amount of that activity is in the for-profit sector. So why not take a small piece of the endowment and invest it -- in a way that both advances the mission and generates returns?"
The fund's $10 million allocation, about half of one percent of the total endowment, is now 70 percent invested. It is early days yet to assess financial results. "The average investment is only a year-and-a-half old," Wirz explained, "and it traditionally takes five years or even seven" to measure success.
Still, he is proud to say that only one of the 40 ventures selected, has gone out of business. It was a company "that converted text to video, and the product weirded people out. They tried to pivot to something different, but they ran out of cash."
But he counts a number of practical successes:
- Gimlet Media, a podcast launch and PopUp Archive, which indexes and searches for podcasts.
- CrowdTangle, which helps editors identify what is trending on social media in real time and assign coverage if they wish.
- Naytev, a service for A-B testing of headlines and images used by Buzzfeed among others.
- Wedgies, a social poll embedded into Facebook or Twitter. The White House used it, Wirz said, to sample reaction to parts of the State of the Union address.
I asked Wirz what he looks for in investments. "We want to directly impact the world by providing information. Part of that is tools for existing publishers to be better, faster, cheaper." Another is to build projects that impact "Knight communities" -- that is the cities where the Knight brothers had newspapers and built their fortune.
Another subtler objective: "As we learn more about where the frontier of technology is, that helps us see where not to invest in the non-profit side. We obviously would not try to recreate the Wikipedia, but we see quite a bit of that" -- non-profit and entrepreneurial proposals that duplicate an existing early stage venture capital startup.
The Fund has a stake in Videolicious, the popular mobile video editing tool, and OwnLocal, a tool that helps legacy media serve their existing customer advertiser base various digital services.
While much of his job is tracking down the right venture opportunities, Wirz also considers over the transom pitches. The Videolicious stake started with an e-mail inquiry out of the blue.
In an earlier interview with Knight's blog, Wirz, who also consults on business strategy for Knight grantees and projects the fund backs, extracted some lessons from the VC world for struggling non-profit news startups:
In terms of sustainability - that’s foundation speak for making money - the common lesson for nonprofits is that it’s not something that happens at the end of your grant. You’re either thinking about it before you get funding or you’re in trouble by the time the project is over. In terms of growth for both for-profits and nonprofits, they need to be very careful before scaling a business. Organizations tend to scale successfully only when they really understand why what they have in place is working, otherwise expansion can be deadly. That’s particularly true before they consider expanding to different geographies. Replicating a model presents challenges that are almost always greater than you anticipate.
The fund still is not fully invested, but Wirz thinks its financial and learning benefits make it a strong candidate to be renewed or expanded in future years (a decision for top management, not his)
What to invest in next? The fund already has an exploration of virtual reality news possibilities with a company called Seene and he is on the lookout for an "internet-of-things play" that would enhance media ventures ability to capture more user data.