MedCity startup yields 7 tips, 2 hot leads for journalism entrepreneurs
When Chris Seper and his colleagues pitched a local nonprofit on investing in their MedCity News startup, his potential investors didn't focus that much on the quality of MedCity's reporting or the number of its page views.
Instead, they zeroed in on the scalability of the operation's "custom content" -- previously known in the newspaper business as "advertorial" -- and the connections between that content and the firm's website and syndication services.
Seper, president and co-founder of MedCity, says the importance of custom content didn't surprise him. But it underlines for me the importance of a line of business that many startups are only beginning to explore: helping customers previously known only as "advertisers" become thought leaders for their own customers.
When I encountered Seper at We Media Miami two years ago, he was in the position many more journalists find themselves in today: bought out or laid off from their mainstream job and seeking their next paycheck by becoming entrepreneurs.
In early 2009, Seper described his vision for a new news service focused "on business, innovation and influence in health care."
That's still his focus, but he made clear in our follow-up exchange this week that custom content is essential to the reinvention of advertising it'll take to sustain online news ventures.
The value of custom content is among several lessons for journalism entrepreneurs that emerged from a wide-ranging email interview.
Seper's tips, in addition to mastering custom content, include these:
- In approaching potential funders, be prepared to address deep skepticism about journalists' ability to create and run successful businesses.
- Get clear in your own head whether you're building a business to sell or a lifestyle to maintain.
- Beware Google ads and invest the time it'll take to make the most of ad networks.
- If you're creating content you want to syndicate, visit local broadcast outlets first.
- Bad business decisions always hurt, but none so much as a bad hire. Do the homework.
- If you're seeking areas ripe for entrepreneurial development, consider two topics that Seper says are under-covered and offer big markets with big stakes.
My other tutor on this topic is Kirk Cheyfitz, a former newsroom colleague who now owns a $40 million-a-year company focused almost exclusively on custom content. Cheyfitz argues that custom content replaces "interruptive" messaging with reliable content that serves the purposes of reader/user and advertiser alike.
An edited transcript of my e-mail interview with Seper follows.
Bill Mitchell: What's surprised you so far?
Chris Seper: I'm over this now. But early on I was stunned at what little regard many investors and others in the business community hold for journalists as entrepreneurs. Very early on we ran into many people who told us, "This won't succeed because you're just a couple of journalists."
Then when we did show success they were stunned or even more impressed than usual because this was a venture started by journalists. Being journalists was an added barrier to success for gaining investment and first customers beyond being first-time entrepreneurs.
I had to make a point to aggressively position myself as an ex-journalist/former journalist or take an approach that positioned me as a business leader far from my journalist roots.
What is it about journalism or journalists that prompts such skepticism?
Seper: I am not sure. There wasn't much elaboration on that point. Perhaps there's the stereotype of "they write about things but don't do them." But some may have had bad experiences in the past. But there was definitely a vibe from many potential investors and business partners that journalists just don't get it.
How long was the process of first making contact with JumpStart Ventures and securing their $250,000 investment?
Seper: We started talking with JumpStart soon after the company was formed (before actually). But the formal outreach started last January and then really picked up again in April. Our first formal presentation in front of JumpStart was Sept. 30.
In your presentation, what areas did the JumpStart people probe and press the hardest?
Seper: The question was on the scalability of custom content and whether the different components of the business connected (Web site/syndication/custom).
JumpStart says on its website that it expects entrepreneurs it funds to seek "sophisticated follow-on capital." What does that mean for MedCity?
Seper: That means JumpStart expects its clients will need more money from other sources, which is likely true for MedCity. We expect we'll likely have to raise one more round to do an aggressive expansion beyond four markets. But that's not necessarily the case.
How much has been invested so far in MedCity? What's the return been like, and how do you envision turning JumpStart's investment into a smart move for them?
Seper: We've received roughly $500,000 in grants and investment, both from investors and the two co-founders (myself and Mary Vanac).
Our end goal is to be acquired by a larger media company just as those three companies were acquired. That's the only reason JumpStart and our other investors would even consider an investment in us. And that's the way we payoff for them: acquisition/exit.
How much revenue have you brought in so far?
Seper: Decline to disclose.
How does the goal of acquisition/exit influence the way you build the business and do your work on a daily basis?
Seper: Really, that was a decision early: Do I believe this is a lifestyle business or do I believe it can be something much bigger? If it was a lifestyle business I would grow slow. I may even never leave the Ohio market as far as reporting goes. So when I believed it was the [something bigger], it meant I would have to grow fast, take on extra capital, scale this into new markets, work very long hours, etc. And because it's the second [scenario], the acquisition/exit path is just part of that.
How do you view the prospect of continuing to work for MedCity when it's owned by somebody else?
Seper: I love the idea of someone else being responsible for my paycheck. It's very likely that if we do succeed I would get a CEO to run the company long before acquisition. After a certain size I could very well be a detriment as the business leader. I am open and accept this idea.
Is the process you're going through now something you imagine repeating as a serial entrepreneur in new ventures after MedCity?
Seper: I'd like to think so. I have other ideas and I love our industry and want to try them. But this is very, very hard. I can't understate that.
Many entrepreneurs urged me not to do it because of the conditions you subject yourself and your family [to]. I didn't understand them at the time. Now I do -- even though if I had to do it all over again I still would.
Doing and committing to a startup is like those sci-fi movies in which the astronaut has to let go outside the ship and fix some problem on the hull. The astronaut has a tether that keeps him safe. But eventually the decision comes, do I let go of the tether and risk floating away? Because that's the only way the ship is going to be saved. But there's a chance you won't be able to grab that tether again and you'll float away into outer space.
Well, when you start a company you accept you will have to make unbelievable sacrifices. But then come those moments when you have to let go of the tether and risk more than you ever wanted to. You don't even want to let go of the tether. But you do. Because it's the only way this thing is going to win.
What are your major sources of revenue?
Seper: Custom content is the overwhelming leader at the moment, followed by online advertising and then syndication.
Roughly what percent of your revenue comes from custom content?
Seper: Decline to disclose.
Is custom content producing a larger share of your revenue than you anticipated when you launched?
Seper: No. The plan -- and this has held -- is that custom would sprint out ahead of all other revenue. The decision-makers are easier to reach and it's often a faster decision than an ad deal, which often includes a media buying firm or other agencies.
Plus, online advertising and syndication take more time to build. We needed to build an online audience to attract advertisers and demonstrate an ability to produce content before we could win syndication partners. MedCity immediately had an expertise in healthcare content creation.
Custom will likely always make up the largest percentage of revenue, but we expect syndication and online ad revenue to grow significantly this year because of our growth in audience, content and reputation.
Can you provide links to examples of some custom content you've created for clients? How does that content differ from material you might have produced for MedCity?
Seper: We've done work for hospitals, traditional media, universities, trade groups. It's completely different from the MedCity News content. Our full-time writers are doing largely business news from key cities. The custom work is often clinical work or consumer-oriented patient work.
Journalists' traditional perception of content produced for clients is that it's promotional stuff that necessarily places the interests of the client above those of the reader or user. How do you deal with that tension at MedCity?
Seper: We manage custom in the same way a traditional media outlet handles advertising: it's separate.
But I think the idea that custom content is somehow untoward or underhanded is not true.
Everyone is a publisher today and everyone wants content that speaks to their customers and often makes them thought leaders in the minds of their customers. There's some promotional writing, sure. But our customers are often looking for solid reporting, Web writing, social media, etc. that speaks to their customers.
More generally, how has custom content evolved from the days of old-fashioned advertorial?
Seper: Custom today is ghostwritten opinion pieces, Web writing for a hospital website, white papers, marketing copy, press releases, a documentary. It's any and all content.
Remember, everyone is a publisher. So these folks are trying to put together magazines, websites, etc. that serve the needs of their customers and promote themselves. It's not pure sales schtick anymore.
If you were advising friends and colleagues considering an entrepreneurial venture outside the medical area, what would you tell them about custom content? How would you characterize its popularity and profitability?
Seper: Custom content is quickly becoming for new media startups what print advertising is to newspapers. The margins are nowhere near as juicy as online advertising, but the deals can get big very fast. And, as I said, you can get custom deals faster than you can an online ad deal because it takes time to get an advertiser-worthy audience, among other things.
How much is your success to date the result of working in such a well-funded niche (you point out that healthcare-related content accounted for $4 billion of the $35 billion content creation business in 2010)?
Seper: The two key factors: working in a valuable niche that had jobs that needed doing. What's been done in technology (TechCrunch, VentureBeat) and politics (Politico) wasn't being done to the same extent in healthcare.
It makes no sense to pursue a new media startup doing what is already being done by someone else. The medical industry is an underserved and growing market.
What other fields look promising for journalism entrepreneurs?
If I were to start right now on something new I would try to launch a hyperlocal project covering the American prison community.
And when I say community, I mean anyone who has a vested interest in the criminal justice system: prisoners, the families of prisoners, those who have been in or are heading into the system, those employed by the system or because of the system, and so on.
An increasing number of people are touched by the criminal justice system, business continues to grow (private prisons, advocacy, etc.), the reporting on these communities continues to decline, there's an increasing amount of third-party content (prison bloggers, etc.) and there's an intense interest in this area.
I think this is a case of possibly a nonprofit media venture funded by the foundations and then fueled by advertisers and syndication.
I would also consider something around weight/food: both the medical innovations and the culture of obesity, eating disorders and hunger. There as many people starving in this world as there are obese, and an incredible amount of dollars are going toward both: medical research, advertising, retail products, nonprofit, etc. and there's a culture evolving around these oddly connect phenomena.
What's behind the name change from MedCity News to MedCity Media?
Seper: We needed to better explain everything we did. When people heard MedCity News, they simply thought of us as a news outlet. That was problematic because 1) our in-house writers opine, offer analysis as well as do news and 2) we offer content services/custom content. (Our mantra: MedCity Media creates content for people who care about healthcare.) MedCity News is a product. MedCity Media is what we are.
What do you know now about entrepreneurial ventures in journalism that you wish you knew when you started?
Seper: Learn about ad networks (way beyond Google ads), ad management platforms, etc. and get conversations going as early as possible with all of these outlets. If you are gathering any kind of distinct/desirable audience, consider seriously restricting Google Ads on your site or banning them altogether. I encounter more and more sites that are doing this because they believe Google Ads devalue their inventory.
If syndication is part of your model, broadcast media -- particularly, TV -- contain your best opportunities for partners simply because they are more open to the concept, have done it more often and they offer the most ways to make money.
We have very good and innovative print and online partners, too, and don't walk away from any opportunity. But we often get substantive meetings faster with broadcast.
Most of these lessons are universal for any business. As the business leader, you can never interview enough of your customers/readers before launch and then survey them regularly after launch.
Clarity, efficiency and due diligence are everything. Get clarity around expectations for yourself and staff about roles and commitment. Create as many systems (i.e., processes) as possible to streamline work so you don't recreate the wheel every time you make a deal or take an action. Outsource things that create little value for you (bookkeeping, etc.). And when you hire anyone -- from a service provider to a new employee -- do as much homework as you can. Bad hires are much more devastating than wrong assumptions in the business.
What ad networks have you used, and how do you see them helping to grow your business?
Seper: We're in talks with several ad networks. The bottom line, we want to fill our ad inventory and use ad networks to pursue customers that want our audience but cost us too much to really pursue (and we want the highest possible rate).
What tools or approaches have helped you survey your customers?
Seper: MedCity News is on Quantcast and we've used the free survey programs (SurveyMonkey, etc.).
What sorts of traits do you seek -- and avoid -- in candidates you consider for jobs?
Seper: We want people who are highly organized, creative, social media oriented and passionate. Here's an excerpt from our job ad:
"MedCity News seeks a new-media minded, business-oriented writer to chronicle the medical industry. The ideal candidate is passionate about the business of medicine, passionate about their region, comfortable with social/new media and ready to publish copious amounts of unique, important and agenda-setting information that will continue making MedCity News the go-to source for medical news out of your community.
"MedCity News provides news, analysis and opinion about local medical communities for a national audience of healthcare stakeholders. We cover startup companies, new deals, cool ideas, personalities, policies, institutions, business news and important local issues in the major medical cities in this country (not consumer health nor clinical/academic research). We offer our news to other media through a syndication service and then publish all of our content on MedCityNews.com, which attracts a national medical industry audience hungry for actionable intel from these cities.
"An understanding of the local medical industry is a major plus and a background in journalism is a significant advantage (particularly business news). The ability to integrate new media is vital, and you should be as familiar with the way writers work at places like TechCrunch, Politico, Mashable and VentureBeat as you are with places like The Star Tribune and The New York Times. You must believe that journalism's greatest days are yet to come."
Since launching in 2008, MedCity has added a Twin Cities branch and will use the JumpStart money to move into two additional markets.