December 6, 2015
John Paton

John Paton

When John Paton stepped down as CEO of Digital First Media July 1, he didn’t really leave the legacy news transformation business, much less slink away with mea culpas for a failed effort to right the company financially, then sell it.

Paton had prearranged a soft landing, hanging out his shingle as IVA Ventures, a company that partners with digital startup vendors to find customers and financing. Last week Paton emailed me to say that after 120 days, he and the new business are doing just fine, thanks. IVA announced that it has just “formed a strategic association” with a prominent London-based merchant bank, Lepe Partners, thus tapping into a big potential source of investment capital.

“It’s an extension of the same things I was deploying as CEO of Digital First,” Paton said in a phone interview. As legacy companies have decided that they “need to accelerate their digital development,” they have been going to third-party companies for a range of essential tech products.

Paton’s twist is that one way to do that, at Digital First and other legacy companies, has been “deals where we become customers and (financial) partners.” That’s far less expensive than building all the components of transformation in house. Plus bringing titles as customers — 75 in Digital First’s case — adds greatly to the odds of an investment stake being successful.

At IVA, Paton is switching sides, helping the vendors build their client base, arrange financing or, when the time is right, get into the merger and acquisitions arena.

IVA stands for Incubate, Validate and Accelerate, Paton told me, three stages of development for the young companies that dominate the digital services sector, gradually supplanting more traditional production or ad sales vendors.

Glancing over IVA’s client roster — seven listed, more to come — I was surprised to find a predominance of well-established and well-known companies:

Paton did not disagree with my suggestion that in these instances he is betting on companies that are well down that path already and ready (using his terminology) for acceleration. “We’re better with an established product than a launch with a minimal viable product.”

IVA does some investments now and will be able to take on more positions in promising early-stage ventures and expansions to global markets thanks to the association with Lepe Partners.

I would put Paton’s own venture, based in Lower Manhattan, in the I or V stage, still getting its legs, neither a big moneymaker or industry force yet. The current professional team is just Paton and Arturo Duran, formerly an executive at Digital First and Paton’s previous venture, the Hispanic media conglomerate Impremedia.

IVA is worthy of note and watching anyhow, in my view, both for what it says about Paton and about the current state of legacy media transformation.

Paton pepped up his troops with blog entries and speeches as he led a digital charge and declared the print business model over. He played down his extensive previous experience in investment banking, enabling him to hold the confidence, for a long time, of his hedge fund backers at Alden Global Capital.

This new gig combines the perspectives of a digital evangelist and a finance guy. Also, if Paton was early as his critics held, to a “digital first, print last” mantra, he had a great vantage point for figuring out which vendors were offering something essential and delivering on their promises.

The New York Times and a big chain like Gannett can build out their own content management or paid digital subscription systems (Digital First had neither), but smaller groups and standalone papers or magazines must spend increasing time assembling a panoply of off-the-rack support systems.

The customer-investor strategy Paton describes is not unique to Digital First. Hearst has incubated digital ventures in that fashion for years. Others are coming on board more recently, seeking to find a winning product they can sell to others like Digital First’s Ad Taxi placement service.

I buy into the consensus view that print-to-digital transformation is a one-way street that will take years to navigate. In that process dueling vendors (some offering products or services you didn’t even know you needed) will continue as important players.

I asked Paton if he foresees any of IVA’s partnerships and brokered investments being directly in journalism.  “I haven’t found one yet that meets our criteria”, he said, “but I’m not closed to the idea at all…What we are doing is more about supporting journalism in the future — and figuring out how to make it more viral” for companies racing to replace continued print advertising losses — which Paton correctly forecast in the late 2000s.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
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