Can Venture Philanthropy Save Local News? This Ambitious Initiative Aims to Find Out

photo: Menna/shutterstock

photo: Menna/shutterstock

With regional local news outlets on life support, a new initiative funded by the John S. and James L. Knight Foundation and Pierre Omidyar’s Democracy Fund asks a tantalizing question: Can venture philanthropy create sustainable ecosystems of strong local news organizations?

By adopting the principles of venture philanthropy, the American Journalism Project (AJP), spearheaded by two experienced local news entrepreneurs—Elizabeth Green on Chalkbeat and John Thornton of Texas Tribune—eventually wants to raise and invest $1 billion in “mission-driven local news outlets” on an annual basis.

It’s an audacious goal that runs against some pretty fierce headwinds. But trends across the larger journalism funding space suggest that civic-minded donors may find a lot to like about the project.

The Promise of Venture Philanthropy

According to the AJP, “Market forces are failing local news, and as a result, our democracy is at risk.”

Declining revenues, changing reader habits, the Facebook and Google advertising duopoly, a shortage of qualified investigative journalists, the threat of “vulture capitalists”—all of these factors have conspired to erode footprint and influence of local news across the country. “There is no American industry of such combined size and civic importance that has endured such an economically devastating decade,” AJP states.

The project argues that venture philanthropy can help turn the tide.

This funding approach first gained serious traction 20 years ago during the dotcom era. By borrowing key ideas from the business investing world, its proponents aimed to reinvent how nonprofits were financed and built. Since then, venture philanthropy has been deployed across the larger funding landscape, often focusing on a specific issue area or geographic locale and helping nonprofits scale by providing unrestricted support.

In a related development, a number of efforts have emerged in recent years to mobilize large new chunks of philanthropic capital to tackle other challenges. One successful example is Blue Meridian Partners, a funder collaborative focused on children in poverty. Another is Co-Impact, which describes itself as “a global collaborative for systems change” and launched last year with $500 million in initial commitments. Both ventures have the backing of leading billionaire philanthropists, as does an older initiative, the Charter School Growth Fund, which launched in 2006 and has been a key player fueling the growth of charter schools, attracting a who’s who of deep-pocketed education reform donors.

Could an effort to mobilize big new money for journalism succeed at a moment when many wealthy donors and foundations are deeply worried about the future of the Fourth Estate?

John Thornton has been mulling this question for years. “On and off over the last decade, I have been obsessing to a lesser and greater degree to how you make capital formation happen to make public journalism happen,” he said. An experienced venture capitalist himself, he applied its principles at the Texas Tribune, and he clearly believes there’s an opening for scaling this strategy across the country.

A Differentiating Approach

Inside Philanthropy’s journalism vertical is replete with donor-funded efforts to bring local news back from the brink. If AJP can apply the principles of venture philanthropy across local news ecosystems, how will it be different than existing approaches?

For starters, one of venture philanthropy’s basic tenets is providing capital in the form of general support. This is unique, as a large majority of foundations continue to make grants primarily earmarked for project-based support. Unrestricted support—also known as “build capital” in the venture philanthropy lexicon—is more valuable as it helps nonprofit develop their overall organizational capacity.

The value here for struggling outlets is pretty self-evident. “Everybody in those organizations is doing more than one job—they’re doing four to five. If you’re doing four jobs, you’re probably not doing any well,” Thornton said.

Another linchpin of the venture philanthropy approach is offering management assistance, much as the VCs in Silicon Valley use their skills and networks to help entrepreneurs execute their ideas. AJP has something similar in mind, saying it will bring “transformational value to our member organizations by bringing expertise from commercial media, established nonprofits, and venture-backed startups.”

Successes in Scaling Up

The entrepreneurs behind AJP definitely know how to build things.

Elizabeth Green’s Chalkbeat, a nonprofit education reporting partnership, began in GothamSchools in New York City and EdNews Colorado in Denver, and eventually expanded into Chicago, Detroit, Indiana, Newark and Tennessee.

Thornton, meanwhile, is a general partner at venture capital firm Austin Ventures. He raised $4 million, with $1 million coming from his own bank account, to get the Tribune off the ground back in 2009. Fast forward to September of this year. The Tribune now has 1.9 million website visitors per month and boasts 4,399 paid subscribers.

These figures were included in the Tribune’s first-ever strategic plan, which sketched out how it hopes to evolve by the year 2025. The outlet, for example, plans to launch a breaking news desk and develop strategies that aim to attract “Texas’ fastest-growing populations: young and ethnically diverse Texans,” as well as “urban and suburban” folks outside Austin. It plans to hire more Spanish-speaking employees, focus on “email acquisition and retention,” and double down on its engagement-heavy newsletters.

Can the Project Pull it Off?

AJP’s game plan sounds promising, but can it really raise the big bucks?

While time will tell, it’s worth noting that successful capital aggregation efforts like Blue Meridian Partners and Co-Impact got off the ground with the early backing of billionaire philanthropists who made hefty pledges—commitments that in turn drew in other top funders. In contrast, venture philanthropy outfits like New Profit and the NewSchools Venture funds have struggled to mobilize the kind of game-changing resources that their founders had hoped for when they started out.

Yet even if it seems far-fetched that AJP could ever move $1 billion a year, this effort could still shake loose serious new funding for journalism, including from donors new to the space. A strength of the venture philanthropy model is that it mitigates risks for donors, because they know that a skilled intermediary is playing a hands-on role in helping grantees succeed—which is especially reassuring when investing in green leaders with untested ideas. Donors are more inclined to support work that is being shepherded by experienced professionals, and AJP’s Green and Thornton certainly fit the bill.

Risk-averse donors are also sympathetic to ventures with name-brand institutional support. This is why the Knight Foundation and the Democracy Fund’s involvement with AJP is so important. Knight, in particular, embraces a “throw-it-at-the-wall-and-see-what-sticks” approach to all of its funding areas, and if the past is any indication, it will provide the AJP and its recipient outlets with flexibility and room to experiment.

Venture philanthropy groups don’t have endowments. They operate as funding intermediaries, which means that their leaders spend a lot of time raising money. This approach can foster a greater sense of accountability and urgency. Like private investment firms, venture philanthropy groups need to show they’re achieving impact in order to keep funds coming in. While quantifying success can be hard in some nonprofit areas, media actually lends itself well to hard metrics—as we see in the case of the Texas Tribune. I imagine that AJP will rely on similar metrics in its effort to engage donors.

A Supportive Philanthropic Climate

Writing in Medium, Green expounded on her vision for the project. By talking about local news as a “social enterprise,” defined as a “mission-driven organization that deploys all the best business innovations to meet its social purpose,” Green is aligning AJP with powerful currents within the funding world. Instead of dreaming up a new philanthropic model, the simple idea here is to use an existing one already embraced by the wealthy donor class to revive American journalism.

"Social enterprises,” Green argues, "proliferate in other sectors for which an important public mission just can’t be paid for through traditional capital markets, or, at least initially, through the government.” Why not journalism, too?

Green’s message seems to be resonating. As of mid-October, the AJP has raised $400,000 in initial funding from Knight and the Democracy Fund. Teresa Gorman, the latter’s local news associate, explains why the fund was drawn to the project:

The idea that nonprofit news needs to be more business savvy isn’t a new one. The idea that more local foundations and local philanthropy need to support news and information is not a new one. What’s exciting is that it brings a few of those ideas together…

The project hopes to raise around $50 million in a “first fund” to strengthen 25 to 35 local outlets, with the goal of catalyzing an annual $1 billion—in both direct funds raised and a “ripple effect” for other investors spread throughout the local news sector.

Again, that ambition sounds far-fetched. But if ever there were a good time to launch an outfit like AJP, it’s right now.

One of the biggest philanthropic outcomes of the 2016 election was the “Trump Bump” for nonprofit journalism. Blindsided by an election riven with misinformation and the denigration of the media, civic-minded funders banded together to open a spigot of funding that continues to flow.

Indeed, the funding seems to be directly proportionate with the amount of chaos and division emanating from Washington. Given the Democrats’ return to power in the House, we’ll likely be stuck with this toxic climate for at least two more years. It may even get worse. If it does, donors may dig even deeper.

Given this reality, coupled with the encouraging successes of Green’s Chalkbeat, Thornton’s Texas Tribune, the Lenfest Institute, and—of course—ProPublica, AJP should find itself operating in a supportive philanthropic climate.

Now through mid-2019, AJP is recruiting other venture philanthropists—foundations, families, individuals “worried about the political climate and the plight of local news”—into the firm.

Related: “Build Capital.” Inside the World of Venture Philanthropy