

Bay Citizen, a non-profit news startup, blows $5 mil in one year - freejoe76
http://sfppc.blogspot.com/2010/12/bay-citizen-to-spend-5-million-in-one.html

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dasht
Journalism and politics are sort of aspects of the same thing. Neither is too
far from money. People should understand Bay Citizen in that mode of thinking.

[aside: I have a really clever start-up idea for a journalistic venture in
Berkeley, CA and would like to find some partners. (lord -at- emf.net) Here's
some back story to the linked story, though.]

In the Bay Area, the journalism industry has crashed pretty hard. Papers have
failed, others shrunk considerably. A lot of government operates under far
less scrutiny than T any time in living memory.

Historically, news moguls have had enormous political power. The movie Citizen
Kane gives a cartoonish sense of the Hearst news / political machine. (The
S.F. Chronicle is currently a Hearst paper. The real world Hearst castle that
corresponds to the one in the movie is in these parts. Etc.)

The Hellman's (Bay Citizen's main benefactors and instigators) qualify, in
this region, as "old money". The first Hellman to rise prominence here was a
major player. If you read the society pages (what's left of them) you'll
sometimes see the Hellman's and branches of that family like the Dinkelspiel's
come up. They are Big Shots in these parts.

Thus, Bay Citizen could be characterized as "old money" swooping into to fill
a journalistic void, in part motivated by a recognition of the political power
represented in that void. I want to be clear that I'm absolutely _not_ saying
that Hellman is an egotistical power-grabbing Kane type or anything so
cartoonish or anything so ethically simple minded. I'm just saying that it's
not so surprising that when the regional journalism industry collapsed... one
of our prominent and well established families would step up and try to get
something going in that area. If it wasn't Hellman money, why, then, there's a
short list of other family names that would have been next in line.

I won't comment on the editorial politics of Bay Citizen or some of their
partner sites because I'll both get myself in trouble and bore most HN readers
with too much insider Bay Area politics but I will skip to a prediction:

Bay Citizen isn't about to go under. The highly paid execs, I bet, mostly
won't be tossed (if any will at all). Or if it gets rebooted and lots of
people tossed ... it'll still be booted up and resume. Some funding will be
renewed and the experiment will continue a few more years. The political power
stakes are too high to just walk away. The money amounts are very low relative
to those stakes. The tentative successes of Bay Citizen (e.g., a modest amount
of syndication, etc.) look promising on paper. Nobody seriously expected a
self-sustaining operation at the end of one year (especially given the peanuts
they said they pay stringers).

Right now, Bay Citizen --- journalistically disappointing as it has been, in
some of our views --- is nevertheless one of the loudest journalistic voices
in a news-starved region. $5M was a bargain, so far. The project is an easy to
make fun of tentative success, as far as I can tell, in the eyes of its main
sponsors.

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adaugelli
It's amazing how much money is like time.

If you have a ton of excess time, you are far less efficient and it simply
takes you longer to complete relatively simple tasks.

Having tons of money before you can prove product-market fit just leads to
misallocated spending and inefficient uses of money (because people force
themselves to spend to justify the amount of money they've raised.)

This is the reason programs like YC & TechStars work - it doesn't take a ton
of money to build an early product and prove your model works.

Once the model works - then you should spend like crazy to scale - but because
you've spent the time with very little money - you understand the value of
each dollar and the positive affect of each additional dollar.

 __Edit: For examples, check-out most of the startups that blew up in the late
90s. They raised a ton of money because they could, but it was spent on domain
names, really expensive office space, executive talent, and building
proprietary software for non-core functions.

My favorite example is the story of the Industry Standard - Check out
"Starving to Death on 200 Million" by James Ledbetter if you want to learn
more. __

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jessevondoom
This just kills me. I run a nonprofit building open tech for the music
industry. While we're not without reach or connections, but it's still
challenging as hell. No investors, a long road to true 501(c)3 status, and the
reality is that finding millions from a wealthy benefactor doesn't happen for
most.

I guess my point is that most startup nonprofits don't get the benefit of
healthy salaries or even seed money. It's a labor of love — not unlike any
entrepreneurial venture, but without the potential payout at the end of the
road. I think new and innovative nonprofits have a real place in our economy,
but hearing about $400k salaries for unproven CEOs at a first-year nonprofit
doesn't win new people over to the side of innovative philanthropy.

If they blow it and don't make it past this first year (and it sounds like
there's a good chance of that happening) then it could be a real black mark on
new model nonprofits...

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dasht
You have to understand that it is mostly one guy and one extended family that
self-funded Bay Citizen. Those hefty salaries just signal that their approach
is to give some of the core group they've hired some breathing room to
experiment and incubate. It's just not a good comparison to a grass roots NPO.

~~~
jessevondoom
That might be true, but $400k is a whole lot more than breathing room.

But regardless...my point is that this doesn't help instill public trust at
all — especially in a massively down economy. My worry is of the double-edged
sword: if they fail with a big cash influx it's easy to point to them and say
that new thinking in/around nonprofits interfacing in mainstream industry is a
failure.

They were given enough capital to last beyond one year...I just hope the
gamble pays off so we don't see experimentation in the space end with them.

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ghshephard
$400K in the Bay Area for a CEO is average-low. It's not a paltry sum, but
it's certainly not anything a truly Tier-1 CEO would work for unless they
either had some upside (equity) or had ulterior motives (Labor of Love).

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jimboyoungblood
Are you suggesting that $400K is reasonable, and that it is because this
person has the title of "CEO" and is located in the Bay Area?

We are talking about someone who:

1) is leading a _startup journalism non-profit._

2) has no prior experience as a CEO

3) has never worked in the journalism industry

If this were a tech startup, the salary range for this CEO would be $0 to
$100K. To be fair, since as a non-profit there is no equity upside, one could
argue for a hefty year end performance-based bonus. But a guaranteed $400K
salary is beyond absurd.

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ghshephard
Correct, I am saying that $400K is reasonable for a CEO of a venture of this
sort only if they do not have extensive experience and/or if they were doing
this as a labor of love (Not-for-Profit). If they had significant experience,
or knowledge of this industry, they should be making much more.

Someone decided that his background would make him an effective CEO - and once
they did, the salary should be commensurate with the responsibilities.

If this were a tech startup, the salary range for a CEO in the valley (for a
Series A/B Round startup) would be $250K-$300K with an upside ranging in the
10s of millions.

A guaranteed $400K salary is really not a very decent salary for a CEO. I'll
see if I can find some stats to back up my claim.

[EDIT: [http://www.siliconvalley.com/salary-
survey/ci_12523817?nclic...](http://www.siliconvalley.com/salary-
survey/ci_12523817?nclick_check=1)]

In 2009: The median pay package the valley's boards of directors awarded their
chief executives dropped 5.6 percent, to $2.2 million.

~~~
jimboyoungblood
You are using CEO salaries of publicly traded companies as comps for the "CEO"
of a startup journalism nonprofit (with NO employees to manage, as of the
CEO's first day on the job). You don't see anything wrong with that?

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philipn
(I run a 501(c)3 non-profit startup)

The Bay Citizen is taking in nearly all of its revenue from one source. As a
501(c)3 organization, you can't do that for very long or you'll end up being
classified as a Private Foundation (and lose the ability to take in tax-
deductible donations). In order to survive for more than just a few years, Bay
Citizen will need to diversify their revenue stream. So a shift toward
membership-based fundraising doesn't mean they are hard-up on cash or think
their burn rate is too high -- this is just something they have to start
doing.

There's a bunch of information here if you're supremely curious:
<http://www.sharinglaw.net/npo/PublicSupportTest.htm>

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anmol
ceo is a ex-mckinsey partner who draws a $400k salary. what do you expect the
internal culture is like?

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jeffreymcmanus
It's important to distinguish journalism from the business of journalism.
Journalism is doing well thanks to the internet. The business of journalism is
doing poorly, also thanks to the internet.

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kvs
1999

