
Venture capital is going to murder Medium - tortilla
https://m.signalvnoise.com/venture-capital-is-going-to-murder-medium-656cbccf4829#.tkfbmwfm4
======
payne92
This, unfortunately, is the entrepreneurial version of the "second system
syndrome": [https://en.wikipedia.org/wiki/Second-
system_effect](https://en.wikipedia.org/wiki/Second-system_effect)

The pattern: an entrepreneur achieves some level of fame/fortune.

Then, they overcapitalize their next company (to various degrees) from high-
expectation investors. Next, they are reminded how fricking HARD startups are,
and how much LUCK was really involved in their first success.

Some compound the pain by presuming the second will go like the first, and
they run things fat and expensive from the start: high headcount, expensive
office, high salaries, over the top perks, etc. And then when reality hits,
the "corporate lifestyle downgrade" is especially painful.

(I'm speaking from hard-learned personal experience, and I see this pattern
over and over...)

~~~
vmarsy
While Second-system effects seems to be describing software, the "human"
version of it is apparently called Sophomore slump [1]:

    
    
        A sophomore slump refers to an instance in which a second, or sophomore, effort fails to live up to the standards of the first effort. It is commonly used to refer to the apathy of students (second year of high school, college or university), the performance of athletes (second season of play), singers/bands (second album), television shows (second seasons) and films (sequels/prequels).
    

The second company of a previously successful entrepreneur seem to match that
definition!

[1]
[https://en.wikipedia.org/wiki/Sophomore_slump](https://en.wikipedia.org/wiki/Sophomore_slump)

~~~
benevol
And it's also why democracy is crumbling in Western societies (current
generation do not have to fight for it, and take it for a granted and
guaranteed system, which has nothing to do with the truth).

Which means it's probably going to die before it will be resurrected on a more
sane foundation, some time in the future.

------
dexwiz
How long before SV reinvents the paid magazine subscription? Advertising seems
to have an adverse effect on content quality, mostly because it puts focus on
the wrong metrics. An alternative is needed.

Medium is in a perfect position to introduce a subscription service. They have
a community of both publisher and consumers, a leading platform, and the
backing of VC. Turn Medium into a Patreon for writers. This does not mean a
paywall. This means things like locking comments to subscribers only, direct
tips to authors, chat sessions with authors.

Twitch managed to take a primarily ad based platform and layer subscriptions
and donations over the top of it. Their stroke of genius, is that any
subscription locked content is left up the creator (streamer) such as emotes,
sub-only chat, sub games, etc. It is possible. It also helped that Twitch
Prime piggy backs on Amazon Prime, but Medium may be able to find another
similar service to partner with.

Also all things are cyclic. We are seeing a low point for paid subscriptions
(newspapers), but that doesn't mean it won't come back in another form.
Enhancing the social experience, not the content, via subscriptions may be a
viable path.

~~~
6stringmerc
Patreon is already the Patreon for Writers though and for Medium to chase that
type of audience is counter-intuitive. As a conduit to larger audiences, I
think Patreon is about as useful as selling photocopies on a street corner.
Medium has a much larger footprint which, in my perspective, allows them to be
more of a Curator / Publicist / Rights Management entity than a skim-off-the-
top-pseudo-serfdom-model like Patreon.

------
leggomylibro
While I've personally incorporated an LLC for dealing with institutions that
don't like doing business with individuals, I'm starting to think that anyone
starting a new business should seriously consider making it a Public-benefit
Corporation. It lets you define alternative motives for the company besides
pure profit, essentially writing the flowery "mission statements" that most
companies espouse right into the company charter.

It's much harder for an activist investor to demand more profits RIGHT NOW if
you can point to your charter and say that you're focusing on your
corporation's stated goals - maybe in Medium's case, that could be something
like 'supporting quality citizen journalism throughout the world.'

I guess that might make your startup less appealing to VC initially, but I'm
sure SV will happily put its money where its idealistic mouth is, right?

~~~
mikeyouse
I don't think that would have much of an impact. The focus on profits from
VCs/investors isn't due to the corporate structure of the company, but the VC
Firm's internal metrics -- the 10-year fund lifecycle, LP demands, etc.

Also the mechanism of leverage isn't the fiduciary duty that's placed on LLC /
C-Corp management -- the idea that businesses are legally bound to chase
profits is misguided. Company management must act in the best interest of
shareholders, but have an incredible amount of leeway when doing so. The
leverage from VCs comes from their ownership of significant chunks of the
company and board representation. They can replace the management team if they
don't acquiesce to VC demands. Changing the corporate mission statement won't
mitigate these problems.

~~~
leggomylibro
That's a good point; I guess it wouldn't really help much in the startup
phase, but if the company does get established and IPO'd, then it would make a
difference with the looming threat of minority shareholder lawsuits.

------
aub3bhat
I will offer a counter opinion, the problem with Medium (or to some extent
Quora) is not that they raised too much funding but rather they bet
incorrectly on the content. As much as readers on Hacker News might want to
believe otherwise, light/low-intellectual-effort content such as memes,
listicles, gifs, images are far far more profitable than wordy blogposts &
articles. Sure you might get lucky and have a viral article once in a while,
but low effort content delivers far better median return.

Regarding the funding, consider that Buzzfeed has raised 446.3M$ and Giphy has
raised 150.95M$. The money raised is consistent with the kind of site he had
envisioned, the issue is that there isn't a market for it.

~~~
chrisabrams
I concur with you that they bet too much on their content. The question then
is: did the vicious cycle start from raising too much, or betting incorrectly?

~~~
aub3bhat
When you are worth few hundred million to a billion dollars. The only rate
limiting condition is the time you have left, and the window of opportunity.
From his perspective (and correctly) there isn't any point in bootstrapping.

Medium is not the first such example, you also have Path (where sadly one of
the co-founder was not as rich), Quora, and as a counter example Uber.

------
vonnik
It's a pleasure to see DHH pat himself on the back each time his stopped clock
overlaps with the hour. He shows the palpable schadenfreude of a man, sitting
on the sidelines, who won't shut up about the players in the game. But I
notice another flaw to his prose aside from the self-congratulations.

Many people who stumble into a certain amount of fame and adulation, like him,
get sloppy when they write. They start to repeat themselves. They don't offer
evidence to back up their claims. They don't dig deeper than the insight they
offered in the last five columns. In short, they don't do the work any more.
DHH's post show all those symptoms. He lacks a good editor, and probably
thinks he doesn't need one.

It might be interesting, for those who want to do the work, to consider why
VCs invested more than $120M in Ev. One answer is that VCs tend to invest in
strong founding teams, and he is about as strong as a founding team gets.
Personally, I would never invest in a media company, but abstracting away from
the sector, Ev looks like a very good bet.

Secondly, investments fail all the time. Medium might be one of those. Our
understanding of the world doesn't change much if that's the case. None of
this is really news.

~~~
adamlett
_It 's a pleasure to see DHH pat himself on the back each time his stopped
clock overlaps with the hour._

I don't get this metaphor. How is DHH's clock stopped? As far as I know, he
has a very successful business, while leading an exciting lifestyle (he drives
racing cars!), and he also heads a wildly successful open source project. I
can think of few other besides perhaps Marc Zuckerberg, who is winning in life
to that extent.

 _Many people who stumble into a certain amount of fame and adulation, like
him, get sloppy when they write. They start to repeat themselves. They don 't
offer evidence to back up their claims. They don't dig deeper than the insight
they offered in the last five columns_

It doesn't seem like you're disagreeing with him though.

 _It might be interesting, for those who want to do the work, to consider why
VCs invested more than $120M in Ev_

You're completely missing the point! We all know why it makes sense from the
perspective of the VCs. DHH is writing from the perspective of a _founder_ ,
and the deal makes a lot less sense from that perspective. VCs make many bets,
expecting to lose most, but win big on a few. The founders however, don't get
to make more than a few bets, and the odds of winning one are very low.

 _Secondly, investments fail all the time. Medium might be one of those. Our
understanding of the world doesn 't change much if that's the case. None of
this is really news._

What a cynical way to look at this. Sure, the VCs will be fine if and when
Medium fails, but it will have an impact on a other lot people: employees,
who've spend years of their career for nothing and whose stock options are now
worthless, and customers who have come to depend on the product.

~~~
vonnik
DHH's clock is stopped because he keeps saying the same thing again and again:
don't raise VC. When a startup fails that raises VC, he points out how right
he was. When a startup succeeds that raises VC, he says nothing. In fact, most
startups are default dead and raising VC doesn't change that fundamental fact
-- but it does give them what is essentially proxy revenue so they have time
to figure out how to make real money. There is a very long line of people
between Mark Zuckerberg and DHH who are "winning at life", as you put it.

Without VC money, Ev would have had a hard time getting attention and traction
for Medium, which is what he needed to test out his idea. That is true for
many founders. VC money is their ticket to real-life business school.

An expectation of Medium failing is just an instantiation of a more general
expectation that startups will fail. It's not that cruel, really. The
employees worked for a well-known brand and are still in the hottest job
market in the US. We should not weep too much for them.

~~~
adamlett
The underlying premise of what you write, seems to be that money is the only
yardstick that matters. That is why you patronisingly write that there _is a
very long line of people between Mark Zuckerberg and DHH who are "winning at
life"_, even though the reason I referenced Mark Zuckerberg specifically was
that he seems like a rare person who succeeds in business _and_ apparently
manages to balance that with the rest of his life (hats of to him for taking 2
months of paternity leave). It is why you dismiss the notion that the people
who worked hard on a failed product, could have anything to be sorry about as
long as they are still able to get a high paying job in the next hot startup.
And its why you disregard the part of DHH's criticism that doesn't talk about
whether or not your business will stand a smaller or greater chance of "making
it", but warns about how dissatisfying it is to be a founder and not have
total control, and about how the pressure to strike it big or go busto sucks
all the fun out of having a business.

Which is fine, I guess, and certainly explains why you wouldn't be impressed
by someone like DHH. I for my part find DHH's opinion both interesting and
refreshing.

~~~
vonnik
> The underlying premise of what you write, seems to be that money is the only
> yardstick that matters.

That's not what I said at all, and it does not reflect what I think, but it
does smack of the presumptuous and dogmatic pigeon-holing that DHH often
commits.

Money is not the only thing that matters, but it is a thread that runs through
most endeavors in tech and all venture undertakings and businesses.

Control is a big issue. And so is survival. Sometimes to you give up the first
to achieve the second. That usually happens by degrees. I am part of a
venture-funded startup and well aware of the tradeoffs.

I found DHH's perspective interesting the first time, but he has not done a
lot to hold my attention since that initial exposure.

------
michaelbuckbee
It's interesting to think what the other non ad based models might be:

1\. SAAS Freemium: It's free to write on Medium, but if you want a real domain
and a few more features pay $10/mo

2\. Patreon-ish: Direct monthly sponsorship (subscription) to individual
authors

3\. Fractional Payment: Overall subscription to Medium as a service payed by
readers. Authors are paid according to a formula for how many people viewed
their content each month.

Any I missed?

~~~
scriptkiddy
>1\. SAAS Freemium: It's free to write on Medium, but if you want a real
domain and a few more features pay $10/mo

I think this is a fantastic idea. It has worked on many other platforms such
as shared hosting before.

>2\. Patreon-ish: Direct monthly sponsorship (subscription) to individual
authors

This is also a great model because it allows readers to pay for content that
they consider worth while. It has the capability to increase overall content
quality, become a platform for new writers, and medium could scrape some small
amount of dough off the top for the service they are providing.

>3\. Fractional Payment: Overall subscription to Medium as a service payed by
readers. Authors are paid according to a formula for how many people viewed
their content each month.

I don't think this is a great idea to be honest. This is essentially how click
farms already work and has lead to the uprise in clickbait. I see this as the
primary reason why sites like Buzzfeed exist.

~~~
bicknergseng
I've been thinking about 2 as a potential path forward for
journalists/journalism. Is there a reason to continue the monolithic paper
over directly funding individual journalists?

I think there's a cool idea in a platform designed like this... somewhere in
between Kickstarter, Patreon, and NPR, but with a whole bunch of tools for
news consumers to discover, read, and support both journalists and stories
they're interested in. Things like supporting and discovering topics like
"local region politics", "travel", or "technology", while allowing journalists
to describe their backgrounds, political leanings, etc, might be a way of
addressing trust and transparency in journalism and journalistic leanings
while also allowing a range of opinions and perspectives on one platform,
rather than being driven solely by editorial control.

~~~
scriptkiddy
I love this idea. I'd honestly be really excited to take it on as some sort of
side project. The company/application itself could be an extension of the
idea. Open source the whole thing and let the community help improve it while
using a patreon-esque model to support the core developers/maintainers.

~~~
bicknergseng
I think that's pretty clever. Spent 15 min talking about it with coworkers
today though, and IMO the challenge with something like this is identifying
and specifically addressing the problems it would be trying to solve rather
than boiling the ocean and hoping it does the "right thing".

~~~
scriptkiddy
I think it requires some more thought.

------
Gaessaki
I apologize if the answer is obvious, but could someone explain to me the
rationale behind a blogging platform taking 132M in venture funding?

This isn't critique of their strategy or anything. I'm genuinely curious as to
why they would do that. I'm sure their engineering is great, but does it
really take that much money to build and scale such a product? It seemed like
most of their marketing was organic too. I'm just trying to understand the
situation better.

~~~
jkestner
They've paid a lot of money to have their own content created. For example,
[https://backchannel.com](https://backchannel.com)

~~~
Gaessaki
So they outright paid content creators and writers? It seems that Backchannel
is owned by Wired/Conde Nast. Have they contracted them to keep Backchannel
publishing on Medium?

------
wonko1
Feels like we'd only just forgot about Posterous. At least Posthaven is
already there to accept the fallout?

Nice to see ten times as much money was raised this time though.

Such a shame though, would be nice if there was a better way of extracting
value from these viable but non-unicorns.

------
6stringmerc
The one pivot Medium could do - and potentially reap large fiscal revenues &
find profits in turn - would be to become a Writing Talent Incubator. They
have the Ecosystem. They have the Banner. If they have cash, then they can get
into the Rights Management sector and pursue the sources of almost every
modern Media or Communication Content: Writers.

Compared to Engineers, Writers are dirt cheap. Funding in the tens of
thousands of dollars per writer - or unicorn hundred thousand for some really
promising ones - is the pathway to getting Content that can be monetized. If
they play nicely with Writers and not make the "Indentured Servant Musician
Record Label Contract" a staple of their model, it could attract a lot of
attention in a good way. Mutual long term benefit = good business.

Unfortunately the Hit-to-Miss ratio isn't something I'm confident Medium wants
to buy into. As in, if the most popular Writers sling pretty unappealing
material (ex: Self Help, Conspiracy Theories) then it could take a lot of work
figuring out where the gold might be. Having lots of data and pieces to
examine through their systems certainly provides an advantage at the outset.

It's still all about risk and reward though. The big hits are what cover for
the bad bets. It's a viable business model, until it isn't. Which, honestly,
goes for a lot of other types of businesses too (times change, tastes change,
regulations change, etc) so it's not out of the realm of consideration.

Basically I see Medium as right in the sweet spot where Netflix turned the
corner. Licensing content and being the distributor is grunt work. The real
money comes from owning the fountains. In a perfect world Medium would buy-up
Script Revolution tomorrow, specifically the founder/creator, and begin the
Content / Writer Incubator attempt with sincerity with his cultivated pool of
writers, and see how it turns out.

Such a pivot definitely has some appeal to me as both a Content Creator and
Consumer, and is, dare I say it, a bit more innovative than figuring out a new
part of the donkey to pin the ad tail on.

~~~
jrochkind1
And "big hits" for authors, especially non-fiction authors, aren't really all
that big. With _very_ occasional exceptions. I'm not sure this would work.

~~~
6stringmerc
True, selling "texts" is a busted model. I wasn't advocating that
particularly; I think the revenue model is in the downstream rights
management, not the actual text. Audio book rights. Film rights. Translation
rights. I'm not the biggest fan of the Copyright system in the US as it stands
now (specifically Term Length) but pointing out all the different avenues for
compensation via multi-media exploitation is a forward-looking business model.

------
minimaxir
I noted on the original discussion thread that Medium became the de facto
place for easy-setup-startup blogs after Tumblr faded from consciousness. If
the same things begins to happen to Medium as they chase an exit strategy, do
these startups have a Plan C?

~~~
koolba
Plan C is to get acquired by Yahoo.

------
WalterSear
While I appreciate the value that Medium has provided, I'm unclear how its
product could take $132 million dollars to create. Could someone elucidate me?

~~~
batbomb
75 people employed for 4 years at ~$200k/head + rent in the heart of SF for 4
years at Market and O'Farrell + Amazon + ...

~~~
WalterSear
>75 people employed

This just shifts the question down the resource pipeline :)

------
CoffeeDregs
Ev was right about social (micro-) blogging with Twitter and the VCs backing
him did well as Twitter figured out how to monetize content. Ev says he's got
wind of a similar opportunity in long form blogging. I'm not sure why we'd be
surprised that VCs would back him strongly, even while they understand the
monetization risk.

Actually, the lead investor says it better:
[https://knowledge.sparkcapital.com/our-investment-in-
medium-...](https://knowledge.sparkcapital.com/our-investment-in-medium-right-
tool-right-network-right-time-e081438d30f)

------
draw_down
Wow, somehow I didn't realize they'd taken on that much funding. I have to
agree, I don't see how they make their way out of this. Would love to be
wrong, though.

~~~
Bartweiss
My first thought was of the _Silicon Valley_ episode about asking for a lower
early valuation. $132 million is a stunning amount of money for a company with
an online publishing platform and no real revenue, and I'm a bit shocked they
let the numbers climb that high.

~~~
wyldfire
"no real revenue" \-- I don't think I've ever seen an ad. So what _is_ their
business model?

~~~
epmaybe
I'd imagine it wouldn't be too hard to start putting in ads once you've built
a userbase

~~~
WalterSear
I not so sure. You might not die immediately, but you would start bleeding to
death right away.

~~~
wyldfire
Worked for YouTube.

~~~
scriptkiddy
The only reason it worked for youtube is that they were the only service
offering reliable high quality video. Other video hosts had problems with
loading times and reliability.

Youtube is arguably a more valuable service in that it takes way more
infrastructure to run a video hosting site than it does to run what is
essentially, a simple blog. It would probably take no more than a year of
development experience to build a site like Medium(leaving out scaling
concerns). Youtube, on the other hand is a beast. I can't even imagine
beginning to build an application like youtube. Youtube can push ads hard
without bleeding users because they offer quality so many orders of magnitude
higher than the alternatives. Medium has only one thing to offer: nice design.

------
pweissbrod
Honest non-nvestor question: How is it that investors valuate and front
hundreds of millions into companies with a functioning app, a user base and no
clear path on how to monetize? I saw this recently with yik yak as well and it
confuses me.

------
powera
It's not venture capital. It's the standard reason 150-person organizations
die; they have no revenue of note and no plan to get more.

------
Kinnard
I wonder if medium could partner with Brave Browser

------
mathattack
I don't think Venture Capital is killing Medium. Spending that much money no
matter what the source is the problem.

------
acconrad
_Written on medium_

~~~
Bartweiss
> "It’s the best writing environment on the web, and they sweat the details
> like nobody else."

> "Especially for anyone who moved to Medium but hedged their bets by keeping
> their own domains."

The claim here isn't that Medium is _bad_ , or even not excellent. It's that
they took >$100 million in VC money with no real plan to monetize, and so
they're doomed regardless of product quality.

