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As part of my Reynolds Fellowship, the Donald W. Reynolds Journalism Institute has asked me to write about lessons learned in the successes and failures of news startups. If there’s one resounding failure, it’s been the inability of local news startups to attract any sufficient backing for their efforts.

Lesson learned: Don’t be a locally focused news startup.

Consider Homicide Watch. The highly interactive website, which has been a force in journalism and the community since 2010, is shutting down because it can’t find a backer in the District of Columbia. Laura and Chris Amico, along with a changing team of industrious interns, have been chronicling the District’s murders on the site.

Though outposts of Homicide Watch will continue, thanks to partnerships with the Chicago Sun-Times, The Trentonian and Northeastern University, the flagship site in the District will shut down in January.

In a city like Washington, D.C., one augurs to guess just how this is possible. Homicide Watch has been one of the most talked-about local news bootstrapping efforts. The Amicos have received substantial recognition for the work, in particular from Harvard University’s Nieman Foundation and the Online News Association.

The District has been a great place for nationally focused news startups to thrive. Politico started from nothing. The Huffington Post’s focus on politics as a niche helped the site grow. Vox is the exemplar of the venture-backed news startup.

But when it comes to a locally focused project that looks at crime involving generally poor black citizens of the District, nary a media partner or investor can be found — even though the Amicos point out that running the site is just the cost of a single reporter.

Nieman Lab reported that another locally focused news site, Philadelphia’s, is shutting down after two-and-a-half years. The founders of the site wrote on their goodbye announcement that “funding has been impossible.”

The site has been critical to Philadelphia, and the announcement boasts of this impact:

We can correlate our work with a 25 percent reduction in Philadelphia homicides; in a city where 80 percent of the killing is committed with guns.

Why isn’t some venture capitalist or wealthy individual or someone doing anything to fund this organization?

Even the Knight Enterprise Fund isn’t really investing much in any kind of content-focused local news startup. And this is the Knight Foundation, which purports to focus on building information around communities.

As Joshua Benton, Nieman Journalism Lab’s director, writes:

From what I can tell, is not a high-cost operation. Philadelphia has more than its share of wealthy, civic-minded individuals. This would be a great moment for one or more of them to step up.

Why can’t local news attract investment? Perhaps it was the colossal failure of Patch. Perhaps TBD’s failure in the District was a sign that hyperlocal (or even regional) news couldn’t turn a profit.

What’s clear is that almost no one is investing in local news. But there’s almost a bubble for news startups that have some sort of national appeal. I’ve spent the past seven months looking at news startups, particularly venture capital-backed news startups, and almost every single one I can think of is focused on national or international news.

Even the Knight Enterprise Fund isn’t really investing much in any kind of content-focused local news startup. Of the 35 featured companies Knight showcases, I counted only three locally focused startups. And this is the John S. and James L. Knight Foundation, which purports to focus on building information around communities.

It’s a totally lame excuse to even say that local news doesn’t have any chance of success. After all, venture capitalists are gambling on far less proven companies and strategies.

Most of the news startups funded by VCs right now don’t even have proven business models, or are chasing after a very crowded space.

Many of the companies I spoke with simply said they weren’t even focused on the business model. Others are hoping they will differentiate themselves in a crowded market for platforms and/or be able to take a slice out of the digital advertising market.

We might be just as suspicious of any company that promises returns. After all, as Jon Krause of The Wall Street Journal writes:

Consider this. The entire market for advertising is around $100 billion a year in the U.S. (Globally it’s close to $500 billion.) Yet the nation’s gross domestic product is more than $16 trillion.

That means every venture-backed startup chasing advertising revenue is going after just 0.6 percent of the economy. Put in employment terms, the ad-related economy employs just a few million people, versus 140 million Americans whose job it is to do everything else.

Still, the pursuit of advertising dollars includes about every startup that is going for scale first and says it will figure out how to “monetize” its users “once it has the eyeballs.”

And every startup has to compete with Facebook and Google for that slice.

Maybe local news isn’t sexy. Maybe looking to fund local news content is expensive. But we’ve seen that VCs are now willing to fund content — more now than ever. An article in the Pando Daily, co-authored by Hamish McKenzie and Sarah Lacy, has called it the “Holy S---“ moment for VC-backed content.”

There are some local sites that are doing well. Consider DNAinfo, the New York-based crime site. It’s expanded to Chicago and the District. The New York site gets 2 million unique visitors monthly. And it appears to be making money by selling ads at the hyperlocal digital level.

We can’t just innovate around national and international news, and presume consumption behaviors only prompt interest in these areas. If funders don’t pump money into local news, all of the innovation that’s happening in news will simply bypass the local level.

And yet it’s local news that is suffering most and in need of the attention of VCs and others who can rethink how to recharge the profit and product of local news. VCs need to start taking risks on local news, for the sake of all of us, but with the potential for high return.

Nikki Usher  
Nonresidential fellow


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