Raising Capital: The Benefit of Up-front Fundraising

The Benefits of Upfront Fundraising

Later in this guide we will discuss how to project your revenue and expenses in your business plan, and deal with your overall finances. Here we address the earliest stage of financing a startup, the capital also known as seed money. Across the country, the nonprofit news sites that have grown rapidly and become powerhouses within their states, and those that have become influential and had impact in their topical journalism, often started with a substantial bankroll before they even began publishing. The Marshall Project, Texas Tribune, Voice of San Diego, MinnPost, rapidly gained a foothold because they were backed by investment capital upfront.

Many journalists come to INN saying they are planning to start a nonprofit by bootstrapping it. They plan to just start writing to show people what they can do and then raise money. Jumping into publishing that way creates a very challenging route to success. We have found that you are going to be able to do more journalism with more impact more quickly if you have funds upfront—raised even before you formally organize as a 501c3 nonprofit.

Our recommendation is that whenever possible you gather enough capital to cover a minimum of two years of expenses before launching. We advise startups to spend equally on the journalism and on building audience and support. If you are starting with one person leading the newsroom and another on the business side, your expenses include two salaries plus whatever you have outlined in your business plan as the professional services and equipment you need to get registered and develop your mechanism of delivering news. If you have enough funding to start with more staff, you can expect to have more impact more quickly, and that in turn will help you raise more funds.

Making a Capital Pitch

As you are planning your publication, you should be out talking to your local community or the community of people who really care about the topic you will be covering. As you do that, you will develop and refine a summary document or slideshow (often called an investment pitch deck) that communicates what you intend to cover and why you are qualified to do so. You will want to leave behind with them a presentation about what you are intending to do and what part they can play. The same points should be very clear in your mind so you can talk simply and compellingly to inspire excitement about participating in your venture as a key donor.

The terms partner and investor are sometimes used interchangeably to refer to the key donors who provide our members’ upfront capital. But while an investor in a for-profit company typical expects a financial return in the form of shares or a cash payback with interest, the payoff for

the investor in a nonprofit news organization is the coverage that results and the strengthening of the community in which you and they live and participate. Your pitch therefore focuses on that outcome, the change they can expect to make, and what they can accomplish with their money and your effort.

Many sites start with one key donor who is the catalyst and brings in other investors. If you have not found that wonderful person, go out into your community and ask people about their needs. Then ask, “Do you know anyone who would want to support and invest in our meeting that need?” You gain multiple benefits from one conversation by using it to introduce yourself and your venture, learn your community needs and also get leads on sources of funding. If you are meeting with a community or family foundation, they may not be a direct giver but may be a connector to donors whose interests they know or represent.

In some cases, foundations will provide seed money for your venture. They may call it a planning grant or a pilot project grant. Crowdfunding is another way to build startup capital in some communities and for some topics. But it takes a lot of marketing to get enough people to make the small donations that characterize crowdfunding, so it is considered a supplemental revenue source.