Improve your chances for corporate funding

Folio: The Magazine for Magazine Management, May 1, 1995 by Bruce Sheiman

In my last column (April 15, page 78), 1 advised aspiring magazine moguls to think first about individual investors for financing their start-ups. Ego and a touch of laziness frequently get in the way of rational decision-making, however, with the result that many entrepreneurs believe their best bet is to take their ideas to an established Publisher first.

I say ego because we all want to believe our magazine idea is so great that Time Inc. or Hearst would jump at the opportunity to launch it (indeed, we even secretly fear that they may steal our idea). I say laziness because we also want to believe our target list should be just five or 10 companies - more manageable than the 30 or 50 people we may need to contact to put together a limited partnership.

Entrepreneurs have been bringing magazine proposals to established publishers for years. But it is only since the late 1980s, after Robin Wolaner found an angel in Time Inc., that entrepreneurs have been rushing to corporate publishers with great expectations. The knowledge that the Wolaner deal is unique in our industry has not deterred them. Nor does the fact that everybody with a new magazine concept goes to Time Inc., Hearst, etc. stop entrepreneurs from believing that they hold the winning idea.

Nonetheless, if you follow the precepts below, you will increase the probability that your magazine idea will receive the consideration you believe it deserves.

Put together a superb business plan. Corporate publishers, who understand magazine publishing better than just about anyone, will expect to see a sophisticated plan with all the critical questions convincingly answered. Razzle-dazzle is secondary to a serious presentation of editorial, circulation. advertising, management and so on.

Make sure your concept is well developed. The more specificity and real-world concreteness you can give your magazine, the better. This means that you will have developed a prototype, or that you have already tested the idea with advertisers and/or readers.

Find a friend in the organization. This person will help you navigate the corporate bureaucracy and make your case to key decision-makers. When I was struggling to launch New York Arts, for example, I made the acquaintance of a longtime editor at Time who loved my idea enough to present it to Henry Grunwald, then editor in chief for all Time Inc. magazines.

Understand how your magazine fits with a publisher's portfolio. Few publishers are prepared to launch a new magazine - which is a risky proposition by itself - in a new market or where they have limited experience. It is axiomatic that you should target publishers that have one or more titles in your market. But also consider publishers that have a strong compatibility with the publishing economics that characterize your magazine. In addition to leveraging their advertiser and subscriber bases, publishers also want to build on their operational strengths. For example, if your magazine is primarily circulated through single-copy sales, seek out publishers that are strong newsstand players. Further, if you go the extra step of articulating a strategy that includes your magazine and those of the publishers you are contacting, I guarantee that you will attract their attention. Such an effort reflects a degree of sophistication that is unusual among entrepreneurs.

Think beyond the biggest publishers. In addition to giants like Time Inc., Hearst, K-III, Gruner Jahr, etc., look to medium- and smaller-size publishers for funding. I got a call recently from the publisher of a new newsletter who thought her publication would be ideal for Conde Nast or Hearst. Ask yourself: Why would these mammoth publishers bother with a small title? What is motivating this thinking? Again, ego and laziness.

The real work in finding a corporate investor is to locate appropriate mid-size and smaller publishers that, very likely, are operated by entrepreneurs. True, these publishers may not have the cachet of Conde Nast or Hachette, but there are possibly 200 medium- to small-size consumer and trade publishers worth investigating, and rarely are they inundated by new-magazine ideas from entrepreneurs.

Moreover, don't build a magazine so big that no publisher will take you seriously. Plans that propose a big-budget title to compete in highly competitive categories are easily dismissed. For most major publishers, a start-up costing more than $5 million is probably too large.

Approach your least desirable prospects first. That way, you will be able to modify your plan and presentation for when you approach your most important prospects. And don't waste your time with publishers that have grown almost exclusively through acquisitions. They will have little interest in a start-up.

Bring something irreplaceable to the deal. Remember, most new-magazine ideas are not unique. And most publishers have the requisite operating expertise and resources to launch their own titles. (If they did not, there would be no reason for you to consider them.) So what can you, the entrepreneur, bring that they cannot easily replicate themselves? For starters, a vision, drive and dedication that says you are synonymous with your magazine. Also, entrepreneurs can take a generic idea and give it a highly distinctive personality. And finally, you presumably bring experience and expertise in a special-interest marketplace.