Today, Berkeleyside officially closes its direct public offering (DPO), after raising $1 million from the public directly investing in the Bay Area news organization.

Berkeleyside launched the DPO in 2016, and it has spent the past two years hustling to find investors. This week in Solution Set, we’re going to look at why the Berkeley, Calif.-based site decided to launch a DPO, what it learned through the process and what your news org can learn from their experience. Even if your outlet isn’t going to undertake a DPO, there are certainly things to take away that would be relevant to both for-profit and non-profit outlets that are chasing reader revenue.

Solution Set is a weekly report from The Lenfest Institute for Journalism and the Solutions Journalism Network. Every Thursday, we take an in-depth look at one swell thing in journalism, share some lessons, and point you toward other excellent resources.

A major disclosure here: The Lenfest Institute gave Berkeleyside a $60,000 grant last year to help the organization share learnings from its DPO and explore the potential for the model to be applied elsewhere. I was only peripherally involved in the Institute’s grant program and Berkeleyside had no editorial control over this report.

Now that that’s out of the way, here’s the TLDR version of what you need to know:


The Challenge: Berkeleyside launched its direct public offering in 2016 to raise additional capital so it could grow the site.

The Strategy: The site, founded in 2009, began an all-out campaign to attract investors, but it didn’t meet its initial goal and had to extend the DPO another year.

The Numbers: Berkeleyside raised $1 million from about 400 investors. Most people invested $1,000, the minimum amount allowed.

The Lessons: Berkeleyside found that it’s helpful to have a point person running initiatives like a DPO, and it’s important to be transparent with investors about what you can deliver for them.

The Future: The site is hiring its first membership manager to work with its new investors and manage its membership program.

Want to know more?: Scroll down for past coverage of Berkeleyside and learn more about revenue generation ideas.

Now, let’s dig in a little deeper:

The Challenge

It was 2016, and a reader came to Berkeleyside with a question: Have you thought about doing a direct public offering?

Like practically every news organization, Berkeleyside was looking for new ways to generate revenue to support their journalism.

Publishers (including Berkeleyside!) have tried lots of ideas, from memberships and subscriptions to events and e-commerce.

But a DPO was something new. Berkeleyside co-founder Tracey Taylor said the site was the first local news organization ever to undertake a direct public offering.

A DPO allows a firm to raise capital by enabling the public to invest directly in the company. It’s similar to an initial public offering, but there are no middlemen, which makes it cheaper and easier to undertake for smaller companies.

Berkeleyside decided to launch a DPO instead of looking for capital from a bank loan or other traditional source because it wanted to pay returns to its community members, not a corporate entity.

“DPOs are used quite frequently to launch businesses if you’re opening a new restaurant or new business of any form,” Taylor said. “And you can raise the capital to build it, but we didn’t have to do that. People could see very clearly what they were investing in and we told them how we were going to use the money to grow and improve the business. There were a lot of good things in the run-up and decision making. We felt that it added up, but it was still a huge leap. It had never been done before by a news organization.”

The rules for a DPO vary by state, and Berkeleyside worked with an attorney to apply for approval in California. Organizations that undertake a DPO can make decisions about how much they’re looking to raise, the minimum investment, and more.

Berkeleyside set an initial goal of $800,000, and it set the minimum investment at $1,000. It decided not to give investors equity in the company, and Berkeleyside investors will get a 3 percent annual dividend from their shares.

The Strategy

After state approval to launch the DPO, Berkeleyside began spreading the word to attract investors. It created a standalone website with information and background about the DPO process. It mentioned the DPO in stories on Berkeleyside, it ran marketing campaigns, and even held house parties across the city to meet potential investors and tell them more about the site. “We got a lot of traction and interest around those parties,” Taylor said.

Berkeley is a relatively small place — it has a population of about 120,000 — and it helped that Taylor and her co-founders, Lance Knobel and Frances Dinkelspiel, had deep ties to the community. They reached out to their friends and acquaintances and kept asking for suggestions of people who might be interested in investing. They looked for people who supported other community groups or were civically engaged. They even made cold calls to people they thought might be interested.

“We thought of everybody, and we just kept putting names on lists,” Taylor said.

Though all the founders come from journalistic backgrounds, they’ve had experience selling advertisements and sponsorships both for Berkeleyside and for the annual ideas festival it runs in the city. Still, going out and speaking to potential investors was new for them.

And when they went out to pitch potential investors, they emphasized that investors would be supporting a resource that benefits the entire community.

“If all they cared about was making money, we told them quite candidly, then you should not be investing in Berkeleyside,” Taylor said. “We refer to it as an impact investment. You’re making an impact in your community, you’re helping a community resource thrive and be successful, you’re putting money into something that’s having a beneficial effect in your community because it’s holding power to account and keeping you informed. That was our messaging.”

Berkeleyside’s DPO was approved in March 2016, and it had a year to hit its initial $800,000 goal. It didn’t meet it, so the site applied for an extension, which was granted. The extension gave Berkeleyside another year — until today! — to meet its goal, and also enabled it to increase the amount it was raising.

Because it had more time, Berkeleyside decided to up its goal by $200,000 to $1 million.

Still, it took two years for the site to reach that mark, and Taylor said it was a grind to get there. Berkeleyside raised about $500,000 in the first five months. “It went very well, very quickly,” she said. But then it would slow down and pick back up in cycles.

“It was really hard to keep the momentum up over that long period of time,” she said.

The Numbers

Berkeleyside raised $1 million from 355 investors.

The largest single investment was $100,000 and it came from an unexpected investor, Taylor said. “People you might not have expected invested heavily,” she said.

More than half of all the investors contributed the minimum of $1,000, and the average investment was $3,000 — though some outliers, like the $100,000 investment, impacted that.

Berkeleyside began using the funds as soon as they came in. The first thing it did was redesign its website to make it mobile friendly. It also invested in its advertising operation and its Uncharted: The Berkeley Festival of Ideas. It also hired another full-time reporter.

The site primarily has three revenue streams: Advertising, membership, and events, namely the festival. About 60 percent of revenue comes from advertising, with the rest split between reader revenue and the festival.

The site averages about 220,000 monthly unique visitors a month.

The Lessons

• Have a point person: The Berkeleyside team is small, and all three co-founders contributed to running the DPO.

In retrospect though, Taylor said it would’ve been helpful to have one person in charge of running the program and working with investors. It takes a lot of work to solicit potential investors, chase down leads, and keep investors updated on the progress. And it was a challenge for Berkeleyside to manage that with all of the additional responsibilities of covering the news each day.

But with limited resources, the site wasn’t sure it wanted to spend the money necessary to enable someone to focus exclusively on the DPO. Also, as the three founders, they felt that they were the best people to tell Berkeleyside’s story to investors.

“We could’ve thought it through a little better in terms of who was going to drive and who knows, it’s the benefit of looking back, but maybe we could’ve closed it in a year,” Taylor said. “It certainly would’ve made our lives easier.”

No matter the type of fundraising you’re doing, it’s certainly helpful to have someone focused on maintaining relationships with funders. It may cost you a bit in the short term, but is likely worth the long-term investment.

• Move quickly: After it applied to launch its DPO, Berkeleyside’s attorney said it would take up to six months for the site to be approved. But Berkeleyside got the go-ahead in just three weeks.

“It threw us into a total panic to be honest,” Taylor said. “We hadn’t gotten our ducks in a row.”

As a result, it took another six or so months for Berkeleyside to get ready to publicly launch the DPO. That delay was a major reason why the site didn’t hit its initial goal in the first year.

There will always be things outside of your control, but by making sure your work is done and that everything is lined up, you can maximize your chances of success despite the curveballs others throw at you.

Don’t overpromise: Berkeleyside was very clear with potential investors about what they should expect from investing in the site. They said they’d offer a 3 percent dividend, that can be paid annually or accrue over time.

Berkeleyside can buy back shares at anytime, and if the company is sold or if it shuts down, the investors will have the right to receive their investment back. There’s risk in every investment, of course, and Berkeleyside didn’t shy away from emphasizing that. If the company goes into bankruptcy, other creditors’ claims receive precedence before the DPO investors.

Because of its reputation in the community, Berkeleyside was able to use its goodwill to attract supporters who believe in its mission and want to see it succeed. Still, it explicitly outlined what investors could expect.

No matter if you’re soliciting investors, donors or subscribers, being clear about how their support will impact your news organization and what they can expect in return is important.

“You need to think very carefully about what you can deliver to your investors,” Taylor said. “We erred definitely on the side of caution; we didn’t overpromise. All of our messaging, and every time we spoke to potential investors, we did not make this about being an opportunity to make money. That seemed to work.

• Choose a structure that works for you: Berkeleyside is based in a relatively affluent city in northern California. It knew its community and realized a direct public offering was a model that would work for its site.

This sounds simple, but a DPO won’t work everywhere, and as news organizations look for ways to generate revenue they need to think about what’s best for them and their communities.

After learning more about how a DPO works and understanding the demographics of the community, Berkeleyside decided that the format was right for them. But even after deciding to undertake a DPO, there were all sorts of decisions to be made.

Berkeleyside’s founders, for instance, didn’t want to give up control of the company, so they decided not to give investors equity in the site.

“We want to remain the owners of our business,” Taylor said. “We think we know how to run this business best. We didn’t want to share that out. It sounds a little bit selfish, but we’ve done pretty well so far. We believe we had the expertise and we didn’t want to have other owners making decisions around how to run the business.”

There are all sorts of decisions that you’ll have to make as you think about potentially raising capital, creating new revenue streams or even launching a new product or news organization, and as you examine your options it’s helpful to look at other people’s experiences but also to consider how your own market would react.

• Seek clarity: In addition to the DPO, Berkeleyside also has a membership program.

Readers can support the site with monthly or one-time payments and they get a T-shirt, discounted tickets to events, and other perks.

DPO investors obviously contribute more than people who support Berkeleyside through the membership program, but the site still had to be clear about how the two programs were different.

“That was a challenge, sometimes distinguishing the two in our messaging and when we talked to people was hard. People would say, ‘I’m already a member, why are you asking me for investment?’ We had to try and work up some good answers on that. What is the difference between being a member of an investor?”

When potential investors didn’t want to pony up at least $1,000, Berkeleyside was able to point them to the membership program if they wanted to contribute less.

As publications launch avenues for readers to directly support their journalism, they need to give readers clear choices and make it as simple as possible for them to contribute.

The Future

Now that Berkeleyside has closed its DPO, it’s beginning to think about how it will manage its new investors, and how it will differentiate the investors and the members.”[Investors] should have a feeling that they’re well informed of what’s going on and they have insights that the rest of the community doesn’t,” she said. “We feel that way about members too, and one of the interesting things in the next year is how do we chop up the information we want to give people and how do we decide what we want to tell to whom.”

Berkeleyside just hired a membership marketing director, a first for the organization, who will work to build out the membership program and will also manage investor relations.

The site plans to hold investor-only gatherings and also regularly update them on the state of the business.

There are currently 1,200 Berkeleyside members and the site would like to grow its membership to about 5,000, Taylor said.

The membership marketing director will be responsible for growing that program and it will look for ways to expand it.

Berkeleyside is also in the process of forming its first advisory board. “We feel like we reached a new level of maturity,” Taylor said.

And as it wraps up the DPO, Berkeleyside is looking to educate other publishers about the possibility of using direct public offerings. Berkeleyside has given advice to another California news outlet that’s just received approval from the state to launch a DPO and it also plans to write a guide to share best practices with other outlets.

“We’re hoping this can be replicated around the country and be a new model to sustain local news and independent reporting in communities.”

Want to know more?

Nieman Lab wrote about the Berkeleyside DPO in 2016 just as it was about to launch.• Last summer, as Berkeleyside was closing in on its DPO goal, Poynter had an update about how things were going.

• Though it didn’t use a DPO, the podcast company Gimlet Media also allowed its listeners to invest in the company. (Though investors had to meet certain criteria.) The company recorded an episode of its Startup podcast about the process.

The Local News Lab spoke with Berkeleyside co-founder Lance Knobel last fall, and he also shared lessons from the site’s DPO.

• Want more revenue ideas? Check out Better News, a new resource from the American Press Institute that’s part of the Knight-Lenfest Newsroom Initiative.

Anything to add?

Is your news org doing anything cool to generate revenue? I want to hear about it.Send me an email, I’m at [email protected].

I’ll share some of the responses in next week’s edition.

See you next Thursday!

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