Monday, March 16, 2015

How Venture Capital and VC Growth Expectations Contributed to Gigaom's Demise

From Medium:

Gigaom: The Life and Death of a Venture Funded Media Startup
As most know, we lost Gigaom last week. It was a sudden passing of a widely beloved tech media company, and it’s been touching to watch the Twitter tributes from fellow media and tech readers wide and far.

But now that the memorials have largely been done, the soul(s) of the company is rising up and on to better places, it’s time to examine the body and determine the cause — or causes — of death.

As a former employee, I have a perspective that’s probably a bit more informed and nuanced than many. Not authoritative in any sense, but a perspective that is informed by the knowledge which came as a result of four years at the company as a VP and the last two as an external research analyst partner.

Like most, I was shocked when the news came out. After all, Gigaom had just topped up the tank a year ago with an $8 million funding round. Om, in a post announcing his transition to full-time VC, talked about how the company was doing well. Paul Walborsky, my former boss, talked on record about how the company was growing. All of this seemed to make sense and largely fit the picture that I was getting as a former employee semi-tied into the company through friends and ex-coworkers and through working with them as an external research partner.

The news also made me sad for what we had lost. Gigaom had gone big, had tried to build something new and different, all the while adhering to an editorial ethos that remained a part of its DNA until the very end. Despite it’s collapse, Gigaom’s story was a worthy one, one worth telling, and because of this I figured I would do just that, hopefully providing the necessary context to help myself and others figure out what happened.

I found as I reflected further I should not have been completely surprised by what happened. It’s not unlike when someone suddenly passes and signs of ill health that were previously ignored come into sharper focus. And while I don’t have the body in front of me to examine — no one save the company’s officers, VCs and now Silicon Valley Bank, its main creditor, have the benefit of the company’s financials — I think I can connect some dots from my own knowledge of the business and some of the evidence put into the public domain by former employees.

In the press, some had pointed at research as one of the main causes of Gigaom’s demise. I do think research and its cost model played a significant role. But I don’t think it was the only cause. Gigaom died a premature death due to many reasons, and if there’s any one overriding cause I’d point to the massive amount of VC funding and the resulting company cost model that was put in place to attempt to scale — across all of its business units — up to meet the high growth expectations that are incumbent with venture investment.

But I’m getting ahead of myself. Let’s start with the beginning.

Gigaom And The Tech Media Landscape in 2007–2009
Back in 2007, the tech blogosphere had started to come out of its early wild west days, but it still wasn’t completely corporatized. Sure, AOL had started to roll up companies like Weblogs (owner of Engadget), but they hadn’t yet bought Techcrunch, while independents like VentureBeat, ReadWriteWeb and Gigaom were cranking out good work....MORE