The Accidental Entrepreneur: Interview with Mediabistro.com’s Laurel Touby
Filling a need is what a successful small business is all about. That’s how mediabistro.com got started. The company’s founder and president, Laurel Touby, a freelance writer who wrote for magazines such as BusinessWeek, Glamour, Travel & Leisure and New York, saw a need for herself and others like her: a way to network. The business began as an afterwork cocktail party in 1994. She steadily added products and services to service the media community. mediabistro.com started as a community of 10 people; the company’s database of those attending events is now more than 700,000 strong. The company has 30 employees.
In June, Laurel Touby reached a milestone that many small business owners dream of: she negotiated the successful sale of her business. The buyer was Jupitermedia Corp., a Darien, Conn.-based provider of information and images. The sale price? A cool $23 million for the company ($3 million of which is subject to a two-year earnout period). Touby, who owned 62% of the company, will stay on as a senior vice president at Jupitermedia. NY Report Editor-in-Chief Rob Levin sat down with Touby to discuss mediabistro. com, from its beginnings through its sale.
RL: Is mediabistro.com a company that was really founded by its customers?
LT: That’s a great way of putting it. Yes, I was the first member and I had a need to meet other people like myself and to commune with them, to hang out with them, and to have a connection with other people who were doing similar work. This allowed us to trade war stories, commiserate with each other, meet each other for drinks to share business information, etc. So I was the first person who was the customer. But quickly I realized that there were others like me. They came to the parties, and as more of them came to the parties, the bigger my database became. It started with 10 people and today the database is about 700,000.
RL: How does the company make money?
LT: In the beginning it was just the parties and we didn’t make any money and it wasn’t really a business, but that community went online in 1997. When I went online, during the first three years, the products and services were given away, they were freebies. They consisted of job listings, event listings, bulletin boards and resource pages. Basically, I just created, or my friend actually created, software for the community to interact — and that was the product. But the product didn’t cost any money in the beginning. It wasn’t until 1999 that I first determined that we could get money for the job listings and that became the core of the business. In April 1999, I sent an e-mail out to everybody who had posted a job that month and I said, “If you’re happy, and only if you’re happy, send a $100 check to this post office box and consider this an invoice.” And I went to the post office box that first month and out came eight checks. I thought, “$800 for job listings, not bad for pocket money.” And then the next month I did it again, and there were 16 checks the next month, and then 25, 35, 45, and before I knew it, I was making more money in this online job listings site than I was ever making as a full-time journalist at the time.
So here I was, and I had a decision to make: Do I continue to be a journalist and make a paltry living and express my creativity that way, or do I put all that behind me and start to become a business owner and try to get funding to do this right? Revenues at this point were around $30,000 a year. I knew that women-owned businesses often start with too little funding; I knew that I had to write a business plan immediately and get funding if I was going to do it right.
RL: How much money did you raise and where did it come from?
LT: I wrote a business plan with the help of business advisors. My goal was to raise $1 million, even though I didn’t need half of that. The funding came from a venture private equity hedge fund called Gotham Partners. A small portion of it came from Marty Peretz, who owned the New Republic back then, and some of TheStreet.com. At that time, I kept ownership of more than 70% of the company.
RL: How did you convince your investors to give you $1 million for less than 30% of the company?
LT: Unlike all the other dot-coms that were seeking funding, we were making money! We had customers, we had traffic, and we were real in many ways.
RL: Can you give us a timeline of when the different products and services from mediabistro.com came about?
LT: First there were the cocktail parties; then in 1994, there was an e-mail newsletter that included job listings and parties and notifications for the community. Then in 1996 or 1997, the Web site started. In 1999, I changed the domain name to Higher Minds. I fought a lawsuit in 1999, and then in 2000, I renamed it mediabistro.com. In March of 2000, I got $1 million in funding, but I only got half the money up front; they give you the rest when you hit milestones. By the end of 2000, we were scared; by September 11, 2001, we were really scared. By early 2002, we had launched our first classes and we were getting less scared. By the end of 2002, we launched a bunch of classes and a premium content subscription membership program called AvantGuild, and we were even less scared. By 2003, we were profitable, depending on the month. By the end of 2003, we were solidly profitable. By 2004, we were kicking ass, and we haven’t stopped growing since.
RL: Was there a point when you felt that you had made it and you weren’t worried about whether the company was going to be around next year and whether you were going to have to put more money into it?
LT: I never worried about putting more money into it. Out of the million they promised they had given me $500,000, and then after 9/11 I asked for a little more to get me through and they gave me another $50,000. Then the next time I went to get money from them, they said come back when I was profitable. Several years passed. They didn’t give me additional funding until I was so profitable that I didn’t want the money. I never worried that I’d have to put more money into the business. I never worried about waking up one day feeling I was bored with the business. I was always excited about its prospects, even in the worst of times. But sure, I was always scared.
RL: Did you ever think of calling it quits at any point?
LT: After September 11, I really thought: “What are we doing here, having parties, making merry, when there’s this kind of turmoil in the world?”
RL: How did you market mediabistro.com, and did the marketing change over the years?
LT: The marketing for mediabistro.com has always been a) through word of mouth and b) through party marketing. I call those parties our marketing effort. We don’t make any money off of them. So, why do we do them? In the business world, to a business person, having a party makes no sense unless it’s sponsored. And yet we’re doing 200 of them a year, so there’s got to be a reason! The reason we do them is because it gets the word out about the offerings that we have, it keeps our brand front and center in the minds of our customers, and it generates buzz and excitement around the brand.
RL: Do you have parties elsewhere other than in New York?
LT: We have parties in 12 cities nationwide.
RL: Do you have employees in all those cities?
LT: We have local people who help organize the parties, volunteer to host and check people in at the door.
RL: Looking back, why do you think mediabistro.com has been successful?
LT: mediabistro.com has been successful because every single day we make mistakes, and we’re not afraid to make mistakes. But we also make decisions that lead to tiny incremental improvements. So, every single day, we might leap forward three steps and make a mistake that will bring us back one step. But we’re constantly pushing to improve.
RL: Can you give us an example of some of these improvements?
LT: It’s everything from launching new blogs to launching an exciting new sponsored party to something as small as men-tioning somebody on the Web site and that person turns around and sees their name there and then tells five people that they’re on the site. It’s not one big thing. It’s incrementally improving all the time, trying to constantly make things better.
RL: When you’re planning something and you’re worrying about making mistakes, do you worry a customer is not going to come back because of a mistake?
LT: Yes, we’ve had customers not come back because of mistakes. Luckily, we have 700,000 customers instead of just a few. We have different types of customers. We have consumers who are customers. These are the media people out there doing their jobs, clicking on mediabistro.com every day, reading the news, checking out the job listings. We have employers who are customers and post the jobs. We have thousands of them who have been steady, loyal customers for years. And we now have advertisers, who are our new customers. They post advertising to reach both audiences, but mainly the 700,000 consumers. So when you have so many different types of customers, obviously you don’t want to upset or offend or turn off any one customer, but it really does help to have such a varied customer base.
RL: Have you ever made a major overhaul to your Web site since its launch?
LT: No. I’ve had dreams of making major overhauls, but in the Web world, people get used to a certain look of a site, and even if it’s crappy, they get mad at you if you change it too much. While we’ve gone through one or two redesigns, we’ve added things and our real challenge now is to get attention for all of these orphan products and services. For example, we have this freelance marketplace — a thousand people are in there, they’re great people, and a lot of people are getting work from it, but many people don’t know about it. As a result, it’s hidden because we have so many other things we’re promoting.
RL: What’s your process to launch a new product or service, or launch in another city?
LT: All of these answers are different depending on the product or service. We departmentalize. We’ve got a job department, a job listing department or employment department, a classes and seminars department, an events department, and a membership department and an editorial department. All of the department heads come up with ideas. I come up with ideas, everyone comes up with ideas. We’ve got way too many ideas to implement. So how do we choose among the ideas? We’re basically looking at our biggest revenue streams. Where’s the revenue currently coming from and how can we expand it?
RL: So ideas are chosen based on revenue?
LT: Yes, we look at what are the potential revenues from each new product or service. Or, if it’s a crazy editorial idea, and it will only cost a little bit, if our audience loves it, we will find a way to get money for it.
RL: Looking back, what were some of the biggest roadblocks you encountered and how did you get around them?
LT: The biggest challenge for me and for this company was to recognize what I can’t do and what needs to be done and then find somebody who can do it and do it well. And that’s hard, recognizing talented people with the right skills and then convincing them to work for you. The next biggest challenge is getting talented people to stay with you. We face this problem all the time.
RL: Do you have someone who acts as a chief operating officer — somebody who is taking care of a lot of the operational issues?
LT: Not anymore. Our new owner helps with all of that, but for the first few years, it was me and a bunch of college kids. Eventually, we found some good people who stayed with us and fulfilled defined roles. This stabilized the company, and then we were able to bring on more people.
RL: Did these people have more experience than your typical college student?
LT: Not much. They just happened to be talented people. For example, my former chief financial officer was a publisher at a magazine before I hired him. He was in his 20s. He was one of a bunch of people who turned out to be excellent hires, but a lot of people went through the grinder and didn’t last.
RL: What are some of the things you’ve learned about hiring?
LT: I look for tremendous enthusiasm and a willingness to go through some tests. We try to have a test for every single person we hire. And if they don’t follow up that day or the next day with a thank-you note that’s well thought out and that points to different things discussed in the interview, then I get very discouraged. I feel that they’re not excited enough and passionate enough about the prospective job, so that person might not get hired. The other thing we’ve learned to use is an online candidate assessment tool called skillsurvey.com. Job prospects are directed to the site and fill in a form. The system checks references and I believe it provides more accurate information about the skills and qualifications of the job prospect than you could ever get on the phone.
RL: In terms of motivating and retaining employees, I would imagine that at the beginning you weren’t paying market rate. How did that work?
LT: Now we are paying market rate. For years I couldn’t pay it. Instead, we gave them exciting work to do, freedom, and power to make big decisions, choices and mistakes. Today, what I found helps the most is controlling my temper. That’s probably my worst thing — controlling my disappointment or frustration and trying to prevent myself from expressing it in a negative way. It’s very hard to do as a manager.
RL: Tell us about the sale.
LT: Okay, so here’s how it worked. We got approached last year by a couple of companies in our space who would be very likely buyers. We’d never been approached before, so we took it very seriously when more than one said they were interested in buying us. At that point, we hired a boutique investment bank because I wanted to do this the right way. I didn’t want to field inquiries by myself or make decisions when I really didn’t have all of the information I needed. The banker’s objective was to get the best price. They put together a book and they put together an auction, because once you have a couple of inquiries, you have no idea who else might be interested in your company. The banker sent the book to companies that could be potential buyers. We got some offers, but none of the prices were good. So I said, “Okay, that was fun, let’s move on.” And that was at the end of last year. We just said, “Okay, forget it!” No one wanted to come anywhere near the price that I felt the company was worth.
Then, in March of this year, Jupitermedia came out of the blue and said, “Hey, we’d like to talk to you.” They went through my lawyer, not through the banker, because they knew my lawyer, they had a relationship with him. My lawyer introduced us in March and the discussions went very quickly because mediabistro.com’s numbers were getting better and better. They didn’t see any problem with the price I wanted and made an offer that was close to that. We haggled and we came to this ultimate price of $23 million, $20 million of which is cash, and $3 million is an earnout over two years. The deal took about three months to close.
RL: Why do you think the offers weren’t good on the front end?
LT: The main reason was that a lot of those companies saw us as a job board. They didn’t see us as a fullfledged community Web site and all they gave a damn about, no matter what they told me, was job board, job board, job board. The job board represents only half of our revenues. We make a lot of money off other things and they just didn’t want to pay me for the other things.
RL: Now that you are a wealthy individual, has your life changed much?
LT: No, I still take the subway. Maybe I’m eating out a little more often. The one thing I’m going to spend the money on is a gigantic loft apartment so I can have all my journalist friends over for dinner.