The New York Times plans to buy The Athletic for $550M

The New York Times Company agreed to purchase sports media outlet The Athletic in a deal valued at $550 million, The Information reports.

This deal comes after months of speculation — at one point, The Athletic CEO Alex Mather approached Axios about a merger, which did not come to fruition. With this deal, the company seeks to bolster its subscription business — The New York Times surpassed 8 million subscriptions last year and is on track to surpass its goal to grow to 10 million subscribers by 2025.

Founded in 2016, The Athletic had 1.2 million subscribers as of November, who pay about $72 per year. But on its own, The Athletic isn’t yet profitable, and didn’t plan to be until 2023 — it employs 600 staff and spent almost $100 million between 2019 and 2020, though it only brought in around $73 in the same time period.

The New York Times’ acquisition of The Athletic is consistent with recent trends in media, where many outlets are consolidation. Recently, BuzzFeed acquired Complex and HuffPost before going public, for example. But media workers are skeptical of these changing tides — after BuzzFeed acquired HuffPost, for example, it laid off 47 of 190 HuffPost employees and closed the entire HuffPost Canada arm, impacting 23 more employees. At the onset of the pandemic, both The New York Times and The Athletic laid off employees as well, as did many media companies.

More media workers are seeking out union agreements to protect them from sudden layoffs and paycuts, which were a constant threat in the industry even before the onset of the pandemic. Some journalists have taken an even more radical approach — in late 2019, Deadspin’s entire staff quit the site due to frustrations with management and started Defector, a worker-owned media company. In its first year, Defector earned $3.2 million in revenue, which accounted for its $3 million in operating expenses.

In a much smaller deal than its acquisition of The Athletic, The New York Times purchased Wirecutter, a product reviews site, for $30 million in 2016. But there has been significant tension between Wirecutter and its parent company in recent months — after two years of slow-paced union contract negotiations, Wirecutter staff went on strike for five consecutive days, including Black Friday and Cyber Monday, after management failed to reach an agreement with them before Thanksgiving. Then, the Wirecutter Union filed an unfair labor practices complaint with the National Labor Relations Board after The New York Times withheld their pay while on strike. By December 14, the union, represented by The NewsGuild of New York, reached a deal with the New York Times, ensuring increased pay and improved working conditions. But the New York Times is still facing scrutiny for anti-union behavior.

Hey @TheAthletic, we’d love you to meet our friend @nyguild,” the Wirecutter Union tweeted after the news broke.

There’s no word yet on how subscriptions to The Athletic will change, or how staff at the publication will be impacted by the acquisition.

The Athletic’s numbers look fine actually?

The Information broke some neat news earlier this week about The Athletic, the subscription sports media website that has raised lots of money and, per the report, spent lots of it.

While we have all become inured to a degree regarding losses at quickly growing, venture-backed companies, seeing a media business lose software-style money was eyebrowraising. However, after a quick scan of the numbers, I have to wonder a bit. It kinda looks like The Athletic is doing fine?

Per Jessica Toonkel’s reporting, The Athletic burned $54 million in cash in 2019 against revenues of $26 million. That’s a lot of burn, right! Maybe? It depends whether the site was hiring lots of staff, building out its product, and setting the groundwork for future revenue growth.

So, did the spend work out? Seems like it: The Athletic racked up $47 million in revenues and burned $41 million worth of cash in 2020, according to The Information, despite the pandemic kicking sports in the shins that year.

With thousands of subscribers, The Juggernaut raises $2 million for a South Asian-focused news outlet

As paid newsletters grow in popularity, Snigdha Sur, the founder of South Asian-focused media company The Juggernaut, has no qualms about avoiding the approach entirely. In October 2017, Sur started The Juggernaut as a free newsletter, called InkMango. As she searched for news on the South Asian diaspora, she found that articles lacked original reporting, aggregation was becoming repetitive and mainstream news organizations weren’t answering big questions.

Then InkMango crossed 700 free readers, and Sur saw an opportunity for a full-bodied media company, not just a newsletter.

One year and a Y Combinator graduation later, The Juggernaut has worked with more than 100 contributors (both journalists and illustrators) to provide analysis on South Asian news. Recent headlines on The Juggernaut include: The Evolution of Padma Lakshmi; How Ancestry Test Results Became Browner; and How the Death of a Bollywood Actor Became a Political Proxy War. The network approach, instead of a single newesletter approach,aggreff is working so far: Sur says that The Juggernaut has garnered “thousands of subscribers.” During COVID-19, The Juggernaut’s net subscribers have grown 20% to 30% month over month, she said.

On the heels of this growth, The Juggernaut announced today that it has raised a $2 million seed round led by Precursor Ventures to hire editors and a full-time growth engineer, and expand new editorial projects. Other investors in the round include Unpopular Ventures, Backstage Capital, New Media Ventures and Old Town Media. Angels include former Andreessen Horowitz general partner Balaji Srinivasan; co-founder of Kabam, Holly Liu; and co-founder of sports-focused publication The Athletic, Adam Hansmann.

Currently, The Juggernaut charges $3.99 a month for an annual subscription, $9.99 a month for a monthly subscription and $249.99 for a lifetime subscription to the news outlet. It also offers a seven-day free trial (with a conversation rate to paid at over 80%) and has a free newsletter, which Sur says will remain free to bring in top-of-the-funnel customers.

The Juggernaut is part of a growing number of media companies trying to directly monetize off of subscriptions instead of advertisements, such as The Information, The Athletic, and even our very own Extra Crunch. If successful, the hope is that paid subscriptions will prove more sustainable and lucrative than advertising, which still dominates in media.

But Sur is purposely pacing herself when it comes to expenses in the early days. The team currently has only three full-time staff, including Sur, culture editor Imaan Sheikh and one full-time writer, Michaela Stone Cross.

Snigdha Sur, the founder of The Juggernaut.

“Sometimes at media companies people over-hire and over-promise, and then don’t deliver on the profitability or return,” she said. For this reason, The Juggernaut largely works with “freelancers who would probably never join any specific publication,” Sur said. While The Juggernaut hopes to have full-time staff writers eventually, the contributor approach helps temper spending.

Beyond pace, The Juggernaut is looking to build up its subscriber base by writing stories that require deep, creative thinking. The publication intentionally does not cover commoditized breaking news, which could have the potential to bring in more inbound traffic, or anything that doesn’t have a South Asian connection.

Sur is living the stories that she is working to tell. Born in Chhattisgarh, India, she grew up in the Bronx and Queens in New York City, and spent time living and working in Mumbai, India. Since founding The Juggernaut, her goal for the publication has been to be a place for not just South Asians, but for “anyone who has a form of curiosity and appreciation” for South Asian culture.

“We try not to translate words we don’t have to do, we’re not trying to dumb this down, we’re not trying to write for the white teen,” she said. “We’re trying to write for the smart, curious person. And we’re going to assume you know stuff.”

Precursor Ventures just raised a second fund to zero in on pre-seed-stage startups

Precursor Ventures, a 3.5-year-old, seed-stage investment firm in San Francisco, just closed its second fund with $31 million in capital commitments, roughly double what it raised for its debut effort in 2017.

Somewhat amazingly, it has 75 portfolio companies to show from that first fund, and many more that it has been quietly funding with the second. Not only does it show how far smaller pools of capital can go, but Precursor is run by a single general partner, longtime VC Charles Hudson, formerly of Uncork Capital. He has help from senior associate Sydney Thomson and, more newly, an analyst, Ayanna Kerrison, but it’s still lot to manage.

How does he do it, and how can he identify breakout companies when he’s moving as quickly as he does? We talked with him earlier today to get an update on the firm, which is focused in part on funding women and other underserved minorities but is more broadly seeking out burgeoning marketplaces and people “who have fundamental insights that are likely to be true for five to seven years,” no matter whether or not they have founded a company previously, says Hudson.

More from our chat below.

TC: Like a lot of fund managers, the money for your first fund came mostly from family offices. This time, you say it’s more institutional money. But isn’t it challenging for big institutional investors to write smaller checks for a fund of Precursor’s size?

CH: It is still hard. We definitely have a more concentrated [investor] base. But I think people who last time around didn’t necessarily believe in pre-seed deals, who thought that it felt like adverse selection and involved too many companies and too little ownership, have changed their thinking. Now, most realize that seed investing is a continuum, as [fellow investor] Hunter Walk likes to say. They see the value of being the first money into a startup.

TC: For your first fund, you were writing initial checks of $150,000, then raising special purpose vehicles to support some of your breakout companies. Were you using AngelList syndicates to do this? 

CH: Yes, we write a small check and if we’re fortunate, we get pro rata allocation and we’ll use SPVs, some on AngelList, some [not involving AngelList]. We did 14 SPVs altogether for fund one and they’ve been a great way for us to maintain relationships with companies beyond even their Series A round.

TC: You’re often funding people who’ve never started a company before. From where is your deal flow coming?

CH: We were the first investor in the [subscription-based sports website] The Athletic because I was introduced to the founders through a founder who I knew from Uncork. Juniper Square [which makes investment management software] I met through AngelList folks and some other people who I know. Carrot Fertility [which enables employers to offer fertility benefits] I think I met through [Evernote founder turned investor] Phil Libin.

We also have almost 300 founders in our portfolio across companies we’ve backed, and they do a tremendous job of referring people. And we try to be a good partner to seed-stage firms so that when they see startups that [are too early for them] they’ll send the founders our way.

There’s a small sliver of entrepreneurs who can walk into an Uncork or Freestyle or First Round with little more than an idea and raise money. Those people totally exist. It’s a small fraction of the population, though.  I think the majority of founders we meet are coming out of another company or experience, they aren’t super famous yet, but they’re totally qualified and have a good idea and need $500 million to $1 million to make enough progress for the bigger seed funds to pay attention, and someone has to fill the gap.

TC: You aren’t the only fund backing these types of startups. In fact, most of your deals are co-investments. But you’re maybe better known in this world. Does that help in terms of securing a meaningful ownership stake? Do you have a specific target when you’re writing a check?

CH: My view is that you want enough ownership that the model works. We could probably be more punitive if we wanted — the air is pretty thin in pre-seed — but with a $30 million fund, ownership of 5 percent is plenty. We’re sensitive to the dynamics of seed funding, wherein seed investors want [a bigger ownership percentage]; if we’re taking 10 percent and they’re taking another 25 percent, that’s already well above the ownership level that a founder should [be left with].

TC: What was the math that you pitched to your investors?

CH:  Basically, I didn’t want us to be a fund where we need multibillion-dollar outcomes. Getting to a billion-dollar valuation is a big accomplishment. I think we’ve gotten numb to it, but it’s still a really hard thing to do. If you get [at an exit at that level], it should return your fund, or multiples of it. For us, though, if we have a company that sells for $500 million and we own 3 percent of it, we’re fine.

Our enemy is dilution. If our 5 percent stake ends up being where we exit, or it goes to 3 percent, we’re okay. If it goes to 1 percent, it’s unlikely that that exit is going to be material. [Working in our favor], we like capital efficient businesses [versus] the companies getting written up for raising large amounts of money [and often diluting earlier investors in the process].

TC: At the outset of Precursor, you’d said that backing women and minorities was going to be among your priorities. How would you score the firm on this front so far?

CH: We’ve made a lot of investments already and we’re doing better on gender dynamics than in fund one. Across the entire population of our second fund, 56 percent of portfolio companies have a female founder on the team and 51 percent of the CEOs are female. As for people of color, 17 percent our founders are either black or Latinx and if you add Asian founders into the mix, that percentage goes way higher.

TC: Do you feel like progress is being made, in terms of underserved populations being better able to access capital?

CH: I’m probably more concerned than I’ve ever been. I think that increased awareness about the issues that particularly black women face has not translated into them receiving more money. In talking with black female founders, I don’t get the feeling that their experience is improving, even while there are more of them, and they are stronger founders with more traction than we saw before.

TC: What are you looking for, exactly, in a founding team?

CH: I don’t care that much about traction. That’s not an important input in our model. Most companies are between five and 12 months away from a public launch, where their product can be evaluated and assessed. So the founders’ insights have to be sufficiently durable that their ideas will be true in a year and where a million dollars can get them from a lack of evidence to an indication that they’re on to something.

TC: Are you funding people who come out of industry and so know what their industries’ pain points are?

CH: Sometimes, or sometimes they’ve encountered a problem in their life that needs to be solved and is adjacent to the work they do.

TC: And how do you keep tabs on all of these companies?

CH: We probably spend the most amount of time internally on our own systems and processes that we use to keep track of portfolio companies, though at this stage, there’s no substitute for spending time with them, so half of my day each day is spent with companies that we’ve already backed.

TC: Do they also give you monthly or quarterly updates?

CH: We work out a cadence, whether it’s monthly meetings in person or over video or via something written. We don’t prescribe the form, but we say, ‘It’s worthwhile for you to report once a month so, so you can get our input.’

I find the founders who share the most information get more value out of us. Some don’t, though, and there’s only so much we’re going to impose on them.

TC: What about conflicts of interest? Given how nascent these startups are and how fast you are writing checks, are you dealing with startups that potentially compete with one another?

CH: We say no to a lot of interesting opportunities because I don’t [want to be in that position].

The tactics behind The Athletic’s breakout success in sports subscriptions

Local newspapers may be shuttering and people may be consuming most news on social media, but don’t tell Alex Mather that a subscription news publication can’t grow like a unicorn startup. His 2-year-old sports publisher The Athletic has gained over 100,000 paid subscribers (60% under age 34) and has a 90% retention rate.

Having already raised $30 million in its short life, the company announced a new $40 million Series C yesterday, led by Founders Fund and Bedrock Capital. It reportedly values The Athletic around $200 million.

I interviewed Alex Mather (The Athletic’s CEO) and Eric Stomberg (Partner at Bedrock Capital) to understand what’s behind the breakout success and why they think this publishing startup can scale to become a multi-billion dollar company.

EP: Bedrock makes concentrated, contrarian bets. Explain how The Athletic fits that.

ES: I first met Alex and Adam in 2016 during Y Combinator. The popular view then, as it remains now, was that people just aren’t willing to pay for content online and that to win in media you have to put out a high volume of free articles on social.

The Athletic took the opposite approach. It’s a narrative violation. Everything is part of a paid subscription, with the belief that instead of writers needing to post 3-4 pieces per day, they should focus on deeper stories that add value to paid subscribers over time. That worldview resonated with us. If you can create content at scale that people are willing to pay for, that’s a powerful economic engine.

There’s so much sports coverage already out there, by professionals and amateurs alike, so why are people willing to pay for The Athletic?

AM: While there appears to be an abundance of content, most of it is aggregated, shallow content for a broad audience. We produce fewer stories and target a diehard fan. Our subscribers consistently tell us that no one else produces the same depth on a daily basis.

How did you determine the $60/year price point?

AM: We think of $60/year ($5/month) as less than the average NBA ticket. It’s a meaningful price but not prohibitive, especially when we do discounts in the first year. Like all subscription companies, whether we like it or not, we have to consider how our pricing stacks up against Netflix. For $10/month, you can subscribe to Netflix which is spending $8 billion per year in content.

Is The Athletic profitable?

AM: We expand by launching in local markets. We are in 47 thus far. The operational focus is on building a local team and becoming profitable in each local market. I can tell you that most markets are profitable in the first year–currently all of our markets over one year old are profitable and most of those over 6 months old are profitable.

(Photo by Thearon W. Henderson/Getty Images)

Explain your growth strategy in terms of coverage: which sports did you start with and at which level (local vs national)?

AM: Direct-to-consumer businesses have to work really to earn their subscribers’ hard-earned money. We have to obsess over where we can be different. In the beginning, that was with hockey and baseball, because those have been de-prioritized by the bigger players. That shifted as we gained more subscribers: we needed to become comprehensive. We hired folks to cover the NBA, to cover the NFL, to cover soccer.

Do subscribers usually come just for one local sport or for the broader bundle?

AM: We’ve built a powerful bundle. A local newspaper has local politics, local restaurants, and then local sports. We have just the sports, but add a national perspective and a nationwide bundle. Most of our subscribers are “super bundlers,” meaning they subscribe to content from multiple cities plus at least one national product and usually a college product that’s not local. We provide all that for significantly less than competitors.

Eric — as a VC looking for multi-billion dollar exits, how are you analyzing the potential scale of a subscription publication like this? Even most people who are bullish on subscriptions believe it’s a choice of going for a niche audience and staying small.

ES: There are two things we look for in a subscription business: retention and a positive flywheel.

Retention. In any subscription business, the key question is: can they maintain their subscribers over time? Most of them don’t. Spotify does, Netflix does, and The Athletic does as well. The Athletic is off the charts, which sets it up for scale. You want to see deep engagement over a very, very long period of time — years.

A positive flywheel. The more you build your subscriber base, the more you build your revenue base. That allows you to get better content, to hire unique writers, to build greater depth. In doing so, you attract people who weren’t ready to subscribe in the early days but now you have writers they follow and content they want. Technology is important here too: as you build a bigger platform with more content, serving the right content at the right time to each user is a key advantage. When this flywheel is working it’s actually quite hard to put a ceiling on the business.

Most publishers did a so-called “pivot to video” over the last couple of years. You’re anchored in writing. Why not more video at the start?

AM: We’re obsessed with the consumer and all our research in the beginning said that people still like to read books and articles. Advertising with text may not be as good as with video, which may be why so many other companies “pivoted to video,” but we think the written word is still the best way to convey certain types of stories. It’s straightforward, it doesn’t require headphones.

There’s an incredible amount of talent out there that can produce these stories and that has been cast aside by many entities. We saw it as an opportunity to give them great jobs and bring value to our subscribers. That has paid off for us.


What are your plans for video or other content formats in the future?

AM: We raised this Series C with audio and video in mind. We can tell even more stories when we add in audio and video possibilities. Our goal is to serve the subscriber: some love to read, some love to listen, others prefer to watch. We look up to things like The Ringer, Andre the Giant on HBO, VICE News, Gimlet, and The Daily by the New York Times all as incredible storytelling, and we ask ourselves “how can we do sports versions of those?”.

Why focus on hiring experienced, full-time writers rather than a stable of contributors or curating from the vast pool of content by fans? Lots of amateurs pay close attention to sports.

AM: What’s really important to us is a growth mentality — that by Day 100 on our team a writer is thinking very differently. We’re providing lots of data, lots of feedback. We invest in great people who will figure this out with us over time. Also, scaling so quickly from 0 to 300 editorial staff was possible because we recruited experienced talent who know what to do already.

We do have about 400 contributors as well. These are folks who may be lawyers or accountants but are passionate about the teams they cover. We are a way for them to reach a premium audience. We can pay them really well and give them world-class editors formerly with Sports Illustrated and ESPN.

How are you acquiring your subscribers?

AM: When we expand into a new market, we gain new subscribers by hiring writers who have a following already and by word of mouth from existing subscribers. Then like any direct-to-consumer brand, we are acquiring subscribers through Google, Facebook, and Twitter.

You financially incentivize your writers based on them acquiring new subscribers through their articles or by promoting The Athletic with their followers online. That is very uncommon in publishing. Explain that strategy.

It ties back to our focus on building for the long term and investing in talent that will grow with us. We like to assign incentives that give us the best chance of building a sustainable business and we think about compensation in that way. We give our team equity in the company and for many, we tie a portion of their comp to the performance of their team, sport, city. It’s a great way to share in the responsibility and success of the business.

At the bottom of articles, you ask readers to rate each story as “Meh”, “Solid”, or “Awesome”. I wish every publisher did this. How do you use this data? How do a writer’s scores impact them?

AM: It’s about feedback loops. Our writers gauge feedback when they share on Twitter. This is another data point. It helps paint a more complete picture. NPS alone isn’t enough of course though. We look at whether articles drive new subscribers, drive deep engagement, drive comments, etc. We don’t use pageviews, but we certainly use metrics. Usually, this results in a writer producing very different work on Day 100 than they were on Day 0.

Explain the interaction between subscribers. It’s not unique to have a comments section: there are bad comments sections, good comments sections, and comments sections that go unused. At a tactical level, how do you think about building community?

My co-founder and I met at Strava, the social network for endurance athletes. I ran the product team and we were obsessed with community. We see an incredible connection between community engagement and subscriber retention. The question that drives us is how can we connect users in an authentic way, how can we connect users to our staff in an authentic way, how can we connect users to athletes in an authentic way. We’re doing a lot of experimentation here. We have a distinct opportunity because of our paywall: most of the comments on The Athletic are saying substantive things.