Some publishers are actually making investments in such businesses, but the challenge seems to be not only finding that diamond in the rough, but having a culture which can support the process.
Delegates attending the Digital Innovators' Summit in Berlin this week were given a pretty stark warning from Brian Garrett, managing director of CrossCut Ventures and co-founder, president and chief operating officer of StyleSaint, who estimated "85-90 per cent" of those in the room would "fail miserably if you try to do incubators or strategic investments".
"I think unfortunately there’s something cultural in old school publishing businesses – that may be public and have shareholder responsibilities to drive profits – that is not conducive to lean start-up mentality," Garrett said.There’s something cultural in old school publishing businesses ... that is not conducive to lean start-up mentalityBrian Garrett, CrossCut Ventures and StyleSaint
There is value in publishers trying to bring the start-up "culture and mentality" inside their business, he said, and that "publishers are critical" from a strategic perspective for start-ups, both in terms of their experience in "storytelling" and existing "reach and distribution". But he questioned at what stage in a start-up's journey this sort of connection should begin.
Publishers making the investment
Despite this, there are examples of publishers who are finding investment in start-ups to be a valuable experience, with a spotlight on the benefits beyond the finances.
Dennis Publishing, for example, operates Dennis Enterprise, which takes out "minority investments" in start-ups of interest.
Chief executive James Tye stressed that the point of this style of investment is "not just about making money", but also "about what it brings to your business", such as driving innovation and an "entrepreneurial culture", as well as in providing certain "business stability" in the process.It won’t change your life. But it's definitely worth giving a goJames Tye, Dennis Publishing
He admitted that unless publishers invest in what turns out to be the next big thing, "it won’t change your life". "But it's definitely worth giving a go", he added.
Another example can be found at European media company Sanoma, which – in addition to running an 'innovation lab' – invests in start-ups through its Sanoma Ventures outfit as part of its efforts to find "viable options for the future", Herman Kienhuis, investment director at Sanoma Ventures, explained at the conference. This is in addition to existing work across traditional and online media.
"Big organisations can’t move as fast as technology can," Kienhuis explained. "Start-ups can."
"We don’t know what the future will bring so you have to experiment a lot".Big organisations can’t move as fast as technology can. Start-ups canHerman Kienhuis, Sanoma Ventures
As a publisher, he argued that they have much to offer the start-ups they invest in, such as its established brands, its "media reach" and "large network of corporate clients".
When asked whether having publishers involved as early-stage investors in start-ups can impact on interest from others later on, Kienhuis said that Sanoma does not "get special treatment that prohibits exit to another buyer".
And, Tye added, the publisher can always "exit, take the cash and reinvest in the business" further down the line, if necessary.
But, he again stressed, the bigger reason for this activity is "the cultural business".
"We are in the talent business and this brings new talent all the time."
Together, Tye and Kienhuis shared a number of practical tips for other publishers considering a slice of the start-up investment pie:
- Be able to move fast. "Entrepreneurs won't wait", Kienhuis warned.
- Be patient as you may "have to wait a long time to see results", he said.
- Be able to relinquish control – something stressed by both Kienhuis and Tye. Publishers, particularly the executives, "have to step back a bit", which can be harder than it may sound, Tye added.
- Create an environment where it is okay to fail, as long as you take lessons from it. According to Kienhuis, "failing once or twice increases your chance of success".
- Immerse yourself "in start-up community" and "pick the right team" Tye said, explaining how Dennis Enterprise took on a non-executive from the start-up world to drive those connections.
- Select "good partners", Tye said, and be sure that those you choose to work with "share the vision" of the publisher.
- Understand the "measures of success", Tye said, explaining that publishers should not apply the same expectations of a start-up, that they might of an established outlet.
And, at the very least, Kienhuis advised publishers to engage with start-ups, even if no investment is involved.
"Connect with start-ups, maybe not invest if you’re not sure, but connect and give back".