by lalorek on April 4, 2011

At Juan Pelota’s coffeehouse in downtown Austin, John Thornton, 45, a successful venture capitalist and general partner of Austin Ventures, met with me in late February to discuss how he co-founded The Texas Tribune in 2009.
In an hour long interview, Thornton, who lives near the coffeehouse, seemed relaxed and contemplative as he discussed the nonprofit organization’s successes and setbacks.
Already in its first year, the Texas Tribune has won two Edward R. Murrow Awards from the Radio Television Digital News Association and an Online News Association award for general excellence. Texas Tribune reporters and editors consistently produce some of the best political news coverage in Texas. But the venture has not been easy or cheap.
Where did you get the idea to start a statewide, nonprofit, non-partisan online news organization focused on politics?
“At the beginning of probably ‘06 we were looking at opportunities in news related businesses, everything from sort of distressed newspaper assets to online stuff and I just had a kind of “aha moment” somewhere in that process that we were talking a lot about these as businesses but we weren’t talking really any about journalism,” Thornton said. “And that the commercial viability of what I call public service journalism just seemed like it was ever more imperiled. It didn’t really have anything to do with making money. And in fact, the imperative to be profitable really stood in the way of doing some of the public service journalism that I felt like had been done many years ago.”
So Thornton began to think about journalism as a public good, just like clean water, clean air and national defense are public goods, he said. But journalism is a public good, that unlike most public goods, the government cannot provide, NPR and PBS notwithstanding, he said.
“And so I just began to sort of noodle on the idea that maybe my philanthropic efforts should be directed on this for a while,” Thornton said.
For a few years, Thornton talked to everyone he could inside journalism and business circles to get feedback on his idea. He wanted to make sure he wasn’t “crazy.” He received a lot of positive reaction to his idea.
Thornton, who now serves as chairman of the Texas Tribune, has never been a journalist but he’s always admired the profession.
“I was just too greedy to go that route,” he said.
For awhile, Thornton looked at investing in existing newspapers, but decided they weren’t profitable enough.
“As businesses, I’m a fan of being as profitable as you can that is just really difficult to do with public service journalism,” he said.
Thornton and his wife, Julie, invested $1 million of their money to startup the Texas Tribune. He hired Texas Monthly editor Evan Smith to head up the news operation. He had no expectation of a return on his investment. Instead, he saw the donation as philanthropy “just like giving money to the ballet or the children’s hospital.” Thornton is a former board member of Ballet Austin, the Austin Museum of Art, and the Harry Ransom Center at the University of Texas. He was also a founding board member of the Entrepreneur’s Foundation.
“It’s a little different in the sense that I think about it in the same way as I think about a seed investment in a for profit company,” Thornton said. “The major gifts like mine capitalize the entity to subsist until it can get to a business model where it doesn’t require people like me to write big checks.”
That’s the plan for The Texas Tribune. The business model consists of a third of the nonprofit’s revenue coming from corporate sponsorships, one third from its members and the one third from specialty publications. Already, The Texas Tribune has more than 2,000 members who’ve contributed between $25 and $5,000. College students can join for $25 and other memberships start at $50. The average gift is around $98. It also has dozens of corporate sponsors for its site and its events series, TribLive. The sponsorships for the event series cost around $25,000, Thornton said. And Thornton wants to dramatically grow The Texas Tribune’s specialty publications. It publishes a newsletter called the Texas Weekly. Ross Ramsey, the Texas Tribune’s managing editor, created the publication for Austin political insiders. Subscriptions cost $250 a year. The Texas Tribune continues to raise funds from wealthy individuals and foundations, but the goal is to create a revenue stream that covers its expenses.
The Texas Tribune now has a staff of more than 20 people. But the most important member was the first hire, Evan Smith, Thornton said.
“Certainly I would not have done this if Evan hadn’t agreed,” Thornton said. “It’s certainly hard enough with him. Without him, it just wouldn’t be worth doing.”
Thornton calls Smith a risk taker and “one of the most public service minded guys I know.” The Texas Tribune hit on all of the things that are important to him, Thornton said.
“He certainly could be making more money somewhere else,” Thornton said. “He could have a big high profile job in the magazine world I have no doubt.”
Smith earns the same salary he earned as president and executive editor at Texas Monthly. But he has agreed to defer 10 percent of his salary for the first two years.
To build the staff, Smith and Thornton hired experienced journalists. They also paid them comparable to what they earned at their last jobs. Payroll takes up the biggest chunk of the news operations budget.
“I would love to be paying people less,” Thornton said. “But Evan just felt strongly that you kind of get what you pay for. So I have followed his lead. We’re constantly fighting about expenses. He’s trying to build a great product. I’m trying to make sure the thing is viable. It’s a tension that is not unexpected. It’s always there.”
Texas Tribune has only lost two of its staffers since it started operations. Elise Hu recently left to go to National Public Radio and another staffer moved to join his girlfriend in St. Louis.
“I feel like if we do our job well, that’s going to happen a lot,” Thornton said. “If we became known as a launching pad for journalistic super nova careers that would be great.”
Since launching the venture, Thornton says his biggest disappointment has been his inability to attract much national foundation interest.
“With the exception of the Knight Foundation, most of the large foundations are trying to figure out if this is mission appropriate for them and they’ve got a lot of other competing demands” Thornton said. “They always do.”
The Texas Tribune received a $500,000 grant from the Houston Endowment and $250,000 grant from the John S. and James L. Knight Foundation. On March 11, the Knight Foundation gave the Texas Tribune and The Bay Citizen a $975,000 grant to share to build an open source publishing platform to help other news startups.
“The timing was not terrific,” Thornton said. “A lot of the foundations were taking big hits. I would have thought we would have gotten more of the Fords, the Pews and Rockefellers to follow the Knight Foundation and that just hasn’t materialized.”
As a result, the Texas Tribune has focused on generating more revenue from corporate sponsorships and specialty publications.
And Smith now spends half his time on fundraising. He recently hired Mark Miller, senior editorial executive at Newsweek, to take control of day to day editorial so he could focus on fundraising, Thornton said.
“He recognized that’s something he needed to do,” Thornton said. “Whether it’s corporate sponsors or wealthy individuals, he’s the guy people want to see.”
In the first two years, the Texas Tribune expected to raise $3 million.
“To date, we’ve raised $7 million and we have about $1.5 million in the bank,” Thornton said. “We were eerily on plan for 2010.”
“My original model had us breaking even in year three,” Thornton said. “I don’t know if that’s going to happen or not. That’s just something that is partly a function that this thing has been more expensive than we anticipated – considerably more expensive – 50 percent more expensive. So it may take a little longer.”
Where did the extra expenses come in?
“It’s a little bit of everything,” Thornton said. “It’s a big state and there’s a lot to cover. Evan is a quality freak. There are never enough resources to satisfy his craving to do the job well. He usually just kind of wears me down.”
Still, Thornton would do it all over again.
“I’m so proud of what that team has accomplished in a relatively short period of time,” Thornton said.
Last month, the Texas Tribune had 300,000 unique users. It is running at more than 100,000 unique page views a day.
“All of those are so widely ahead of where we expected to be,” he said. “There’s just never enough money. I may have underestimated how much that weighs on you. It’s just like any other business, there’s never enough money…We didn’t get there exactly the way we planned, but you never do in a startup.”
Thornton is most proud of the Texas Tribune’s data as journalism projects. Staffers have turned databases into compelling stories.
In the area of innovation, the Texas Tribune plans to monetize its mobile apps platform, Thornton said. It’s also incorporating gaming into its site with the trivia game Qrank.
“Qrank will be to the Tribune what the crossword puzzle was to newspapers back in the day,” Thornton said.
The Texas Tribune also collaborates with other news organizations. It recently partnered with the New York Times to produce news for its Texas edition. The revenue stream is not huge, but the exposure has been great. The Texas Tribune has also done projects with newspapers in Houston, San Antonio, El Paso and projects with Newsweek and Austin’s public radio station KUT.
Thornton didn’t test the Texas Tribune idea before launch. But he and Smith did talk with other nonprofit startups like ProPublica.org, California Watch and Voice of San Diego.
“We certainly have not been shy in asking for advice,” he said.
Thornton doesn’t view other news organizations as competition but as collaborators. The Texas Tribune allows other news organizations to run its content for free.
“At the outset, I’m not sure whether some news organizations thought we were friend or foe,” Thornton said. “There’s always friendly competition. But for the most part, I think that’s dissipated. We want to produce a great product. But what we really want to do is assist the people of Texas to make informed decisions in their civic lives.”
In the original plan, the Texas Tribune thought newspapers would pay a small amount for content, Thornton said. But it became evident the newspapers were so resource challenged that wasn’t going to happen, he said.
“It’s not the way I would recommend you start a company,” Thornton said. “That was probably the biggest risk we took that we would throw a party and no one would show up. It’s nice to throw a party and they call the cops. We had more than 1,000 members before we launched.”
Thornton’s advice to other news startups is start with a wealthy donor, hire great talent and raise as much money as possible.
“You’ve got to ask for money,” Thornton said. “The problem with a lot of journalists is they have never been put in that position.”
Knowing what he knows now he would do it all over again.
The Texas Tribune has been “one of the great joys of my life,” Thornton said.


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