Venture capital (VC) money for blogs?  What is your's worth?

Venture capital (VC) money for blogs? What is your's worth?

So reading recently of individuals looking to either sell or purchase blogs got me thinking about is there an investment opportunity in the blogosphere?  If there is an opportunity for venture capital (VC) to invest in blogs and help them grow?  If so, what is the return on investment (ROI) and what is the exit?  How could you evaluate potential investments?  Let’s talk about this.

ROI and getting out

So the first question a venture capitalist (VC) will ask is what is my return, and how do I get paid?  Given that it seems difficult to know which blogs or bloggers will be runaway hits from the beginning, I would think that the returns would have to be fairly large to entice venture capital money.  The odds of the homerun investment would likely cause the terms of any investment to be somewhat draconian.  With the exception of some fairly large and well known blogs that were able to get buy-out offers (such as Get Rich Slowly) most of the blogs would probably be cash flow properties at best and simple failures otherwise.  Even the cash flow sites would be of varying quality and income.  So this seems to be the way a VC would get their money out.  Given the limited returns and fewer buy-out opportunities, a true VC likely wouldn’t be interested, and certainly not in individual blogs, as there simply isn’t enough opportunity for investment on a dollar basis.  So any investment would need to be along the lines of an angle investor, a partnership or cash flow investor.

Are you burning money or printing money by investing in a blog?

Are you burning money or printing money by investing in a blog?

Evaluation of potential investments

So how would you evaluate what makes a good blog investment and what doesn’t?    Is there a page view or visitor growth rate or other metrics that could tell you how a site was performing and what type of income it could produce?  What about search ranks on certain terms or Alexa rankings?  Given the differences in monetizing opportunities vary by the type of blog, some page views for a credit card blog, would probably return more than the same number on a video game blog.  So the evaluation seems difficult, but there are a bunch of metrics and data available, and with enough history for both successful and unsuccessful blogs, trends and rules of thumb could likely be developed.

So how and what would you be funding with an investment in a blog or blogger?

Many VCs like to see tiered investments, only releasing funding as certain milestones are met.  For example, one you have 1,000 unique visitors a day for a week, we’ll release the next $10,000.  Given the metrics we mentioned above, tiered investments seem fairly easy to put together, and would allow milestones and progress to dictate funding releases.  But what exactly would you as the investor be funding, and what are the terms?  There are a number of potential funding methodologies that could take place, including:

  • Essentially a pay-by-article method, where a blogger receives payment based on their article productivity.  However, this content creation could also be outsourced like the niche websites that have popped up everywhere.
  • A link building and\or networking plan where the blogger and investor try to gain other advertising, products, or sponsorship.
  • Multiple sites could be funded, run by a single blogger working full time.  In this case a straight salary may work best, but is related to the by-article method above.  This could also involve outsourced content creation.

If you do invest or partner, then you have a different set of issues.  As a venture capitalist, how do you exert board-level control?  As a partner, what is the best ways to enforce the agreements, and who owns what?  There should obviously be a central entity that owns all the content created as well as the brand and technical databases, with financing equal to in-kind contributions valued on an hourly or project basis.

Options for existing blogs with traffic and income?

Options for existing blogs with traffic and income?

Need something bigger?

The above works fairly well as a framework for creating a new blog and investing at the startup stage, but there are also options for existing blogs.  If an existing blog is seeking funding or a sale, what are the best ways to re-monetize it or increase the income level?  If it is an older blog, perhaps revisiting the content and rewriting it with an eye toward SEO, updating the adsense properties, or adding a new private advertisement  on more popular pages.  Any of these could increase the income of a blog.  If the blog hasn’t been updated in a while, adding new content and getting the search engines to re-index could go a long way.

If a single website or author doesn’t provide the total return that an investor is looking for, then greater plans are needed.  You could either visit or setup a marketplace where buyers and sellers come together and do more volume, or you can join or create a blog network such that each blog would become more popular and valuable.

Readers, what would you value your blog at?  How did you come to that number?  Would you sell it now or are you hoping to grow it?  Looking to buy or have bought, what are you experiences?

About Karl

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35 Responses to Venture capital investments for blogs

  1. WorkSaveLive says:

    I’ve seen a couple of cool sites where people will build sites, get them established with decent monthly adsense revenue and sell the sites on an auction. I can’t remember the name of the site…but it was pretty cool!

    I have NO clue what I’d value my blog at. Being a blogger I know the Google PR and MozRank Domain Authority are important to advertisers and buyers. With that said, my blog wouldn’t be valued as much right now until I get a PR and a higher DA.

    There is no chance I’d sell my blog right now but I’d consider it down the road. I enjoy writing on it and building relationships with my followers and fellow bloggers…we’ll just see how it goes and how I can manage the time commitment.

    • Karl says:

      I’m sure there is a number that would get me to sell, but I’m quite sure no one would offer this to me. How far down the road do you think that you’d start considering a sale?

  2. This is a great article. I never thought of a blog being venture capital worthy, but there is definitely a market for profitable websites.

  3. Modest Money says:

    Interesting concept Karl. Like Jason, my blog is too new for it to really be worth selling. It’s really tough to get full value for a blog or website since most buyers base the price on 12-18 months of previous income. So for most people they’d rather keep it and make much more than that in the long run.

    • Karl says:

      It’s certainly helpful to have a good stable income when valuing a blog, I think there are some good oportunities to make a quick buck with young blogs. Not saying I’d sell mine here, but if I had several, that could certainly be a more profitable way to go rather than just various ad sales.

  4. There are some people who operate this way, but they do it under the radar. If we are looking at it from a VC angle, we’d be pitching our new blog ideas and seeking investors for a current one.

    It’d be an interesting project to try to sell one per year, with the goal of doubling your profit each year.

    • Karl says:

      Yup, there are people doing this and making sales to cash flow investors, but I’m not sure they could double the profit, depends on how extensive and aggressive the monetation on the blog to that point is.

  5. I’d be very afraid to come up with a valued figure for my blog. It’s still a work in progress, and needs a whole lot of work done to it to improve its worth. What’s more, I don’t think that I would be quick to sell it; even if it was worth a lot of money. I’d most likely look at expansion rather than selling it.

    • Karl says:

      I don’t mind thinking of the value of the blog, in fact I think that’s fairly straightforward discounted cash flow analysis, but given that number, it would be a very small value for me. And I think it depends on the offer. Expansion may be the higher profit way to do things, but maybe not considering opportunity costs.

  6. In the early stages I think it is difficult to come up with a value esp if you began your blog as a hobby. If you started your site with the intention of building a nice business than a VC is important.

    There are several sites online that connect Investors with hot start-up sites. They are actually quite interesting to read.

    Similar to GRS I don’t know, but I wonder if the owner of Mashable ever thought his blog was going to be worth so much a few years after starting it.

    Many people that look to buy and sell blogs use Flippa. I the site helps you determine the value of your current site as well.

    • Karl says:

      I think that this may be one of the cases where the first mover has a significant advantage in terms of price while people are still of the opinion that the purchase is as a great investment. GRS had a very early sale, even into the teeth of the downturn in 2008/2009. I’ve taken a look at Flippa myself, just for kicks, and given what I see, think that I could get upwards of several dozen dollars for my blog. :)

  7. AverageJoe says:

    To answer your question, I’d value my blog at half a million bucks. Takers? If so, I’m ready to talk. Very little haggling.

    I like the concept of building any investment with an eye to sell. By positioning it to sell later, you’ll make good business moves that increase the value of the site to the customer and the owner.

    • Karl says:

      Joe, do you think the building and selling would be better than a quicker sale and pursuing something else? Or even simply re-doing the same thing?

  8. I looked up my blog value on one of those cheesy value sites and it said it was worth $6000. Not bad for 9 months and a $56 investment!

  9. What a concept, selling a blog.. I never thought about that one before. Good post!

  10. jefferson says:

    it is hard not to be impressed when you read that JD from “Get Rich Slowly” sold his site for millions of dollars. he still gets to actively participate in the site, and seemingly gets to post whatever he wants.

    we didn’t get in this blog game to make money, but i would be lying if i said i don’t hope that it works out that way. there are many similar sites to mine (and yours Karl, Jason, and Jeremy) who are bringing in a nice supplemental income each site, and the main difference between them and us, is that they have longevity.

    as far as making a capital investment in a website, i am more interested in creating niche sites than blogs. i recently purchased a domain name and setup the web space. i have been tweaking the design, but the site still needs content. the investment is actually really low, and i do hope that it pays off in the end.

    • Karl says:

      I think whether it’s a blog or other niche website, your plan is solid. And there are a lot of similar websites out there in the personal finance niche, which makes it difficult to differentiate yourself. you’ll have to share your niche website in a blog post some day soon.

  11. I’m with Average Joe, I’ll go as low as $250K right now, takers? I’m having fun right now with the blog and wouldn’t really want to sell, but maybe in the future if I’m tired of it or something, then maybe I guess. Hard to think about because that’s not why I started it.

  12. Nick says:

    I think it would take a lot for a “real” venture capitalist to show much interest… then again, non PF blogs have sold for a ton of money (see: Huffington Post). So my guess is there are at least a few out there doing just that. As a one-man shop, Step Away from the Mall is more of a mom and pop shop compared to sites that have dozens of writers/workers, etc. But I do think the concept would work if the traffic and revenue growth on a blog was compelling.

    • Karl says:

      Agree completely Nick, no “real” venture capitalist would be interested in a single site (at least of the size of any of ours). They would need a bunch of them packaged together to even start to be interested.

  13. A few years ago, I was brought in to help rewrite a blog in hopes of making it SEO friendly. Just judging by how much the owner paid me to do it, I imagine it’s usually a cost-prohibitive measure for investors looking for a quick return!

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  16. [...] Cult of Money’s “Venture Capital Investments for Blogs“ [...]

  17. SB @ FPR says:

    Right now I can sell FPR while concentrating on OCAAT. FPR being one of a kind blog should fetch me decent sum in around a year. I can’t tell from now about my blog values in one year from now.

  18. [...] of money talks about Blogging as a Business run by venture [...]

  19. Hi Karl,

    It seems like all you finance guys get on well. Why not start a test site that brings all your skill sets together?

    10 of you guys get together that you can all trust and formulate a business model / plan.

    This means 10 posts a day minimum on one site and not 1 post every other day on one site.

    Build an authority, rule the sector, sell your site. split the $1,000,000,000 :P

    I do know of a company that has web properties in the blogosphere.

  20. I’m not sure how I would value my blog right now. I enjoy writing at the moment so unless I was offered some crazy amount of money, I wouldn’t consider selling it. Though in the future, that might change.

    The post definitely gives anyone looking to sell things to think about in terms of metrics. You have to figure out which ones truly make your blog valuable. For example, just because you don’t have many comments doesn’t necessarily mean your blog isn’t popular. You’re readers just may not comment a lot.

  21. Karl,

    Great post. I was actually talking with a couple friends about this concept the other day, and then found your article through a web search to see if anybody was actually doing it. Like other folks have said, this is definitely not a play for a traditional VC. I think it makes the most sense for investors who have already had blogs of their own and have a good sense of “success” indicators (i.e. comments, traffic, growth rate, social presence, etc.). I love the concept though, and I definitely think that if done right, there is definitely room for someone to make money in this space.

    Thanks!

  22. This is a very interesting post. I have read a lot about flipping websites – buying, fixing and then selling websites. Most of these sites are affiliate sites that are automated. Interestingly, the naturalmoleremovals.com was said to be sold at $54k at an auction site(got this information from prosperly.com), about 16.5 times its monthly revenue.

    Unlike the automated sites, blogging would require new and fresh posts. I think it would only suit for those who love writing.

    Best regards,
    Belinda

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    Better info on your blog than what I have seen so far elsewhere. Thanks for sharing and… Keep up the good work. I know from experience it’s not always easy! :-) .

  25. So the first question a venture capitalist (VC) will ask is what is my return, and how do I get paid? Given that it seems difficult to know which blogs or bloggers will be runaway hits from the beginning, I would think that the returns would have to be fairly large to entice venture capital money. The odds of the homerun investment would likely cause the terms of any investment to be somewhat draconian. With the exception of some fairly large and well known blogs that were able to get buy-out offers (such as Get Rich Slowly) most of the blogs would probably be cash flow properties at best and simple failures otherwise. Even the cash flow sites would be of varying quality and income. So this seems to be the way a VC would get their money out. Given the limited returns and fewer buy-out opportunities, a true VC likely wouldn’t be interested, and certainly not in individual blogs, as there simply isn’t enough opportunity for investment on a dollar basis. So any investment would need to be along the lines of an angle investor, a partnership or cash flow investor.

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