Nuance is Critical to VC Investing

I've been thinking about this for a while now, and I figured it's time to put it down on paper (so to speak).

As it's commonly known, successful growth investing (VC or PE) is driven by pattern recognition.*  Part of the pattern recognition is a keen perception of nuance, what is slightly different that will make this successful that rendered the other opportunity unsuccessful. It's rarely a glaring difference, and more often than not, the difference between success & failure so subtle that it's barely noticeable.

Ralph Waldo Emerson famously quipped "The line between failure and success is so fine that we scarcely know when we pass it - so fine that we often are on the line and do not know it."  The most successful investors are those who can understand the fine differences between now & then, this or that, and more importantly gainsboro or charcoal.  If everything was simple & straightforward, or black & white, then anybody could do anything.  Obviously, that's not the case.

As an investor, not only is it a necessary skill to understand this level of detail, this level of nuance, but to be able to articulate it to your colleagues, your partners, your investors, and everyone you need to communicate with.  As importantly, in VC/PE, most deals are heavily structured, so further conveying the nuance oriented thinking to the term sheet is critical to driving a desired outcome, and to mitigating failure.

Most of the great investors I've worked with have a keen ability to quickly synthesize what's important and what's not.  And, more importantly, quickly identify the nuanced differences from past patterns they've seen.  They are then quick to succinctly & concisely express those nuances to support their investment thesis.  

The adage of betting on the jockey or the horse is way oversimplified.  Successful investors bet on the skilled jockey that's on the perfect horse in an ideal race where the wind conditions are just right, the feed was properly mixed, the temperature is appropriate, the sun is facing east, the soil is just so, the other horses are misguided, the other jockeys weigh too much, and countless other details.

Great investors, like great entrepreneurs, are obsessed with quality, with detail, with nuance, and those that consistently perform well are those that can appreciate & understand the differences between gainsboro or charcoal.

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* I use the term growth investing instead of value investing, as nuance detection may be less critical to successful value investing.  Skills are quite different, possibly the subject of another post down the road.

Devil's Bargain: When Investors Get Too Low a Series A Valuation

I see a lot of posts these days about startups raising huge early-stage investments at ridiculously high valuations. What no one talks about, and what I think is equally dangerous, is the opposite: startups raising small early-stage investments at low valuations.

When startups in New York City, especially ones with teams of three or more founders, raise low amounts like $500,000 on sub-$3 million valuations, it ends up undermining the success of their startup. Why? Because there doesn’t end up being enough incentive for the founders to stick around.

The first problem is that $500,000 generally isn’t enough for a startup to show any significant progress over the course of a year. In New York City, it barely even covers the cost of living.

Let’s say you have four co-founders who decide to live on a very conservative $40,000 a year. That’s $160,000. And we’ll assume they hire four more employees at $60,000 a year (because only a founder would be incentivised enough to work for $40,000 a year). That’s another $240,000.

On top of all that there are costs associated with raising money, as well as overhead, which can run upwards of $100,000. Before they know it, the founding team has burned through $500,000 in a year and has to raise more money.

But most companies need 2-3 years to really see product-market fit. After one year, their business model isn’t firm. They need to gel, pivot, and truly study the market. That takes time and money. And $500,000 doesn’t give you enough of either.

The second problem is that when founding teams are too large, no one founder owns enough equity to stick around. Let’s say your four co-founders from before sold 25% of their company and set aside a 15% options pool for employees. At this point, each founder only owns 15% of their startup. After subsequent rounds of funding, any one of them can expect his share to get diluted down to 5-10% if he she is lucky.

But because the startup has run out of money after a year, the founders now have to reevaluate whether they should raise more money. Each one says to himself: I just made no money for a whole year. I worked really hard, but we don’t have traction yet. Do I want to go raise more money, deal with existing investors (and the headaches that go along with that), all to have my ownership diluted down to 5%?

This is the point at which at least one of the founders usually bails. And when founders bail, everyone loses.

I’m seeing more and more of this happen in New York City and it’s a dangerous phenomena. We’ve seen tremendous growth in the New York City tech scene over the past few years, but if we want to compete with Silicon Valley, it’s important that we make sure entrepreneurs are incentivised to stick around for the long-term.

We need to educate entrepreneurs to be wary of investors who want to give you small investments at low valuations. What’s the sweet spot?

1. Raise an amount a startup can actually show progress with, around $1+ million, or 18+ months of burn.
2. Keep the founding team smaller than three people.
3. Preserve cash and be liberal/generous with option grants.

If founders follow these rules, they’ll be able to show more progress before they need to start thinking about raising another round and what’s more, they’ll own more of their company when they do it.

That keeps founders happy, investors happy, and ensures the sustainability and viability of the New York City venture community.

Somewhere lies a golden mean of start-up valuation.... 



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Psyched about ER Accelerator's inaugural class!

New York, NY - May 31, 2011: ER Accelerator (ERA) today has announced the 10 startups that will participate in its Summer 2011 program, set to kick-off in New York at its Times Square offices on June 6th.

“We are very excited to have received interest from such a wide group of top-flight entrepreneurs for our inaugural ERA program,” said Murat Aktihanoglu, Managing Director. “We are thrilled with the group of companies which will be participating, and we look forward to working with them and our extensive mentor network to help these companies succeed.”

ERA will be located in the heart of New York City at 1500 Broadway, overlooking Times Square. The state-of-the-art office building has facilities including private rooms for startups as well as various meeting rooms.

“We believe there is no better place to be starting a technology company today than New York,” said Jonathan Axelrod, Managing Director. “We look forward to helping to build the next great generation of New York tech companies.”

The participants in the ERA program were selected from hundreds of applications from all over the US and the world. As part of their participation in ERA, each startup will receive a $25,000 investment, access to 180+ mentors and three months of free office space at the ERA office.

The companies that have been accepted and will be participating in the program are (in alphabetical order):

BuzzTable - BuzzTable puts the "old school" table buzzer on your phone, establishing a direct line of communication between the restaurant and their customer. The focus is customer retention, incentivizing customers to return through loyalty rewards, deals, and a more personalized relationship.

Centzy - U.S. consumers spent $540B on local services like haircuts, massages, oil changes, and yoga classes in 2010, yet over 80% of local service businesses do not post prices and hours online. Centzy is a new search engine where consumers can find accurate prices, hours, and ratings for every service in their city.

LetGive - LetGive provides a platform that connects application developers, charities, and socially conscious consumers. The platform allows developers to turn their applications into fundraising vehicles for nonprofits and charities in the LetGive network. The entire donation and distribution process is managed seamlessly by LetGive.

Nabfly - Nabfly is a mobile tagging platform that lets people scan posters with their phones and engage with a brand through a native application. Nabfly makes it easy to remember and interact with the cool things you see walking around a city.

numberFire - numberFire is an analytics platform that uses quantitative modeling to bring new insights and analysis to the world of sports.

Parking Panda - Parking Panda is a mobile, real-time parking discovery tool. It enables parking space owners to rent out their underutilized spaces to a community of drivers. People in need of parking can save money and time by finding a place to park and paying right from their phone.

Pricing Engine - Pricing Engine is a business intelligence service for digital marketers. It provides users a simple visual interface to discover actionable insights for improvement. The service includes patent-pending advertising optimization and valuation across the full range of creative and targeting options, media choices, and pricing models.

PublicStuff - PublicStuff’s web-based solution addresses the service needs of both local governments and residents by increasing consumer participation while also driving down costs for public agencies. The municipal platform allows agencies to cost-effectively manage communications with the public and better manage the delivery of services. The consumer platform allows the public to request a variety of services.

sitesimon - sitesimon makes it easy to find and enjoy new content online. Users can share their browsing seamlessly, connect with what their friends and others are looking at, and be recognized for discovering sites that others love too.

WebThriftStore - WebThriftStore enables anyone to turn their unused "stuff" into tax-deductible, charitable donations. The product makes it easy to offer anything online, and then allows consumers to use their social networks to convert it into cash for the charity of their choice.

Each of the ERA companies will receive other perks like free legal services from Gunderson Dettmer, and other professional services and support from selected partners and sponsors, such as Amazon, Microsoft, CBRE, Cogent Communications, American Airlines, Steinberg Foreman Group at Morgan Stanley, Phone.com and Manning Publications. These services include free hosting, free banking services and other support.

“We are extremely proud of the sponsors who are supporting ERA and our companies,” said Charlie Kemper, Managing Director. “They have helped us create an experience which we think is unique among accelerators”.

Through its partnership with American Airlines, the Accelerator will now offer unique travel benefits for all of its startups. Each will receive 10,000 Business ExtrAA points, which are redeemable for up to five domestic round-trip flights on American Airlines flights, American Eagle or AmericanConnection or used for other travel awards. “This is an unprecedented opportunity for our startups to be able to travel to where ever they need to be to build and expand their companies, thanks to the generous support of American Airlines,” said Murat Aktihanoglu.

"We are happy to support the ER Accelerator program and to continue to encourage the growth and long-term success of the SMB community through our products, services and strategic partnerships." said Karen Buls, American’s Director – Small and Medium Enterprise Products, Marketing and Sales Strategy.

At the heart of the ER Accelerator program is its 180+ mentors, including experienced entrepreneurs, operating executives, technologists, and investors who will provide hands-on support to participating startups. Mentors include Fred Wilson, Esther Dyson, Randy Komisar, Brian Cohen, David Pakman, Lewis Gersh, Jeff Stewart, Howard Morgan and other such leaders connected to New York and the technology community. Startups will interact with this group of experts through hands-on individual coaching and interactive group discussions.

About ER Accelerator:
ERA is an early-stage investment fund and business accelerator based in New York City. ERA organizes 3-month programs where it funds 10 startups and provides them with office space, mentoring and free services to accelerate the growth and success of these startups. ERA has been launched out of the NY-based non-profit Entrepreneurs Roundtable which was founded in 2007. ER is dedicated to fostering the startup ecosystem and helping entrepreneurs succeed. It provides educational opportunities, community-building functions, and introductions between start-ups and investors through free monthly events in New York, Philadelphia, Turkey and Japan.




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Have it your way...

Mass personalization or mass customization has been the holy grail for many industries for years, and now finally the technology is here to enable it.  Processing power, communications infrastructure, and data management tools have been the hold-back to industries truly shifting from the Ford Model T approach to business ("People can have the Model T in any colour--so long as it's black") to one in which the promise of just-in-time becomes real.

The auto industry has long wanted to be able to build customers cars to spec.  Currently, the process to order a custom car is painful, if even possible.  Dealers pre-buy the most commonly ordered vehicles and will do their best to make sure you drive something off the lot, something that's not exactly what you want but good enough.  This will change over the next years as the interwebs continues to allow the linking of customers directly into a real-time supply chain (a cause of the deemed Demand Economy).

The media industry has long wanted to deliver you tailored content and target advertising.  Certain aspects of direct mail were sometimes customized based on geography and census data.  More recently, direct marketers started using personalized URLs in printed material, however this sort of personalization is still nascent.  Magazines have dabbled is different covers based on geo-targeting, but this has been more of a gimmick. Within cable television, the likes of Black Arrow, Visible World, and Canoe all suggest that mass television advertising will improve, some day delivering different experiences to each of us based on our demographics and view habits.  Why should I ever see an ad (in any medium) for a product that I would never buy or be in a position influence a buyer? The interwebs is now starting to change all of this for all forms of media, from the web, to mobile, to magazines, to news, to television, etc, etc.

The topic of cable television has been beat to death, but needless to say that there is quite a strong consumer desire for a la carte programming and the infrastructure is here to allow it.

The textbook industry is no different. In fact, many of my professors supplemented standard textbooks with assembled course packets of their choosing.  Then, these packets, once photocopied and stapled together, are now digital and web delivered.  As content rights shift away from large publishing houses and individual authors gain access to improved syndication & monetization tools, it's not too hard to imagine a fully customizable curriculum, modifiable in real-time by educators on an as needed basis.

Thanks to the migration to on-demand/SaaS, the enterprise software industry can now provide custom interfaces for each end user, depending on their functional role, responsibilities, clearances, etc. A decade ago, it was cost prohibitive to deploy enterprise applications with hundreds of variations of permissions, but, today, administrators can tailor user interfaces to the exacting specifications & needs of their end user clients. This trends spreads across not just enterprise-wide applications, but also desktop specific ones and many IT departments now have the flexibility to support users on different platforms, operating systems, mobile devices, etc.

The apparel industry should provide me with clothing that fits me perfectly.  Starting with basic customization like Zazzle, CafePress or Vistaprint to technologies that enable retailers to provide cuts & fits for every different body shape.  As the percent of clothing sales on the web continues to grow, retailers will more & more provide shape & sizing varieties that inventory-based retail cannot support.  Companies like StyleCaster and MyShape are already heading in that direction. And fun businesses like GoTryItOn or PlumWillow make shopping/dressing a social experience.  The interwebs should eventually allow me to have perfectly tailored shirts & pants for (nearly) the same price/cost as off-the-shelf apparel in the same amount of time.

The quick-service restaurant business has seen an evolution from McDonald's type fixed menus to Chipotle's and Subway's make-your-own burrito and sandwich, respectively.  As corporations can now get real-time feedback on consumers purchasing habits, expect to see more real-time changes/adaptations to changing trends.

Financial services has evolved to the point where you can nearly build your own banking/credit package.  Many of my credit cards are personalised to the point where you can pick & choose different benefits & rewards combinations based on your particular needs.  Additionally, many card companies now allow personalized printing of the card itself.  Definitely more to come in the area of consumer finance, but it will be slow as this segment is bogged down by bureaucracy and regulation.

Online cereal / granola businesses like me&Goji or MixMyGranola are fast gaining traction as are protein/health bar companies like YouBar or ElementBars.  These outfits use the web to allow for customized mixing & preparation of specific kinds of foods.  There is no reason why this trend will not continue across other food categories as online shopping continues to grow.

Dell makes nearly customizable PCs and has for years.  Although it's seemingly gotten more difficult once again to get an affordable machine built to spec.  Maybe there's another wave of customization to come?

As this post has gotten ridiculously long, I'll end here.  But, the point is, the interwebs allows for so much more than we currently see and soon enough we'll have anything & everything our way...

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Areas of Investment Interest

I'm regularly asked what kinds of investment areas I think are of interest.  I find that to be a generally broad question, since overall I'm interested in fast growing innovative, transformative, and defensible businesses. Those kinds of companies could be in almost any industry and come up from left field.  So, I wish I could be more specific about the next Google or Cisco or Crocs, but if I knew exactly what those were I would go start them instead of seeking to partner with entrepreneurs smarter than me.

Given that, here are some themes that I think make sense today (this post has somehow gotten out of hand lengthwise).

• Internet business that broadly address the female demographic, both content-wise and commerce-wise. Women spend $0.85 of every dollar spent in the United States, yet a mere fraction of the web is devoted to them, both from a media perspective and commerce perspective. Glam, CafeMom, iVillage, BlogHer, and SheKnows have all built impressive businesses, but something is still lacking in this category.
• Web based software & services focused on local businesses and/or small businesses that become deeply integrated into the business process.  Both small and local businesses are in dire need of easy-to-use enterprise-grade software solutions that can help them run more efficiently, acquire customers more cost effectively, streamline their supply-chain, manage employees, etc. Obviously, Salesforce is the big kahuna but businesses like Intacct, OpenTable, ZocDoc, Carbonite, SeamlessWeb, Angie's List, and MindBody are examples of concepts with this focus.
• The migration of enterprise software to leverage web integration; the shift to SaaS/xSP, and delivery, license pricing to term for instance.  Most of the incumbents in software are seemingly incapable of evolving their product suite, recreating pricing models, and adapting to a different sales process.  Across dozens of vertical and horizontal plays, new startups like SuccessFactors, Xero, xactly, Less Software, Accept, or Zendesk seem to be making headway.
• Companies that think differently about advertising (not just banner ads) and view digital media as an evolving opportunity in out-of-home advertising, business-to-business media, mobile location based services, etc.  The vast majority of ad dollars need a high quality home in large buy formats and most of the existing alternatives to television do not yet suffice, yet almost everything around is now networked, capable of reaching consumers 24/7 (not just in front of the PC or the TV).  Businesses such as AdSpace Networks, JumpTap, FourSquare, Paxfire, etc are working on big ideas.
• Big opportunities lie in the localization of ecommerce, of the internet, where companies bridge the gap from the internet being pervasive & global to consumers being local.  Such opportunities tie heavily in to the broader theme of personalization of the web where web-enabled traditional brick & mortar businesses can thrive.  The thinking behind Milo, BlackboardEats, Et.sy, HomeAway, H.Bloom, SeamlessWeb, and FishBowl are some great examples.
• Vertically focused software solutions such as targeted business software products addressing a particular vertical/niche need are of interest. Within many industries, there exist specific applications that improve the industry by leveraging the internet to deliver novel business services.  Companies like LiveOps in the call center business, FitLinxx in the health segment, Black Arrow & Visible World in the television space, Tablet Hotels in the hospitality arena, The Active Network in sports & events, or ThreeStage Media in the conference industry.
• Online education presents an enormous opportunity for further innovation.  With the digitalization of content and the democratization of publishing, traditional businesses catering the education sector are in dire need of visionary change.  Hybrid businesses that leverage & combine both online tools and offline physical attributes to improve curricula are poised to succeed.  Likewise, opportunities exist in the areas of collaboration and the broken down geographic borders that once separated education. Companies like Tutor.com, Lynda, Knewton, Sangari, Udemy, Chegg, 2tor, TenMarks, Revolution Prep, and Flat World Knowledge are all interesting, but there is way more to go.
• Business that are global in nature, leveraging the internet, can now reach & serve several billion end users without needing more than one office. Companies like OLX, Spring Wireless, and Skype are impressive businesses, but there should be room for more globe-flattening ideas. Obviously, outsourcing is a well established trend, but an emerging middle class in the BRIC countries will continue to be a great source of potential monetization.
• Growing data sets within the enterprise or on the web have created opportunities for business intelligence, analytics, information organization, and real-time web businesses. Companies that create businesses around the management and extraction of value from enormous data sets are very compelling.  Some examples are Gracenote, WeShop, or IDAnalytics.
• Broadly speaking, the entire healthcare industry is ripe for innovation.  From medical software to data management to enterprise applications to consumer empowerment tools, there are great businesses driving value to the entire industry.  Web based tools like ZocDoc, networking monitoring solutions like WellAware & Living Independently, and business services technology companies like AirStrip, Castlight, AwarePoint, & Epic Sofware are all working on great opportunities.
• Technology companies servicing the financial services industry, specifically within the areas of payments, web-enabled customer tools, and fraud & security, can solve & address real pain-points and needs.  Interesting companies like VenMo, Andera, Square, and PrivaSys are all working on big ideas.
• The growing shifts in cloud computing, SaaS, or xSP represent broad opportunities to invest in innovative infrastructure companies.  Enterprise focused storage companies like Nirvanix, end-user tools like Dropbox, application vendors like PivotLink, management services like Okta, hosted service providers like AppRiver, security services like Panda Software, or authentication applications like Ping Identity all address massive needs within the hosted universe.

There are a couple of other tectonic shifts that are early in the making, but will likely spawn some interest businesses.

• Online video is a massive whitespace driving tremendous change within the television industry, however regulation, piracy, copyrights, and quality are all mostly unclear for the time being.
• A shifting communications infrastructure, led by the migration to VoIP is only getting started.  The integration of communications tools into every aspect of business is potentially far reaching.

Generally speaking, I'm a fan of companies that aim to be big, industry changing plays, by leveraging software and the interweb to be disruptive.  I'm also partial to businesses models/products that are elegantly simple. In other words, their products/solutions need to be low in friction, easy to use, understand, sell, implement, execute, etc.  And, accordingly, a reasonably high gross margin that can be defended over time.  Obviously, long-lasting content, repeatable products/services, and recurring or subscription revenues are all compelling business model features.

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The Stickiness of Online Media

Online content properties critically need a own/develop a compelling reason for media consumers to come back, and "a better experience" just doesn't cut it.

On the interwebs, consumers have nearly infinite choice of news sites and we are all faced with a seemingly endless buffet of information & content destinations to choose from. Never before has the media industry had to deal with such a techtonic shift of available inventory & fragmentation to the nth degree.

So if content isn't so differentiated and distribution isn't controlled, what's the glue that makes a reader come back to a specific web property?  Does "brand" have enough strength in a world of attention deficit disorder and infinite choice?  Over the past decade, or even past couple of years, we have seen companies rise in from nowhere thanks to the power of the internet.  Yet, I question the long-term sustainability of a brand for a content destination online.  Not because a brand can't get awareness, but more because thousands of brands can get awareness and consumers don't have to stick to just one media outlet.

Printed newspapers & magazines are by & large "pushed" to consumers.  The New York Times is delivered to our doorsteps and Time Magazine shows up in the mail.  Since these products are delivered to us (for the most part) we are practically forced to read them.  Before the Internet, I read the NYT day in & day out because (a) it was one of the few options and (b) because it fell in my lap.  Once I signed up it was made easy for me and I was hooked on a handful of media brands/outlets, rarely changing my devotion.

When broadcast television was introduced and became prevalent, the same held true for that media.  Practically push as well, the TV was the centerpiece of the living room and we had the choice of a half dozen channels to choose from.  If the TV was on, there was a 1 in 6 chance that we were watching said media companies content.  Empires could be built because the $70 billion in ad spend was spent across a handful of media properties.

With cable, TV faced fragmentation and the broadcast channels had to step it up a notch.  But, even so,  we consumers are still laze and the top ten channels on the cable box still get most of our attention.  It's hard to be channel 73 but it's really easy to be channel 1 or 2.  Viewership in the latter dwarfs the former.  And, although cable expanded our channel choice exponentially, it's still a finite selection of content.

The fragmentation caused by the Internet is a million times worse! Very few new media companies have figured out how to get consumers' repeat attention in the world where media isn't push.

Steve Rosenbaum recently wrote a post called Content Is No Longer King: Curation Is King, which argues that content is no longer scarce and in fact "it's everywhere, it's overwhelming, and it's gone from quality to noise."  I couldn't agree with Rosenbaum more.  However, I would also argue that curation isn't all that scarce either.  Rosenbaum added to his thesis of curation in this post about online media consumption, but all that highlighted to me is that nobody is really winning as it's a dog eat dog business and there are no barriers to entry right now.

Vin Crosbie also recently opined on the matter with "the greatest change in the history of media is that, within the span of a single human generation, people’s access to information has shifted from relative scarcity to surfeit." This is exactly the change that leads to the question being posed here - with so much content available everywhere, in hundreds of forms, by hundreds of editors, how does it get monetized at scale?  How does a single media company own & defend enough scale on the hyper-competitive internet?

One way that new media companies have created recurrence in consumer usage is by creating a communications channel, which is critical to walled garden media companies. Communications services create a network effect barrier.  Hotmail was one of the best acquisitions MSN has ever made.  Yahoo has webmail and Google has gmail. Search engines rely heavily on return & recurring traffic from their respective mail applications. Even Facebook now relies heavily of it's messaging tool.   Blackberry has managed to hold on to millions of consumers because of it's closed BBM network and Bloomberg seemingly still holds strong because of the critical use of Bloomberg chat by thousands of traders everywhere.

Content & product alone don't seem to be enough to get users to come back.  When it comes to choosing where to go on the web, users need a stronger deeper hook than just "better" content.  It's painfully clear that content is not "king" today and instead the world of online content is being ripped apart by aggregators, curators, and indexers.  Twitter, RSS, and Bit.ly are fantastic tools for disseminating content, but they clearly devalue the destination.

How does one create a single content brand that can withstand the attention deficit affliction on the web?


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News Isn't That Complicated

A few days ago, Google’s economist-in-chief, Hal Varian, was the keynote speaker at the Federal Trade Commission’s hearings on the future of journalism - "How Will Journalism Survive the Internet Age?" Of note specifically is the slide deck from his presentation, entitled "Newspaper Economics, Online and Offline."

Varian assembled the following chart in his deck:

In addition, he subsequently derives a number of macro trends affecting the online newspaper model, consumer habits, etc, etc. No need to discuss those here since he covered them so aptly, so I will just ask the following question: What if, newspapers could, from one day to the next, turn off the print business entirely and become pure play online businesses?

In the interest of grossly oversimplifying a restructuring, I've taken a stab at revising the income statement (yes, I know, there are dozens of additional atrocities on the balance sheet that I'm ignoring) to the following:

Note that the net margin is still $13, on roughly half of the revenue!! Whether that incremental margin percentage is sustainable over time is debatable, but one of the beautiful things about restructurings is that you get to look at things with a clean slate.

With printed newspapers out of the picture, in my perfectly rudimentary analysis, I've assumed that retail & national advertising remain where they are, that classified revenues take a nosedive by over 85%, newsstand sales vanish, and subscription sales manage to maintain by simply shifting to web only (for premium editorial, crosswords, or things such as tablets). On the cost side, I've assumed that 33% of administrative overhead costs are saved by the simplified model, that production costs are halved since print isn't needed, and distribution & raw materials vanish.

Obviously, you might have a different take on my assumptions, but the basic exercise is that if you stop focusing on revenues so much and instead focus on gross profits, the world might improve dramatically (or might not look so bleak, as in the case of newspapers).


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