From a post on cjr.org by Richard J. Tofel headlined “What I Learned from the Nonprofit News Revolution”:
With the naming of my successor, I am winding down my time at ProPublica, after eight-and-a-half years as president and almost 14 years directing its business operations. As I prepare to head off to consulting and writing, I wanted to share some of the practical things I learned in the course of helping to build a nonprofit newsroom from 25 people to 160, and from an initial target annual budget of $10 million to $36 million today, along the way raising more than $220 million from other than our founders and playing a role in seven Pulitzer prizes.
This article is not intended to be philosophical or historical—like seemingly everyone else these days, I have a Substack newsletter for that—nor is it intended to be encyclopedic….Instead, I want to focus on some practical issues of building a nonprofit news organization that receive less attention—and, while admittedly perhaps less intrinsically interesting, are still significant.
Over these years, especially as ProPublica’s profile has grown, I’ve often been asked for advice by others in the field….I’ve structured this reflection as a set of answers to some of the questions I’ve been asked most frequently.
HOW MUCH MONEY DO YOU NEED TO START?
Other than identifying a mission and an editorial vision, this is probably the most important question a would-be nonprofit news entrepreneur should ask at the outset. If you don’t ask it, you’re making the most basic error in starting a business. Moreover, to answer this question, you need a comprehensive initial expense budget, charting how much you’ll spend on everything from salaries to freelance to office space (if any) to benefits to photos to publishing tools to marketing and beyond.
In my view, it’s a mistake to begin operations without at least 18 months of spending on hand, and two years is even better. This is hard….But I believe it’s the better part of valor.
It’s much harder to get people to contribute to a dream than to a reality….One set of prospective donors—the “show me” set—will likely not be motivated until you have been publishing for some time, and the donor cultivation cycle (easily six months) will further slow their eventual contributions.
So if you can’t raise enough to cover 18 months in advance, you run a real risk of not being able to raise much more before those funds are exhausted. In addition, joining a startup may be a passion play for you, but many prospective employees will think of it more as a risk, and two years of expenses in-hand goes a long way to curbing their anxiety….
WHO DONATES TO NONPROFIT JOURNALISM?
There are, broadly speaking, three types of donors. The first—and the one that most often comes to the minds of outsiders—are institutional foundations. By this I mean not just (or even necessarily) entities organized as private foundations under the tax laws, but places staffed by people whose job is to give away other people’s money….Until the last 30 or so years, these institutions were the heart of American philanthropy, although, with all of the new fortunes, especially in tech and finance, they are no longer.
Three key things to bear in mind about institutional foundations are 1) they are not doing you a favor in giving you their money—it is their job to give it to someone; 2) they tend to be relatively fickle donors, with strategies changing as staff turns over and fashions shift; and 3) while foundations like to think of themselves as having a high tolerance for risk, in practice many rarely invest in completely unproven nonprofits. Bottom line: Institutional foundations are much more likely to be in your second wave of donors than your first.
The second cohort of donors, and increasingly the one with the greatest potential for giving, is what are…rich people. Often they operate through family foundations, sometimes even with paid staff, but the decision makers usually remain those whose money is involved, frequently the same people who made the money. In contrast with institutional foundations, these people tend to be less fickle, provided you can realize the dream you sketched or sustain the level of performance that attracted their support in the first place. They are often willing to take more risk, including coming in earlier….
Last is a large mass of smaller donors. As we have seen in recent years in politics—especially in the campaigns of Barack Obama, Bernie Sanders, and Donald Trump—this source of funding has enormous potential. In news, public radio also provides some inspiring examples. Smaller donors in large numbers bring many of the advantages of larger wealthy donors without the concentration of risk….
For nonprofit digital newsrooms, also, a word of caution: smaller donations in large numbers are, at best, a third-wave revenue source, and are unlikely to be meaningful until your content is fairly widely known and distributed. For ProPublica, that took until we had been publishing for more than eight years….
WHAT MOTIVATES DONATIONS TO NONPROFIT JOURNALISM?
I have found that there seem to be four different strands. First are those concerned about the threats to journalism from the modern business crisis of the press, which provided the impetus for creating these organizations in the first place. This is what drives many of us in journalism, and we are not alone. I am frequently struck by how many of our large donors, for instance, were high school newspaper editors.
Next, and especially in the last five years, come those who may or may not care about journalism per se, but who are deeply worried about threats to our democracy, and see the critical role the press can and must play in safeguarding it. It is this group that Trump drove into our corner….
From the beginning, there have also been funders who care about particular issues—criminal justice, education, health care, racial or gender equity, environmental concerns, and more—and see the important role for journalism in surfacing and addressing these concerns….
Finally, particularly in recent years, a fourth group of potential funders has emerged: those focused on particular local communities, or, in a variant of the journalism-centric donor, those especially worried about the decline of journalism at the local level….
WHAT ABOUT “METRICS” FOR MEASURING SUCCESS?
Often, this question arises because a funder, typically a foundation, requires some quantitative way to determine whether their investment is paying off. But you shouldn’t wait for that; you should establish your own metrics of success before anyone else asks for them. And you should make sure they are closely tied to what you are trying to accomplish—to why you got into this in the first place.
That is why I always try to stress that a conversation about metrics should begin as one about mission. The most important thing for a successful nonprofit of any sort is a clear mission…a simple and direct statement of what you are in business to do—and, by implication if not explicitly, what you are not trying to do….
HOW DO YOU BALANCE EDITORIAL AND FUNDER PRIORITIES?
After almost 40 years in and around the news business, I have come to believe strongly that all successful news organizations start with visionary editors. No exceptions. To be sure, funders will frequently have agendas on what deserves more coverage—I even noted above that such funders are an important source of revenue. But it is a significant error to let them supplant your editors’ vision, and never ends well.
Yes, in the short run, chasing funder fads can be lucrative—but the key phrase there is “short run.” I will always remember a Fortune 500 CEO who sat on the Dow Jones Board of old. He was a taciturn Midwesterner by birth, and rarely spoke at Board or committee meetings. But when he did it was often to say one word, Yoda-like: “Focus.” He was right. Don’t let transitory money distract you.
WHAT’S THE BEST WAY TO THINK ABOUT DONOR TRANSPARENCY?
Nonprofit news is in the transparency business. We ask it of others in our reporting every day, and need to require it of ourselves. A few years ago, a group convened by the American Press Institute…tried to think hard about what this means as a practical matter, and I think the results were pretty good.
I think transparency should extend to disclosing Schedule B of nonprofit news tax returns, listing all contributors by amount above a de minimis level. These schedules are required to be filed with the IRS, but most news organizations avail themselves of their right to keep them from public disclosure. I don’t think they should. And if your auditors try to suggest—as I have seen some do—that you might be violating some privacy interest of donors by disclosing this, tell them, nicely, that they don’t seem to understand what business you are in.
Having said that, there are two restrictions many organizations place on acceptable funding that I simply don’t understand. One is to ban corporate contributions. ProPublica gets very few of these, but I have never grasped the logic of why we shouldn’t take them. Where do the people who favor such a ban think the rest of our donors got the money they are giving us?…
Next is a fairly common aversion to truly anonymous contributions, in which the recipient really does not know the source of the money. (With so much of philanthropy these days flowing through investment companies like Fidelity, Vanguard, and Schwab, this happens quite a lot.) Again, I simply don’t get it. If you don’t know who’s giving you the money, what possible conflict could it pose? Yes, I acknowledge that you could later learn you had received a gift you wish you hadn’t, but then you can always give it back. And, at least for us, over 14 years, we have never had a truly anonymous gift unmasked, either by the donor or anyone else.
These lessons were shaped by a particular set of experiences, in a particular period of time. Those with other experiences would, of course, draw different lessons, although I hope none to the contrary. One of the things I have found so exciting about being in the news business, especially during the quarter century since the consumer internet began emerging, is how fast it has changed. At the birth of ProPublica, for instance, the fields of commercial social media, news applications and engagement reporting were essentially unknown. Now, all are critical elements of any complete nonprofit newsroom.
More change, and with it new lessons, are ahead. I hope to keep learning.
Richard J. Tofel is principal of Gallatin Advisory LLC, and author of the newsletter Second Rough Draft.
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