An early Axios investor talks about the future of VC-backed journalism
Good morning! Lucy Brewster filling in for Jessica today.
The journalism industry’s struggle to adapt to the digital age is not exactly news. Yet Axios, the outlet known for its concise, to-the-point coverage style, has been an outlier since its inception as a VC-backed startup in 2017. On Monday, August 7, Axios agreed to sell to Atlanta-based Cox Enterprises for $525 million—a figure over five times its projected 2022 revenue according to the New York Times.
I spoke to Paul Hudson, founder and CIO of Glade Brook Capital, which has been an investor since Axios’ 2019 Series C-funding round. They are also investors in companies such as Airbnb, Lyft, and Snapchat. According to Hudson, don’t make any larger assumptions based on this deal. “I think the Axios team is exceptional. So I wouldn’t extrapolate the success that they’ve seen to the broader landscape,” he said. Yet he said the deal does establish that breakout journalistic enterprises can see gains: “They’ve proven that it’s possible to build a modern, digitally native media business in a successful way, and to an extent that encourages others to go and build,” Hudson said.
Axios founders Jim VandeHei, Roy Schwartz, and Mike Allen started the company after leaving Politico in 2016. All three are staying on in their roles managing the business under Cox Enterprises. Axios has become popular in its half-a-decade lifespan for its political coverage during the chaotic Trump administration as well as its newsletters with a loyal audience and bullet-pointed articles. It’s also benefited from Big Tech’s advertising spending—companies such as Meta have spent sums on getting the attention of Axios’ D.C. readership in the political arena. Axios HQ, the software communications company, will become a separate entity when the deal closes, but will still be majority-owned by the Axios founders.
Considering Axios’ financial and editorial achievements, the deal raises the question of whether a standalone media company business can be sustainable even in a best case scenario. Hudson said that the deal was not born out of financial necessity, but out of a shared vision for growth between Axios and Cox. “They definitely did not need to sell. The business is very healthy. There’s no need to raise capital, nor have they tried to raise capital,” he said.
So then what’s the benefit on each end of the deal? Cox Enterprises, the Atlanta-based media business owner, was an early investor in Axios prior to the acquisition. The transaction will allow for substantial returns to Axios’ early investors. According to Hudson, the deal built upon a shared vision of priorities for the company and a mutual goal to resuscitate local news coverage across the United States. “They’re looking to accelerate the growth and expansion of local news to the markets across the country,” Hudson said. The deal also includes a $25 million dollar investment into Axios’ editorial division.
Axios has been building its initiative to expand local news coverage since last year by establishing newsletters in cities across the U.S. that pick up local stories. It already has 24 regional outlets, and is hoping to expand to over 100 cities in upcoming years. According to the company, it will add six more by the end of this year. While Axios has lofty goals for local journalism, Cox has somewhat of a legacy in it—the conglomerate owns the Atlanta Journal-Constitution and Dayton Daily News.
Yet while the initiative aims to aid the local news crisis that has left many communities without access to comprehensive journalism, whether that’s what it will successfully do is an open question right now. Critics have argued that the local newsletters have so far hit cities that already have local news outlets—and that picking up their stories could actually direct subscribers away from local newsrooms and to Axios.
One constituency that looks to benefit from the deal? Journalists in cities scattered around the country. On Friday, Axios publisher Nicholas Johnston tweeted: “Hi, if you’re a local journalist looking for work, or think you might be soon… email in bio. I’m about to do a lot of local hiring.” So it seems plans are underway.
Jackson Fordyce curated the deals section of today’s newsletter.
Correction, August 15, 2022: A previous version of this article misstated that WagePoint is backed by Providence. WagePoint is backed by PSG.
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