Berkeleyside news site utilizes investment crowdfunding to raise capital

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Berkeleyside, an independent, online-only news outlet covering the city of Berkeley, is currently pursuing a crowdfunding-based investment model to sustain its company through community support.

According to Tracey Taylor, a co-founder of the 7-year-old site and contributing reporter, Berkeleyside has come to a point where it needs capital, in addition to funding from advertising and its membership program, to invest in the long-term sustainability of the company.

A direct public offering, or DPO, investment model allows people to directly invest in a company outside of the stock market. This can include both accredited and non-accredited investors, unlike most other investment models, allowing for “everyday people” to get involved, according to Seren Pendleton-Knoll, program director at the UC Berkeley Haas Center for Responsible Business.

“We’re asking people to invest in something that’s right in their community rather than outsourcing or going corporate,” Taylor said.

Announced Nov. 3, shares are being offered at $2 per share, with a minimum investment set at $1,000. Investors must be California residents. While there is no maximum investment amount for individuals, Berkeleyside’s funding goal and licensed investment ceiling is $800,000 under the DPO. It has currently raised $200,000 of that goal, Taylor said.

Berkeleyside is looking to invest in a second full-time reporter, expand its annual Uncharted festival and update the site to be more mobile-friendly.

“Everything we want to invest in are revenue-generating in themselves,” Taylor said.

In terms of content, Taylor said Berkeleyside is also looking to produce more in-depth pieces, develop new multimedia platforms and expand reporting on less-covered areas such as local public schools in Berkeley.

Taylor stressed that even with the involvement of investors and considering Berkeleyside’s community ties, it will remain objective in editorial decisions.

“No investors are going to be invited into editorial meetings,” Taylor said.

DPOs have also been utilized by a number of other high-profile companies, including Ben & Jerry’s, Annie’s Homegrown and the Green Bay Packers.

John Schaeffer, owner and founder of California-based Real Goods, which used DPOs for fundraising in 1991, 1993 and 1995, said the business model has been successful and sustainable for his company.

“It was great because as they became owners in the company, they became more loyal,” Schaeffer said. “It makes a whole lot of sense to cut out the middleman and do it yourself.”

Pendleton-Knoll also said the DPO model could be a particularly successful fit with news outlets.

“(They) have a built-in community base already, making finding investors a bit easier, (but) it takes significant staff time and finance to do it right,” Pendleton-Knoll said in an email. “As these aren’t donations, communication between the company and the investors needs to occur, potentially for an indefinite amount of time.”

Taylor added that the community values of Berkeleyside align with the overall structure of the DPO.  According to Taylor, the benefits of becoming an investor are not only symbolic but will also be profitable, with competitive rates at a 3 percent dividend on an investment. Investors can also receive perks with different levels of investment, such as a photo book or T-shirt.

“We hope there will be large and small donations. We love the idea that we can go (to) the 100 percent, not just the 1 percent,” Taylor said.

Contact Camryn Bell at [email protected] and follow her on Twitter at @cbell_DC.