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Summary:

NSFW Corp. founder Paul Carr admits he is mostly to blame for his company’s inability to raise the funds necessary to keep going, but also says the site pioneered some features that are worth exploring

It may have gone unnoticed in mainstream media circles, but the death of entrepreneur Paul Carr’s NSFW Corp. on Monday caused more than a few tremors in the world of new-media startups — in part because that world is so tiny to begin with, but also because Carr is a somewhat polarizing figure at the best of times, and many were watching his venture with a mix of interest and schadenfreude.

Since the death of something new is often almost as interesting as its birth, I called Carr and asked him to talk about what he or others might learn from NSFW Corp’s relatively brief life as a media entity.

In typical startup fashion, NSFW Corp. isn’t completely dead, of course. The company — which launched its online-only media effort last July (it later also added a print version to its offerings) and was based in Las Vegas — is no more, but Carr and most of his team are joining PandoDaily, another new-media startup created by Carr’s former TechCrunch colleague Sarah Lacy that has renamed itself Pando and has taken on NSFW Corp.’s assets, including the print magazine.

Raising money is really f***ing hard

Sarah Lacy

Sarah Lacy

Carr said that he and Lacy had talked a number of times about PandoDaily acquiring or merging with NSFW Corp., but while they were both media startups and believed in certain principles — such as “paying people for their work and having real journalists,” as Carr puts it — they were also focused on very different topics, with NSFW Corp. taking on everything from porn to politics and Pando doing tech. So what changed? Carr says NSFW Corp. started digging more and more into big tech and media-related stories such as Pierre Omidyar’s attempts to start a media company with Glenn Greenwald — but he also says NSFW Corp.’s financial struggles were a big part of the picture as well:

“It is not getting any easier for journalistic organizations to raise money… everyone says that content is suddenly hot, and it is — but content and journalism are unfortunately not the same thing in investors’ eyes. And we can all wait for a Pierre Omidyar to show up, but truthfully it’s hard to raise money for a journalistic company. And the idea that both of us were out raising money independently — Pando very successfully and us less so — was kind of silly.”

Carr also freely admitted that fundraising for NSFW Corp. didn’t go well during the latest round, and that the company was struggling to survive (it laid off several staffers recently). And he also admitted that a big part of this failure to raise enough financing was his own somewhat antagonistic attitude towards investors:

“It’s really f***ing hard — I was spending more than half of my time trying to explain to investors that yes, we could do slideshows, that would certainly be an option, but that’s not really what we’re about… so we thought wouldn’t it be nice if we could create this world within Pando where we were doing this reporting that we wanted to do, and I didn’t have to have another f***ing meeting with a man who didn’t understand why listicles were not the same as reporting.”

No love lost between NSFW and investors

Money, greed, payoff

On a related note, Carr also admitted that his attitude towards his existing investors — such as his former boss Michael Arrington’s CrunchFund and Zappos’ founder Tony Hsieh’s VegasTech Fund, two of the company’s earliest backers — probably didn’t help increase his company’s lifespan either. As he described it during a discussion of Glenn Greenwald’s new venture, and whether the former Guardian writer would be comfortable reporting on his benefactor, eBay billionaire Omidyar, Carr said:

“You only have to look at NSFW and see that we have been relentless in attacking CrunchFund for its bullshit hypocrisy in investing in NSA-backed [actually CIA-backed] startups, and we have been relentless in mocking the stuff Tony Hsieh is doing in Vegas… of course it has [had an impact on financing], it’s probably the main reason we couldn’t raise any more. It’s the reason why Vegas Tech Fund didn’t invest in the latest round or the round before, and it’s why Mike Arrington hasn’t talked to me in a long time.”

For Carr, whose aggressiveness towards colleagues, friends and pretty much everyone else has achieved almost legendary status in the media community, this kind of attitude may have doomed NSFW Corp. as a financial entity, but it was required in order for the venture to have any kind of journalistic credibility at all. “I’ve never been one to hide behind saying ‘Oh, he’s an investor, I’d better be nice,’” Carr said. “Who cares? We’re f***ing journalists. I’d rather be poor and credible than have $250 million and have to say bullshit like ‘I can’t comment.’”

The beginnings of an innovative paywall

So was NSFW Corp. a failure? “It certainly under-succeeded,” Carr said. “As a company, as a corporate entity, it certainly failed, in the sense that if it had succeeded we would be buying Pando, not the other way around… but as a journalistic enterprise it absolutely succeeded.” The kind of investigative, long-form journalism that the company specialized in has proven to be necessary and has also gotten thousands of people to pay, Carr said (the site has a total of about 6,000 monthly subscribers after about 18 months).

Newspaper paywall

Although it started with a hard paywall, Carr said one of the innovations he is most proud of was the idea of “subscriber unlocks” — which allowed each subscriber to the site (those who paid either $3 a month for digital-only access or $7 a month for access to digital as well as the monthly print magazine) to share up to 10 articles from NSFW Corp. per month with anyone they wanted to, via a custom URL that bypassed the paywall.

“It’s one of the few things that I’m sad about because it really worked, but it doesn’t really fit with Pando — the idea of saying to subscribers that it’s up to you how open our paywall is, that’s one of the things I’m most proud of… we had to solve that problem of how you show people what’s behind the paywall without just giving away a bunch of free stuff, and the answer is you do what a member’s club does, you allow subscribers to share with non-members.”

And while his business may have failed, Carr said that he is still excited about the potential for investigative long-form journalism, and was looking forward to combining his passion with Lacy’s somewhat more friendly approach to fundraising. And what of Pando’s chances of success? Carr said he was optimistic, although he also noted that in general “it’s not obvious how you get a great return on investment from a journalism company.”

Post and thumbnail photos courtesy of Flickr user Christopher.Michel as well as Shutterstock / Sergey Moronov and Shutterstock / Voronin76

  1. “It is not getting any easier for journalistic organizations to raise money…” I don’t understand why there is an assumption that VC money should be accessible for a journalistic institution. A carefully grown journalistic brand is the antithesis of a hockey-stick growth business model that VCs require. It’s not a judgement on them for not wanting to fund a normal-growth business, it just doesnt fit the entire business model.

    Why didn’t Paul just go to a bank like a traditional business owner? All the “hot” content companies being funded are purely growth focused (UpWorthy, Bleacher Report of past, Vox Media) and fit into the model. A site like NSFWCorp at its core communicated that it aspired to growing like a traditional business (restaurant, manufacturer, magazine, etc.) and not a hypergrowth tech company.

    If this is Paul’s understanding of financing a business I’d be weary of reading his coverage of the technology business….

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    1. amen!

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    2. That’s a fair point. Thanks for the comment.

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    3. This was a great comment. Paul was aiming to build an entirely different business from the companies you mentioned, and in so doing, opened the door to a revenue stream that most media properties could never have achieved.

      I think that he came very close to surmounting the ‘inflection point’ necessary to build a thriving business. Closer than people thought, at least. And with fairly little capital raised, he might have gotten a great return to his seed investors.

      Sure as hell easier to get a 5x return on <$1mm raised than it is on the $40mm+ that BuzzFeed, Vox, Huffpo, and Bleacher pulled in.

      He was never interested in the VC game, nor should he have been. Sadly, an extra $500k, which is chump change to VC's, might have gotten the job done. Thankfully, we will get a second chance to find out under Pando.

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  2. Some advice for all startup founders:
    Funding is not revenue. Revenue is revenue.

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  3. “looking forward to combining his passion with Lacy’s somewhat more friendly approach to fundraising.”

    Lacy’s approach being to kiss VC and startup butt and pimp whatever coverage is necessary to remain in everyone’s good fraces. Let’s all do ourselves a favor and stop equating Pando with journalism.

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  4. Why is it that these guys get so many freaking puff-pieces in the world of startup journalism. They flat out lied to their customers — Carr told us that their fundraising had gone above and beyond what they needed, and their journalism itself is latent with adhominem spite. They’re juvenile charlatans who fancy themselves real journalists.

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  5. Mean angry people earn fear and loathing, but not respect. I don’t care what business you’re in, it’s a relationship business. When the chips are down and you need a helping hand, you need friends. Friends are earned. We all survive or fail based on those who have the capacity to support us. Carr strikes me as pit bull with rabies. You try to pet him and he bites. You try to help him and he lashes out. After awhile, you keep your distance. You wait for him to chase one too many cars.

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  6. “For Carr, whose aggressiveness towards colleagues, friends and pretty much everyone else has achieved almost legendary status in the media community,”

    ROFL.

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    1. Glad you liked that :-)

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      1. This quote is hilarious: “It certainly under-succeeded,” Carr said after he extolled his no BS attitude with respect to investors.

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  7. huh: “On a related note, Carr also admitted that his attitude towards his existing investors — such as his former boss Michael Arrington’s CrunchFund and Zappos’ founder Tony Hsieh’s VegasTech Fund, two of the company’s earliest backers — probably didn’t help increase his company’s lifespan either.”

    If NSFW’s subscriber base grew exponentially because of “relentless attacking” of Crunchbase or Vegas, Hsieh would probably have defecated in the middle of the LV strip in-order to get even more subscribers.

    Sorry, blaming everyone including your own grandma is not a sign of business acumen.
    Since we are on the topic of investigative journalism, what were the terms of the acquisition?
    Please be relentless in your reporting.

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  8. Hey Paul, maybe you should try applying to 500startup or Techstars with your “disruptive idea”? They have a lot of mentors to coach you on how to become an entrepreneur and oh yeah…raise capital! Haha

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  9. I’m not sure the word “failure” is entirely accurate for Paul or NSFWCORP.

    As a media businessperson who regularly argues with writers who have absolutely no clue how incredibly difficult it is to run a media company, I sure enjoyed watching Paul’s candid, public exploits. And I give him a lot of credit for being so transparent. And I wish that every well-known writer got to (or “had to”) spend a year as a CEO to see what it’s like. But since that is not realistic, I’m glad that Paul got to be the posterboy for such an experiment.

    And while he certainly demonstrated that being a media founder is harder than it looks, it would be gravely inaccurate to deny him credit where due. The truth is that he achieved some pretty impressive things. There are countless startups who burn through $1mm with nothing to show for it. That hardly describes Paul or NSFWCORP. He built a shockingly large subscriber base at a time when that is next to impossible, and generated more revenue from it than Snapchat makes right now. And he galvanized a lot of attention to his cause and got a lot of people excited about investigative journalism as a business. It is TBD how this will impact Pando’s bottom line in years to come, but it was a no-brainer to combine their entities, as journalism cannot exist without scale.

    The first commenter on this article is correct — Paul’s business model was not going to lend itself to a $100 million exit any time soon. But he also managed his capital very closely and played many cards properly.

    I for one am glad that he had the balls to go for it, and I think there is a real chance that Tony makes a solid return on his forthcoming Pando shares.

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    1. Thanks for the comment, Bryan — by failure, I meant the failure to build a sustainable business, which Paul agreed had not happened. That doesn’t mean he didn’t do anything worthwhile, and there’s no question that media startups are not easy to turn into sustainable businesses. He definitely deserves credit for trying.

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  10. I subscribed for a month or two. Carr’s self-aggrandizing pitch letters overshadowed the entertainment or news value of anything I ever read on the site.

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