Update: HuffPo Finishing On $20M Round, Oak and Others; $110 Million Valuation Ballpark

20 Comments

Update 2: Nov 23, 11:25 AM PST: As we mentioned in the post below, the round hasn’t yet closed completely, and the company is looking to close it $20 million, and that may mean besides Oak and previous investors, some other investor might be coming in. And the valuation is a bit higher than we initially reported: it is $90 million pre and if the round closes at $20 million, then the post money valuation would be $110 million, a huge one in news media business by any standards.

Update 1: Nov 21, 12:05 PM PST: We have confirmed from our sources that the investor is Oak Investment Partners, the big money investment firm. Oak has invested in other digital media related companies like Federated Media, Demand Media, MobiTV, Oberon Media and others. We’re still waiting for HuffPo to respond and will have more from them when we get it. HuffPo PR has a “no comment” on the story. More after the jump.

Original post: Nov 21, 10:43 AM PST: The Huffington Post has raised another $15 million in funding, according to the Times UK, as it continues on a high growth trajectory, which also means a high cash burn….to be fair, the site’s traffic went through the roof and sky during the election season, and it has been investing a lot in expansion.

Our understanding of the third-round funding as of last week was that it hadn’t closed yet, and there was a possibility that the round may even end up near $20 million…we’re trying to get more on it now. While we haven’t confirmed a valuation, our understanding is that it is in the $100 million ballpark, post money. SoftBank Capital has been the lead in previous rounds, and Greycroft Partners has been the secondary investor, besides money from co-founder Ken Lerer and others in seed round. The site has raised about $30 million in total until now (I calculated the total amount wrong before, and wrote $40 million then..it will be close to $30 million with this round).

The election momentum surely helped them achieve the high end of what they were expecting, but does this create unrealistic expectations on the business side? The big question for the site is on two fronts: whether it can sustain the traffic post-election (the Obama administration transition process and drama is probably still helping it) and secondly, are the direct-advertising efforts scaling up, in a market that is brutal, especially for general-interest sites like HuffPo.

The Times UK story says that the money will in part be used to develop local news sections across the U.S. and also go toward more investigative journalism. I have my doubts on that exact focus, and I would venture to say not even HuffPo understands it. It has started a Chicago site, but local is hardest to scale, and with a small direct sales force at HuffPo, even harder. As for investigative journalism, HuffPo’s real daily value is in its aggregation and the spin on it, and investigative, while admirable, will not bring in the dollars needed.

More as we find out more. By the way, Arianna Huffington is doing a Q&A with Ashton Kutcher at our year-end ContentNext mixer, and even though she will be asking the questions, we will make sure she answers some too.

Staci adds: Re the questions about valuation raised in the comments: We aren’t saying what we think the company is worth. Ultimately, of course, the only real value is what someone is willing to pay for it. The estimate here is our understanding of how the company and investors value it based on the amount invested and the equity received.

For everything HuffPo, read our dedicated section.

20 Comments

Brian T

If Arianna is going to start paying bloggers to provide content for the HuffPo blog, please put my name down on the list of interested parties. A blog entry there should be worth at least a thousand dollars, wouldn't you say?

Jeremy Gutsche

Great article. In the past, sites like Tree Hugger, Ars Technica, Weblogs Inc and others have been purchased providing us with general insight that big media companies are (were?) willing to pay something close to $0.5 – $2 per monthly page view. If we assume a conservative number of $0.5, we would end up with a mid-2008 valuation of at least $75 million, so the $110 million here does not seem out of the ballpark.

I dive more deeply into the valuation here:
http://www.trendhunter.com/trends/how-much-is-huffington-post-worth

Karol

"If HPost couldn’t breakeven during the height of the election cycle and couldn’t throw off big cash, why would it reach profitability during an off-election year with declining ad revenues." Because you see this as an investment, and are not shackled by left wing idealism. People who invest in the HP are of the mindset the same of a religion person who passionately feels the need to give to a cause to "save the world". If you read how ignorant the idealistic-liberal comments are after a HP story, you will easily, easily understand where the money comes from. For example I tried to educate some ignorant HP commenters about what the central bank is, how inflation and lose credit markets work. They were insulted that Bush is not the cause of the economic crisis and, disappointed at losing the argument, they immediately turned to ad homoinem attacks. I would have expected a "thanks you for educating me", but there is not accounting for "open minded" people, even when Bill Clinton (Admitted to bad economic policy during his term on Johnny Carson) and Obama agrees with me(talk about decades of bad policy in his presidential win speech). The point is it take a seriously mental person to ignore reality and facts because they *feel* their way through problems and this is a small percentage of the US that buys into the type of seriously misleading stories on the HP. Airhead America for example is a loser for the same reasons, their stories are left wing hate. This is why Al Franken is desperately fighting for his senate seat as AA owes him back wages…..this is also the reason why the more left a journalist/outlet is the more they think journalism should get its revenues through taxes like in Blighty. The notoriously liberal BBC would have went out of business years ago if it had to function without tax payer support for its left leaning agenda.

jb

I guess it bubble 2.0. While HuffPo may or may not be overvalued, remember that the Times has over a billion in debt, and has junk bond ratings, so that influences it's valuation as only $750 mil market cap. Plus, its primary industry, newspapers are heading down and is saddled with all that expensive infrastructure, retiree benefits, etc. So the comparison between HuffPo and Times is just a revenue to revenue one.

Analyst

The valuation makes no sense.

Do you realize that for $110 million you can buy 100% of the outstanding stock of Lee, MediaGeneral and A.H.Belo?

Wilmington Jenning Billingswor

What's funny is that the NY Times, America's most storied news brand, with 100 years+ of chronicling the world, with $3 billion in revenues, is worth $750 million. These venture investors don't know what they are doing. The HPost community is probably valuable, but communities are very tough to monetize yielding appallingly low CPMs. Now with over $35-40 million in liquidation preferences, I don't see it. If HPost couldn't breakeven during the height of the election cycle and couldn't throw off big cash, why would it reach profitability during an off-election year with declining ad revenues. If you can't do it in good times, you definitely can't do it in bad times.

lou

o wonder the left wingers fought to get themselves elected its all about money i guess not the american people only certain ones what a joke.

Thomas

Its pretty basic math. The investor(s) gave them $15 million for X% of the firm. The value is $15,000,00/X= VALUE
For those still math challenged…
if it was 50% then 30,000,000 post money value
If it was 25% then 60,000,000 post money value.

invitedmedia

watch msnbc pick this thing up.

i'm told arianna recently sat in for ms. maddow.

$100M seems reasonable to me.

jb

How the valuation the investors made isn't going to be released since it's not a public company. If you own 100% of a company valued at $50, and then you get an investment of $50, your company is now worth $100 post money, and you now own 50% of it.

John Mecklin

Staci: Thanks for your clarification. Now the story makes sense re valuation.

Abe

What does this mean, "in the $100 million ballpark, post money."

"post money."

Huh?

John Mecklin

It seems to me that if you're going to make a valuation estimate, you have to say how you came to it. I'm not saying Hufflington Post is or isn't worth $100 million. I'm saying that when you're writing about a private firm, just spitting out a number isn't particularly persuasive. I've seen the NT Times use the number $200 million. Given the likely reality — HuffPo is losing money and will be for some time — I don't see why anyone would say it's worth anything like $100 or $200 million.

But I'm willing to be convinced — with facts, rather than just bald assertion.

John Mecklin
Editor, Miller-McCune magazine

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