Atlas Obscura wants to be profitable before raising funds in a tricky media market


Atlas Obscura wants to turn a profit this year before raising another round of funding, at a time when publishers face lower valuations and more selective investors as deal activity slows.

Last year, Atlas Obscura more than doubled its revenue to $18 million, from $8 million in 2021, CEO Warren Webster said. Its travel planning business doubled its revenue year over year and became profitable in the fourth quarter of 2022. Its entertainment business (books, television, movies and podcasts) was already profitable.

But the next challenge is to make its digital publishing business profitable this year before seeking more investment. Webster declined to share how much money Atlas Obscura lost last year.

“Overall, we expect to be profitable this year. That’s our plan,” Webster said. “Probably the most significant change within our business is that we are thinking more about sustainable profitability rather than just top line growth at all costs. I think this may be a healthy correction from the days of pushing, pushing, pushing on the top line and not caring so much about the bottom line. We have solved this problem and we are ensuring that every project we do and every department of our company is profitable or on the way to profitability.

Atlas Obscura is currently looking for a new Head of Brand Partnerships and Director of Media. Webster said the company was on track to achieve profitability by the second half of 2023 and part of the fourth quarter of 2022 was profitable.

Atlas Obscura restructured its travel business to reduce costs by outsourcing some operations and “eliminating a few positions” last August, Webster said. He would not say how many people had been made redundant or how much money the moves had saved the company.

A former Atlas Obscura employee who left before the layoffs told Digiday, on condition of anonymity, that he had heard the company was struggling to raise investment. Atlas Obscura’s last funding round was a Series B round in 2019, in which it raised $20 million from investors like Airbnb, A+E Networks, and venture capital firm New Atlantic Ventures.

Webster said he was “taking the temperature” of investors right now, but was waiting for the next funding round until the company and the market had improved.

“We want to make sure we are growing at a time when the business is profitable and growing organically. It’s always the best time to relaunch. And when the market is in a place where there will be the most favorable conditions. So we’re taking it slowly,” Webster said. “I think by the middle of next year, my prediction is that things will become much clearer in the venture capital and funding world.”

Resize while waiting

Atlas Obscura is not alone in this approach. Many publishers are feeling the pressure to scale their organizations, according to conversations with two media investors and a consultant. The recent wave of layoffs in the media is also proof of this.

Data from capital markets research firm Pitchbook also confirms this: there have only been five venture capital deals in the United States involving publishing companies (defined as service providers of print and internet publishing, such as newspapers, magazines and books) in the fourth quarter of 2022, with a total transaction value of just $4 million. That’s down from 15 deals in the same quarter of 2021, 14 in 2020 and 13 in 2019. It was the lowest number and value of deals in the fourth quarter since at least 2015.

Provided by Pitchbook

“[Private equity] Everywhere, companies are scrutinizing their potential investments more closely. I think we will see some potential investors not committing to new investments until they see how the market performs in the next [three to six] months,” Andrew Perlman, co-founder of venture capital firm North Equity and Recurrent Ventures, said in an email.

Sam Thompson, senior managing director of mergers and acquisitions advisory firm Progress Partners, called Atlas Obscura’s strategy “weighted”. He said now is the time for media companies to take advantage of the market downturn. to ‘clean up’ their businesses before investors return, especially companies seeking interim and subsequent investors.

“I’m sure publisher CFOs are working overtime right now to restructure their businesses to be as strong as possible, and if not profitable,” Thompson said.

Perlman predicted that there will be smaller fundraisers in the future. For now, most companies are focused on “optimizing their operations and profitability,” he said.

Regarding the type of businesses Recurrent is looking to invest in, Perlman said the company wants “brands that are authoritative in their space, passionate, dedicated audiences, a diverse revenue model and strong partnership opportunities.” . The company’s M&A strategy focuses on deals that would add value to its existing verticals, as it monitors “market developments”, he said.

Notably, venture capital firm Lerer Hippeau – co-founded by Ben Lerer, which sold Group Nine Media to Vox Media last year – no longer invests in new media ventures, and media is not currently a sector. priority for the company, a spokesperson said. The company has recently invested in areas such as Web3, healthcare, data and software platforms. Lerer Hippeau’s last investment in a content production company was in 2020, when he invested in Meet Cute, a company that produces short-lived audio romantic comedies, according to his website.

What this means for assessments

Last week, CNBC reported that Vice News was resuming its sale process with a much lower valuation at less than $1 billion, down from $5.7 billion in 2017. The company was seeking a valuation of around $3 billion. when she attempted to go public via a special purpose acquisition. company in 2021, but instead raised $135 million from existing investors.

Vice’s valuation drop came as no surprise to media investors Digiday spoke to, as valuations continued to slide amid an uncertain advertising market and high interest rates that slowed markets. private. Because demand isn’t high and competition is lower, the “irrational” prices people were paying for businesses have come down to earth, Thompson said.

But Vice’s valuation contrasts with the sale of Axios last August to Cox Enterprises, which valued the company at $525 million, about five times its projected 2022 revenue of more than $100 million. However, Axios was profitable – Vice is not (although CEO Nancy Dubuc told The New York Times that the company aims to break even this year). Thompson said the sale of Axios and the valuation of Vice “will be used as a market [comparisons].”

Times like these — when competition is low — are also when traditional media companies buy assets to grow their own businesses, Thompson said. Insider reported this week that Vox Media is looking to raise $200 million to do just that.


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