It's a real loss. It likely could have survived as a bootstrapped business, but being venture backed meant either large growth or death. Dale hints at this in the article, and the choices Maker Media has made over time make more sense knowing the pressures of investment were top priority.
I didn't know it was venture backed. I am having a hard time imagining that as a swing-for-fences, 100x-1000x return kind of business. It sounds more like the kind if thing where a cash strapped business works out a long term deal with an understanding property owner who has maker kids constantly asking for a better 3-D printer.
If you knew anything at all about their funding you would know thats not at all why they got funded. Print is crazy expensive and eventually the muse ran out.
Can you elaborate? "Print is expensive" isn't a great reason for an investment fund to pour millions into a magazine publisher. What was the potential upside?
Consider that the washington post was purchased for $250M. That was about four months current revenue. Admittedly Make Magazine is great but probably not pulling in $700M annually.
If they could have convinced a "famous tech billionaire" to purchase Make as a vanity project / property ...
The problem with bootstrapped businesses is scale. It can be very difficult to do big things like produce a LOT of high-quality original content and start an awesome family-themed DIY fair in the Bay area without money....
On the other side, one of the best bootstrapped DIY events is Defcon. I still remember when they didn't have air conditioning. I know it's not the same and it's not kids friendly- probably why it has succeeded.
My original point is, sometimes you just need to go big, so there is an opportunity to accomplish more. For an entrepreneur, failure is not always the biggest fear; Accomplishing too little can be a much bigger regret.
Subtly, bay area costs are preferred to prices paid by VC backed companies. I built a bootstrapped logistics company in SFBA, and it was brutal. Frankly, we only succeeded/survived because of a single giant deal that involved software and not logistics, i.e. 95+% margin.
What stops a bootstrapped business raising money that doesn't stop a non-bootstrapped business? Is it one of those Silicon Valley "perfect play" things?
Why would it have survived as a bootstrapped business? Potentially, they would have been able to survive on less than 22 staff, but would that not have meant they could have cut back (likely long ago) to maintain a reasonable burn rate.
I'm sure the VCs noticed long ago that Maker wasn't going to pay back their fund, so while they may have kept looking for ways to make the business a huge success, isn't there some point where the VC cuts their losses and just leaves the business to do it's thing?
VCs are focused on paying back their fund. They know that most of the companies they fund don't have enough assets to get anywhere near making a dent.
Maker has a half decent brand, and if the company isn't forced to shutdown, it is possible they could reach profitability and find a way to be a huge cash cow in the future. Or, that they would just continue on, or sell for a penance one day.
The point being, I don't think, and I'm happy to hear a good argument otherwise, that VC is to blame for the bankruptcy.
VC money gave Maker enough money that they could operate and have a shot at becoming something big. How do we know Maker could have built up what they have built without that support initially?
It's a good point: why is it so hard to scale back? Dale says in the article that he is trying maintain control of Maker assets, which makes me believe the other option is a sale. Clearly, Dale wants to continue trying to build (even a break-even) business, but it's possible that the investors want to sell the assets, preventing this, so there is tension between someone running the business and someone funding the business. Dale says "It started as a venture-backed company but we realized it wasn’t a venture-backed opportunity." Who knows if it could have survived without VC backing, but this statement seems pretty clear that the investors weren't interested in the original direction of the company, and tried to put it on a higher growth trajectory -- hence my reading that the options were growth or death. On the product side of the business, the first customers of the magazine and faire were already Makers, and the interest was very high. Then, there was a big shift to package up all of this maker stuff, and sell it to general public. It didn't work. Had the business focused on the smaller niche group, it may have been viable, but not interesting to VC since the opportunity is limited to people who are already makers. Once the VC is accepted though, it's no longer an option to stay niche, and business decisions (such as opening a physical storefront in SF) only make sense when viewed with "huge-or-bust" mentality. It's mostly speculation, but I've been exhibited at Maker Faire since 2007, have written a handful of articles for the magazine and have friends that worked there.
Rapidly depreciating assets can change this equation. In that case it’s vastly harder to scale back to breakeven.
Think of a VR arcade at a local mall, at the point the decide not to buy new equipment they have effectively already failed. The question is simply do they get more money from liquidation or continue running the business into the ground.
There’s a certain catch-22 to monetizing a community of DIY enthusiasts. Large events are very expensive and hard to do right and require deep-pocketed sponsors. But it’s hard to sell DIY enthusiasts mainstream products because they would rather make it themselves or use the open source alternative. So sponsors may have correctly deduced the spend was not moving the needle.
And in the case of Maker Faire / Make Magazine the vast, vast majority of the things the community members made were not products at all and therefore helping them monetize their own work was really a dead end as well. For a short while Make ran an e-commerce marketplace and I think they overestimated the supply of and the demand for products from their community. Etsy bought a similar hardware marketplace and shut it down when it didn’t perform.
In hindsight I believe the real opportunity for revenue in the maker space is education. I like what LittleBits is doing. I may not pay for an elaborate electronics kit but I will gladly pay a subscription fee to anyone that elps my kids think math and science are fun and cool and keeps them engaged when others kids are tuning out.
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