When your online business reaches the stage where it needs some serious scaling up, what do you do?

You could try the VCs (venture capital providers). They are the helpful folk who will take 40 or 50pc of your business in return for funding your expansion. They’ll probably insist on bringing in a new (and expensive) chief executive, robbing you of much hands-on control.

They will also expect an exit payout of something like 20 times the amount they put in. This could only come from either a sell-off or an IPO (initial public offering). Either way, you’re going to lose your business progressively over a few years. Of course, you may get rich in the process, but not before making a lot of others wealthy too.

Then there’s the question of what you’ll do with the money. Spend it, of course. That, as Greg Gianforte points out in his book Bootstrapping Your Business, will just deflect you from selling your product to customers.

Human nature is such that when we have lots of cash we spend it on Wants rather than Needs. In business that translates to a fleet of white Rolls Royces emblazoned with the company name, each driven by a salesperson in a white suit. I once knew such a company. It went bust.

Podcasting
There’s a story doing the blogorounds today about a company called Podshow which has received $25M in VC funding. A number of commentators, including canny Jason Calacanis, are questioning the logic of the money stream : “What on earth Podshow is going to do with almost $25M in funding is anyone’s guess, but it’s not going to end well I can tell you that.”

Jason points out that to raise the cash they must have had “a $35-60M pre-money valuation”, which translates down to the VCs looking for a $300-500M exit at some stage. Revenues would need to be in the region of $30-50M for that to happen. Remember, we’re talking about podcasting here, a technology whose business case has yet to be proved.

He goes on to say that his own company, Weblogs Inc, raised only $100,000+ from VC Mark Cuban “and we never spent it–we made money”.

Alternatives
So what’s the alternative? If you’re a content provider like Syntagma Media — and most blog-type businesses are — there’s an obvious one.

Instead of selling half your business to strangers with half the money going back into their coffers (the money has to go back into the business of which they now own half), you could try looking for a complementary creative partner.

Content provision needs a lot of skills beyond fiddling with template code and pushing out a few posts a day. Having something worth selling and a means of finding buyers for it, require a step-change in skills from one’s first Blogspot days.

You might, for example, seek out an industry consultancy firm which could deliver great contacts and new possibilities, while also taking over crucial areas of the business operation.

That’s what we’re doing here. It’s a much better way to blast your way out from the initial stages of business construction than jumping into the arms of ravenous money-people — even if they let you.

Well, what is it? Let’s examine the problem first.

Blogs are about exchanges of information on the raw and cutting edges. The raw edge is where there’s controversy, or avant-guarde thinking, in politics. The cutting edge is where there’s innovation in tech and new media.

Blogs are like the pamphlets and chapbooks that were handed out on the streets of London from the 16th century. Usually hurriedly-written and scrappily produced, they served a real need in London then, and a similar one now in our rapidly-changing world. But they’re not commercial publishing, they are vehicles for ideas.

Blogs are not good for ad-based commercial publishing. The people who matter don’t see them that way — and they are the buyers.

When blogs are networked as content providers they are mimicking print magazines (whether they know it or not) and straying beyond their point of maximum effectiveness. Unless, that is, they go the whole hog and badge themselves as magazines, and bring in the publishing values of the print serial industry. Then they can approach the kind of advertisers who dominate printed magazines.

The difference between monetized blogs, based on Adsense, and commercial publishing is profound. The former is someone earning money (occasionally, quite a lot) from drawing search traffic through the use of keywords. The latter is a company publishing high-quality content in a mature marketplace.

The problem is both with the blog form, which is useful for highly transient content, and the perception of blogs by businesses which advertise.

Our stretching of the envelope is actually just recognizing reality, for what is the exit stategy of most blog networks? What do they want to become? Just a bunch of blogs tied together by common ownership or webring? What kind of entity is that? A hybrid. Neither one thing nor the other.

So what is the collective noun for a group of blogs? “Network” tells us nothing, especially as the synergy between blogs is often non-existent.

I’d go for “a vacuum of blogs”.

See also “What on Earth is the Blogosphere?“

Syntagma Media is delighted to announce our newest site, Horses and Events, especially as it has a sporting flavour seen through the eyes of a trainer and judge rather than a participant or spectator.

Our author, Jane Phillipps, is right in the thick of things at the major championships, like the Royal London Show and The Horse of the Year, while preparing her own horses for these events.

If you like horses and enjoy reading the views and advice of experience, Horses and Events is the one for you.

A rumour has reached us that Syntagma Media is in the process of being sold. This is not true, at least as a bare statement of fact. Since someone’s got wind of ongoing discussions, though, I may as well spell out some of the details.

For around four months we’ve been talking to a retail consultancy about a form of cooperation agreement. Initially, they were reluctant to get closely involved with a blog network. Blogs were what their kids did when they weren’t watching cartoons on TV. However, they liked our publishing ethos and the quality of delivered content.

Our move towards a magazine format has quickened their interest and we’re not too far from a deal. My preference would be for them to take a 40% stake in the business and handle the IT and advertising, leaving me to concentrate on the publishing side. It would optimize the expertise in-house.

They have huge experience of the retail business and a large number of high-powered contacts. Were this to happen it would put us in a prime position in the marketplace, especially with big stores and shopping malls.

Maybe now our small band of critics can see the full intention behind the magazine format and leaving behind the Blogosphere Game. To them I say, don’t jump to conclusions when you don’t have all the facts.