Earlier this month, Los Angeles-based HitFix (www.hitfix.com) an online news site focused on entertainment, announced it had raised $2M in a funding round. The firm's CEO and co-founder, Jennifer Sargent, has an interesting background, most recently serving as an executive at Variety/Reed Business Information. She also has served at DoubleClick, had a stint as an investment banker at JPMorgan, been a venture capitalist at Bertelsmann Ventures, and started with an Electrical Engineering degree before her MBA. We spoke with Jennifer about what HitFix is looking to do, her own background, and how HitFix is different from the many celebrity gossip and news sites out there.
What's the story behind HitFix and where do you fit in the entertainment news landscape?
Jennifer Sargent: HitFix started two and a half years ago. It came about, because we saw a gap in the market around entertainment news written for the 18-34 consumer segment. There are trade publications such as Variety, Hollywood Reporter, and Deadline at one end, and gossip celebrity news at the other end. But, there are not a whole lot of outlets in between which are breaking news for the 18-34 year old consumer. My previous background was at Variety. What I saw there, was that there were quite a number of consumers coming in, excited to stay on top of their favorite entertainment news, artists, and actors and actresses. But, very quickly, they started to get to the lawyers, the hiring and firing, all the kinds of news that a trade publication has to cover, but which a consumer absolutely does not care about. As a result, consumers would go away after they hit that information. We thought it was a real opportunity to bring in some taste-maker editors, who could write specifically for that audience, and break news.
How did you decide to launch HitFix?
Jennifer Sargent: Our timing was interesting. It was the fall of 2008, when Lehman Bros. collapsed and the stock market was crashing, when I chose to leave a steady, paying full time job to go to HitFix. However, it was an idea and concept which had been brewing for awhile, and besides, I had a personal interest in starting my own company and wanting to be an entrepreneur. The driving force for me was the gap in the market which I saw, a disruption in media consumption patterns. Basically, that disruption is 18-34 year olds have changed how they consume media. Everyone knows this. In the last decade, they're no longer reading print, they're going online for news and information, they are using Tivo or a DVR to pull the commercials out of TV, they've got their ears glued to their iPod instead of the radio. They are getting more an dmore challenging to reach. However, 18-34 year olds have been in high demand by marketers, TV advertisers, and consumer companies as an audience.
My business partner, Greg Ellwood, and I saw that disruption, and also saw an opportunity. Money was moving from print to online, from broadcast to online, and from radio to online. There was an opportunity to capture htose advertiser dollars, and do it by serving up a product that was compelling to both advertisers and consumers. We thought the gap was big enough and exciting enough, that we both quite our full time jobs. We didn't see anyone else in the market doing what we wanted to do on the entertainment side. Part of what we do differently, is we leverage original content and breaking news as a hook to get into the site, then quickly get into engaging applications, such as localized events, original videos, mobile apps, fantasy/reality TV leagues, and more. We're constantly serving up what's next in entertainment for consumers and fans, to keep them hooked in. It's a very exciting opportunity. We're going after a large and fast growing market. It's a $10 billion display market here in the U.S., and entertainment as a whole is rapidly changing and growing. It was an opportunity I didn't want to pass up.
How have you managed the high cost of creating content?
Jennifer Sargent: That's a great question. We've done two things. One, is we've cherry picked amazing editors we knew could break news, get exclusives, and provide access. We were able to cultivate over a half a dozen of them to start, which basically gives us key coverage around movies, music, and television. We're not using the fast food model of content generation and generating thousands of articles a day of 200 words an article. Instead, we're going for quality over quantity. We have done that by picking people who can get special exclusives and breaking news. What we've also done from other content and news sites, is we've paired engaging application with the news. Even though someone might come into the site for breaking news stories around a certain actor or actress, we've been able to get users beyond that first page view into their second, third, fourth, and fifth page view, all because of the applications we've tied with the content. That makes the model for content work a little better than just breaking news, where someone just comes in for one page and leaves.
You've got an interesting background – can you talk about how you've tied together a background in technology with an engineering degree--we see you have an electrical engineering degree--investment banking, and, now online media ?
Jennifer Sargent: It's funny. I started with electrical engineering as an undergrad, because I was truly interested in math and science when I was 18. I studied it, and very much enjoyed it, but by the time I got to my fourth year of school, I figured out I really didn't want to be that engineer in the lab, designing microprocessors. I ended up exploring other things. I was very interested in business, and always had been, so I got a job on Wall Street working at JP Morgan in investment banking, in technology M&A. It was sort of a departure from the hard core technology and engineering into the business world. Investment banking was a great training ground. It was the late 90's, and everything was exploding, there were lots of IPOs and acquisitions, and it was a very exciting time to work in that space. I eventually left investment banking for an opportunity at DoubleClick, the number one ad serving firm, which was a marriage of media and technology. That ended up being a great training ground to learn about online advertising as a revenue stream. It really showed me how you can leverage the power of an online platform for marketers, helping to convince marketers that leveraging the web was a good way to spend and invest their money. You'll recall that at the time, it was all bricks and mortar, and those firms--Home Depot, Coca Cola, and so on--weren't spending a lot on line at the time.
That was back in 2000/2001. It was definitely an interesting lead up to what we're doing not at HitFix. After that, I had a personal interest in moving abroad, and DoubleClick was going to give me that opportunity. I ended up planning a move to Hamburg, Germany to help with their European operations. However, right before the transfer, they decided to sell their international division, and I ended up hanging out in the U.S. longer than I had planned. At that point, I had planned my personal life around getting international experience and moving to Germany. So, I tried to figure out what I could do with my skill set, in engineering, investment banking, and operations, and figured out I could do venture capital. I always wanted to be a venture capitalist, and see the financing side. That led me to a venture capital firm, Bertelsmann Ventures. I worked in Hamburg for about two years, making investments in early stage media and technology companies in Western Europe. I quickly realized that I did not want to be the one financing things, I wanted to be on the other side, as an entrepreneur. It was an eye opener. I decided to go back to the U.S. and business school, applied and was accepted to Harvard Business School, and spent the next two years there, also working on a business idea which won second place in a business plan contest.
I ended up deciding not to do that, and took a full time job at Reed Business Information, which is the parent company of Variety. I ended up overseeing online marketing and development across Reed's website and brands. Variety was definitely the largest and sexiest of those publications. I ended up spending a lot of time at Variety, thinking through growth strategies. It was a great opportunity to get a deep dive into the entertainment space, which eventually led me to some of the things we're doing at HItfix now.
Why the new funding round now?
Jennifer Sargent: We did our initial fundraising in the fall of 2008, and launched in January of 2009. The reason we decided to do this financing now, is we've gotten some amazing traction over the past two years, both on the revenue and traffic side. We felt that we have proven our model, in small scale. The formula is working, and we have combined editorial insiders with innovative applications and technology, and reached that highly sought after 18-34 audience. We're also getting traction with studios and TV networks, and though this would be the right time to step on the gas and accelerate our growth. We've been able to triple in size over he last year, continued our level of growth, and we plan to accelerated beyond that as we go into the next twelve to eighteen months. Now was really the prefect time to raise funding, because we have a great story, we're hitting our milestones, and from the market perspective, investors are coming back into the market. The interesting thing is we got our funding exclusively from angel investors. Overall, I say the overall sentiment is a lot more positive than back in the fall of 2008, when I was doing this for the first time.
What have you learned so far in launching your business?
Jennifer Sargent: There are so many different things it's hard to narrow it down to one or two. I would say that on the business side of things, no matter how buttoned up a plan you have, there are always externalities that can impact your business. For us, it was the economy. We were really lucky that everything came together for us. But, back in the fall of 2008, when we first raised our seed capital, we had no idea what was going to happen in 2009 and 2010. As an entrepreneur, thinking about fundraising and planning, there are just things you can't plan for, which are entirely out of your control. My takeaway there is you have to have some cushion, a plan B, if it takes longer to develop your business. That's not because you didn't execute, but because the market is changing and the economy is slow.
We were very focused on having done this before, and how much it cost to launch a website, how much editors are paid, and how much to sell things--but there are all these other things beyond your business that you have to keep in mind. The other thing I took away, is how much I've learned about angel investors. I was not all that familiar with angel investors, and having worked on the venture capital side I didn't not realize how many opportunities there are on the angel side to get funding from individuals and angel groups. I was completely unaware, going into this process, of the large amount of capital available on the angel level.