How Do We Grow and Fund The Red Line Project?

Last week Sally Duros spoke to our online journalism class about different strategies for funding an entity such as The Red Line Project. As a former Chicago Sun-Times editor and current advocate for L3C newsrooms, Duros had great insight on nearly all aspects of the journalism world.

The point of Duros discussion that was of the most interest to myself as a potential entrepreneur and “owner” of The Red Line Project was her explanation of what L3C is. Low-profit, limited liability corporations (L3Cs) are a new and innovative way to create early funding for a project such as a hyper local news site without having to immediately identify as a non-profit. Duros described L3Cs as projects that are “for profit with a non-profit soul.”

L3Cs differ from non-profit organizations in that they offer investors a return on their investment. This type of business model allows for less risk for investors and more freedom for the L3C itself. Investors allow L3Cs to get off the ground until they can start generating revenue of their own. With the promise of eventually operating self-sufficiently L3Cs are given the freedom to do and stand for whatever they believe in. There are no ongoing sponsors to please.

Investments for L3Cs typically come from people who truly care about the organization, the people involved and/or what the organization stands for. In the case of The Red Line Project investors potential investors could be individuals and foundations that stand for community journalism, student journalism, or even the city of Chicago itself.

I think this would be a very smart path to research as we make more and more progress towards developing The Red Line Project into a fully operational news site. In an age in which online journalism, specifically hyper local journalism, is growing at such a fast rate I think it would be limiting to file The Red Line Project as a non-profit organization. It might allow for early success, but I feel that the website would be granted more freedom in its content and growth as an L3C.


2 thoughts on “How Do We Grow and Fund The Red Line Project?

  1. Mike Reilley says:

    Outstanding summary and a nice job of relating it to our project. Small tweaks: hyperlocal is one word; use toward rather than towards and rework this sentence: In the case of The Red Line Project investors potential investors could be individuals and foundations that stand for community journalism, student journalism, or even the city of Chicago itself.

    Otherwise, a very, very good job.

  2. sally duros says:

    Katie – good job! But still I have a few clarifications ….

    A clarification, an L3C is a low-profit, limited liability company [not corporation]. When you say the L3C would not “immediately identify as a non-profit” you imply some transfer to non-profit status. The L3C is a business and will always be one.

    Good job on your third graf: “L3Cs differ from non-profit organizations …..’ But to be very clear: What an L3C offers investors is potential seed investment from a foundation. This investment takes on the greatest level of risk, making the other tranches of investment more attractive to other investors. Investors assume/require that the L3C business will generate its own revenue and be self-sustaining. To a foundation committed to making systemic change for social benefit, the sustainability of the L3C is the carrot. When a foundation makes a grant – it is spent and gone – one hopes having created some social good but the NPO will have to come back for another one in not too much time. With a socially beneficial business such as the L3C, the foundation is hoping for a sustained revenue stream and a growing business that will not need grant-like future support.

    On your graf: Investments for L3Cs typically ….
    Think about investors in The Red Line Project as possibly being a community foundation who wants to see some kind of change in the quality of news and information delivered to people who live in the communities around the Red Line, as well as the businesses that are clustered around the Red Line and the people who use The Red Line to travel to and from the Red Line. All of these could be investors. And there could be more …I’m not sure about government investment in The Red Line Project. Then the news organization could risk becoming a communications tool of the CTA – might be disadvantages to that! Or might not. hmmm?

    Overall, good job, Katie. By jove, you got it!

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