Jennifer Brandel
Jan 24 · 18 min read
Left: Morten Andersen, CEO of FST Invest. Right: Jennifer Brandel, CEO of Hearken. (Photo by Cecilia Valsted)

Snapshot: FST Growth is a Danish investment company, which is investing in Hearken’s growth in the U.S. and opening an office with Hearken in Denmark to serve European partners. For those interested in the future of media, startups, financing, founder and investor perspectives, read on.

Securing Support for Hearken’s Future, Part I

I didn’t even see the first message from the Danish investor who is now backing Hearken’s future — including our new expansion to Europe.

Morten Andersen first reached out to me in September 2018 via LinkedIn, curious about investing in Hearken, but I don’t check that platform often, and missed his message. When he found an email to reach out directly, I wrote him back a kind note that essentially said “Thanks, but no thanks. We’re not interested in Venture Capital. It’s not the right type of fuel for our growth.”

If you aren’t aware: Venture Capital is people investing other people’s money, and betting on at least one of the companies they invest in making 10x their money back to make up for the companies that don’t pan out. The pressures this creates for founders is a need to grow their company quickly, sometimes at all costs, and VC investors can have a lot of power and influence. (Read this New York Time’s piece for context on why VC isn’t the path we’re interested in.)

To be clear: my company Hearken was looking for a cash injection when Morten reached out. Coming into our fourth year of existence, we’d learned, grown and achieved pretty remarkable things with comparatively little investment. With $1 million raised through a combination of angel investors and strategic investors, and we reached more than $1 million in recurring revenue by our third year of life. We did this despite operating in a market that’s experiencing unprecedented disruption and consolidation, and that has often been slow to rethink its business and value to the public and resistant to change.

Some definitions of investors:

An Angel Investor puts in their own money. They invest for a variety of reasons: e.g., because they believe in the founder or the mission or the market, and they believe the company can make better returns than other vehicles for placing the money. Angels typically exert less pressure on founders to grow fast and grow big.

A Strategic Investor is a group or company who invests because they can benefit from a company beyond just making their money back. They are in an industry or have a mission that is strategic and can learn learn from or partner with the company they’re investing in. Typically strategic investors are looking for a return + business alignment.

When Morten came along, I had already reached out and had conversations with no fewer than 54 potential investors, many who are committed, very publicly, to investing in the future of media. The response to my pitch was always enthusiastic (“Everyone just loves what you’re doing here! We’re huge fans!”), but did not result in the investors writing checks.

I chose to focus on investors with media experience, which of course, limits the pool. One reason is that this industry is complex, and to understand the nuance of what Hearken does takes many conversations, and all those conversations take time I don’t have. I also didn’t reach out to investors not aligned with our industry because past experience showed me by and large, they are very skittish about investing in media. One said to me once, “Why would I invest in an industry that essentially has cancer unless my business is selling caskets?” Ouch.

So I focused on the investors who do invest in media. Here is a snapshot of their responses:

  • We’re going through a strategic shift in our investing thesis, try back in (6 months, a year, etc.)
  • We just closed our venture arm and we now only give grants to nonprofits
  • We only invest in B2C
  • We only invest in these countries / markets
  • You’re a tech platform, we only invest in content
  • You’re not enough of a tech platform
  • We only invest in curbing misinformation
  • We only invest in companies working on media trust
  • We only support investigative journalism or hyperlocal journalism or …
  • We’re focused on AI, big data, machine learning to solve media’s problems
  • You’re too far along, we only support early and seed stage
  • You’re too early, we need to see more traction first
  • Your vision is too ambitious

Learning where we don’t fit — and where to go next

Upon a fair amount of reflection, I came to realize that most investors are operating in a paradigm we don’t fit into. We operate at the systems and process (how) level, not the product (what) level. Despite the fact that multiple third-party studies have proven our theory of change improves trust, yields more paying subscribers, attracts more advertisers and sponsors, produces blockbuster-performance journalism, makes journalists happier, and empower the public across every type of media (newspaper, TV, radio, digital, in 17 countries), blah blah blah … our overarching approach and execution just does not fit into most investor’s boxes.

And I get it. Investors carve out a niche they can wrap their heads and expertise around (AI, hyper-local, big data, misinformation, automation, X region, Y topic, Z format). I don’t blame them. It’s hard to justify which investments to make without some constraints. It’s hard to prove you’re effective at moving the needle on something when there are multiple, interdependent needles to move. But given the volatile, uncertain, complex and ambiguous environment we’re in, I’d expected to have an easier time finding media investors thinking in new ways, or at a higher altitude.

I say all of this not to beat up on investors. Investing in a complex system experiencing unprecedented chaos is hard. I am sharing my experience in the hopes that other entrepreneurs pursuing unorthodox or novel ways of solving for the complex problems of journalism find the aligned capital that we all so desperately need them to find. Just doing more of the same, even if it’s faster or cheaper, hasn’t been working out so well, I think most would agree. So not only do we need companies trying new things, we need investors willing to experiment and broaden their playbook. I’m giddy to introduce you to one shortly. But first, context …

How Hearken Even Got To This Point

Back in 2015 when I started the company, I had no clue about corporate forms, let alone the world of financing. I’d been a freelancer all my life, hustling in a variety of contexts and industries and working to support a staff of one (myself). I had no idea if this company should be a nonprofit or a for-profit company, and if a for-profit — what flavor? LLC? S Corp? C Corp? Hearken existed to fulfill a deep societal mission: to help journalism evolve to become audience-first and better serve its purpose in the digital age. But our services also had a technology component, which meant there was the possibility of scaling.

We found ourselves in a confusing place between two concepts that, in the world of finance, are inconveniently viewed as opposite ends of a spectrum: either maximize social good or maximize growth. The idea being good = nonprofit, and growth = for profit. Neither route felt entirely right but the bipolar state of capital markets (currently) forces founders to pick one. And other forms like B Corps and Public Benefit Corps are still so new, they require finding investors with experience or who are at least willing to take a risk on a different model.

Founders who building companies with both social purpose and scalable profit often find themselves in the valley of death, between two extremes of capital models. (Illustration: Jennifer Brandel)

Adding to Hearken’s identity crisis of “do you care about mission or profit?” (both!), was the nature of the company. Yes we have a technology, but we’re not a “tech company” per se. In order to get maximum value out of our technology, we learned that culture and behavioral change are an equally, if not more important, aspect of the work at this point in the media industry’s evolution. Early on, we tried the plug-and-play, open-source approach and newsrooms need far more than a widget to transform. It became clear newsrooms needed ongoing support, training and guidance to change habits.

Because of this, investors and funders wanted to know: are you a technology company or are you a consultancy (both!)? A consultancy can be a highly profitable business, but is kryptonite to venture investors because it’s not “scalable” like technology is scalable. Growing a consultancy means adding more humans, and humans are (amazing!) expensive.

I ended up choosing to start with the classic Delaware C Corp structure in 2015 two reasons. One: it’s the form investors tend to be the most comfortable with (read: best chances to find financing). Two: the accelerator I got into (Matter) required that form because of point one.

The Birth of the Zebra Ethos

From left, Mara Zepeda, Aniyia Williams, Astrid Scholz and Jennifer Brandel of Zebras Unite. (Photo by Adrian Hallauer for The New York Times)

Whenever I’m presented with a dichotomy of either “you’re this or that” or “you need to choose X or Y” I always have to ask: Why? Why do I have to choose? Can’t both be true?

In 2016 a fellow traveler on this road to creating companies with a deep social mission and a for-profit structure, Mara Zepeda, and I started writing about our values and how hard it was to find investment to match them. At first we just focused on pointing out what we saw was wrong with the systems in place, but a year later we had formulated a vision for what wanted to be born instead. We called the types of companies we wanted to build “zebras.” This was in contrast to the “unicorn” culture that had swept the global market — of investors looking to strike gold in the form of companies that achieve a massive valuation and exit. Think Uber, Facebook, Snap, etc.

Courtesy of Zebras Unite

We chose the name zebra for a number of reasons. The animals are not only real, but they are also both black and white — for purpose and for profit, and they survive through working cooperatively rather than competitively. We weren’t interested in “crushing” the competition. We were interested in systems change. We didn’t believe in the myth of the genius founder and hoarding power, we believed in the power of strong networks, generating power and sharing it. (To see a deeper explanation — check out our post Zebras Fix What Unicorns Break.) Fun fact: as my friend Anders Waage Nilsen pointed out to me recently, “zebra” is also a portmanteau of Mara and my last names: ZE(peda) + BRA(ndel). Pure, beautiful, coincidence.

Since Mara and I first started writing, the ideas we and many others have put forward are becoming less radical and more accepted, even picking up notice from The New York Times. And since we started writing, we’ve grown into an actual organization, cultivated an online community of thousands across the world who also are looking to solve this gap in the capital market.

But nobody has solved financing for zebra companies. These companies come in all stripes (pun intended), and recognizing the patterns and their potential takes expertise, insight and time. Thankfully, there are zebra funding experiments happening by brave founders who won’t compromise their values. But it’s still going to take years to develop and test this new taxonomy and create credible recommendations for companies of many types and at various stages of growth.

Securing Support for Hearken, Part II: The Zebra Deal

OK — zooming back in from the overall funding ecosystem to my company, Hearken. In addition to trying to find investors who think about media from a systems-change perspective (read: very hard), I was also hunting for investors who thought differently about capital (read: nearly impossible). But then came Morten’s email, which turned into a zebra arrangement that I never could have imagined.

Morten leads FST Growth. It’s not an ordinary fund, and he’s not an ordinary VC. FST Growth was started by the second oldest media company in Denmark. As leaders in the Danish media industry increasingly recognize that their organizations were facing seismic change, they decided to do something about it, and created a separate investment company to actively explore solutions.

Courtesy FST Growth

Morten joined as CEO for FST Growth after 10 years of global corporate career with McKinsey & Company and global wealth manager UBS. The situation analysis was clear: at this critical stage, securing even extraordinary financial gains on the capital under management would hardly make up for any further deterioration of value in the legacy company. With that, a natural purpose arose: use the money to help qualify and develop answers to these critical questions for news media:

  • How can we stay relevant in this new landscape?
  • What does a new sustainable business model for media look like?

To do so, he’s investing in entrepreneurs and startups that have shown traction and commitment to helping news media evolve into the digital age.

While he could have invested in Hearken as a straight equity deal, hoping we could make our way overseas to help his market — there were limitations. Hearken’s staff is based in the USA, and while we have some European clients, we’ve relied on pure word-of-mouth to find partners in this market. The time zone difference also makes it difficult to be as available as we’d like to help shepherd change within those newsrooms.

So we did what people trying to do something new must do: we got inventive. Together with FST Growth, we’re starting a new company: Hearken Europe. It will be 50/50 owned by Hearken INC (the “mothership”) and FST Growth. It will be staffed by Europeans who know the market, know the culture and can serve these newsrooms more easily. (We’re hiring! See www.wearehearken.com/europe for details.)

Hearken Europe will operate out of the beautiful old train station in Odense, Denmark. Our first employees will likely live and work somewhere in Northern Europe. (Photo by Jennifer Brandel)

To help the mothership in the USA meet our growth demands, we’ve structured another deal: a low-interest, royalty-based loan to help us hire key roles to grow that we’ve been wanting to fill for a long time. (See www.wearehearken.com/careers for openings.)

What does this mean? It means Hearken Inc. can grow without changing the current ownership structure of the company. We can own our future, not sell more of the company at this early and critically important stage, and stay true to our mission. At the same time, FST Growth will earn on the value generated in this new market, and thereby secure a financial return on the risk and effort invested.

In effect, Europe will soon have access to the valuable services we offer in ways that will serve their needs more effectively than we can deliver from the USA. No doubt the team at Hearken Europe will generate valuable insights that help make Hearken more effective with every partnership we have, regardless of the location.

This clever structure was born out of two cross-Atlantic visits, countless conversations, 5 sets of lawyers, two tax specialists and a shared vision to help media globally. Suffice it to say, this was not as easy as a traditional equity deal. But doing something new and worthwhile is never easy, as we all know.

Morten is the kind of investor media startups dream of — caring, candid, creative and with deep business and operations experience in building and growing successful endeavors.

So I thought it’d be useful to other investors, founders and folks working in media startups to get a glimpse inside of his brain and this unique approach. Who knows, maybe he’ll inspire others to get a little more creative?

And now, meet Morten Andersen: our zebra investor

JB: Why does FST Growth exist? What are your goals?

MA: In short, FST Growth is a purpose-driven investor and growth accelerator on a mission to help transform the global scene of news media corporations for the better. Through our parent company — Fyens Stiftstidende, part of Danish media conglomerate Jysk Fynske Medier — we draw upon a 250-year-old commitment to serving the public in the communities we operate. With FST Growth, our aim is to preserve that legacy by investing in visionary entrepreneurs committed to bringing news media into the digital age.

JB: What kinds of companies is FST looking for?

MA: Beyond looking for visionary entrepreneurs, we’re looking for startups that can help answer the strategic challenges of media, e.g. helping to define new sustainable business models, how to drive deep reader engagement or how to monetize on digital readership. In essence, we believe investing into accelerating the sustainable transformation of the industry bears a much higher value than just securing a one-off financial return.

JB: What was your initial impression when I wrote back to you and said I wasn’t looking for traditional VC capital?

MA: It was a turning point for sure as it forced me to articulate what we stand for (read: I had to fight for it) while also giving me a chance to stand out. The traditional venture capital approach to financing startups has become such an ingrained practice that walking a different path requires a whole new language, financial models, metrics, etc. I never really felt part of the traditional venture capital industry, but there wasn’t an obvious alternative headline I could assign to without sounding like a philanthropist. So it was interesting how that sparked a process of refining my strategy and putting words to it.

Obviously Hearken represented a prime example of a company we should invest with (and I say with instead of in, because we share a purpose now). On top, the ideas about the zebra movement made a lot of rational sense to me and fitted the framework I had yet to articulate as an underlying scheme for our investment strategy. As an example, I had wanted to launch a new website since I joined, but I was grasping for the “true north” in my communication. I found that after speaking with you a few times, upon basically asking myself: “How do I explain myself and my values so I can appeal to someone like Jennifer? What makes FST Growth stand out from other investors and how do we make it clear that purpose is more important than short-term capital gains?”

JB: It seems to me that the zebra ethos resonates with Nordic culture. Do you agree? And if so, what about it?

MA: I think the zebra movement applies universally. It’s obvious that at this moment in history there is an increased appreciation that optimizing for financial gains only will not make the world a better place, nor will it make us as human beings happier. And we see that across borders and across industries.

I think the fundamental philosophy underpinning zebras matches with Danish culture. We pay a lot of attention to balance in society: embracing pluralism, gender equality, balancing personal growth with careers, and looking at the whole picture. We don’t chase growth for growth’s sake; there’s usually a social outcome involved.

JB: How do you think your Nordic culture changes other practices in how you approach this work as an investor?

MA: I think about building ecosystems rather than portfolios. The value-driver of an ecosystem is the pursuit of bringing pieces together to make 1+1 = 3. A portfolio approach is more focused on chasing the individual development often at the cost of others. Hence, the role of the investor changes from extracting value (to pay for what goes down the drain) to contributing value to the system for the system as a whole to advance.

JB: So how did an ex-McKinsey corporate guy like you come to this realization?

MA: Well, as a natural evolution, I guess. During industrialization we created tremendous wealth and prosperity. Optimizing for financial gains has been the guiding paradigm of all evolving production systems, whether in banking, automotive, chemicals or other industries. The natural end game for any strategy book or consulting firm has, for years, been about how to beat the market and first make billions. Clearly, society has reached a point where distribution of wealth now causes bigger conflicts than getting to wealth in the first place. In other words, now that we reached the finish line that we dreamt about decades ago, we naturally seek new ways of fulfillment.

Personally, I had found myself in a corporate environment that on one hand secured a good life for my family, however, also had drained me mentally with literally no connection to a bigger sense of purpose.

JB: You strike me as positioning FST Growth very differently from a lot of the other investors I’ve been talking to. How did this happen?

MA: My view is that you represent the entrepreneur of the 21st century. You care about financial gains only as the means to something, not as the end point. So if that’s how you tick, how do I attract you? It’s not promising you a 10x return on the money; it’s not going to matter to you. That challenge you presented to me by articulating the zebra ethos started a whole domino effect — I had to ask myself: How do I attract the winners of tomorrow? Not by using the same language, metrics, and practices like we used to. So it’s about reinventing the outcomes. I guess the popular term today is design thinking.

However, there is actually also a link back to original macroeconomics concepts like the Pareto efficiency. The basic idea is that when you’re trying to balance different sets of needs, you have to consider how you make it better for everyone without making it worse for another. If I would have taken a classic VC approach in this deal with a more straight financial view, I would probably have been OK with optimizing the value for one or two start-ups in the portfolio as long as it would outweigh the cost on the rest.

If we take our deal as an example, I easily see how I could have optimized just for myself, but not without you paying for it. And vice versa. This approach often ends with a worse outcome — not Pareto efficient — because we end up dead-locking each other in legal fights. Instead, the way we approached the negotiation in our “open kitchen” approach, we started off describing an outcome that would maximize value for both of us at the same time. That allowed us to get as close to Pareto efficient as possible. In the old world, it was all about maximizing for ourselves, and treating legal discussions as a battle. Not only is that exhausting and alienating, it’s a bad way to start a partnership.

JB: Do you think media investments are a particularly good match for zebra values?

MA: Yes. Given anyone looking into media from an investment point of view is not doing it for financial gains, then there must be something else attracting them. You’ll find more hardcore VC in biotech, robotics, and less in media. So because of the financial conditions of investing in media, it naturally attracts investors and allies who have a deep sense of purpose.

History has shown that classical VC has not worked very well within media because for the vast majority, they haven’t been able to return money by the factors that traditional venture capital require. Plus, optimizing for financial gains means you very soon experience mission drift, which ends up serving a financial model and not the mission media must meet to achieve its function in society.

I see media as a catalyst for democracy for societal development. The tension with traditional investment approaches cannot be resolved, so the zebra ethos is a credible experiment to run as the other modes of approaching financing haven’t worked.

JB: You’re taking a risk here by doing something untraditional. What have other investors said to you about this approach?

MA: I can easily tell if people buy into this approach or not. The vast majority express appreciation, excitement, and there is an increasing audience that understands why this reasoning and approach is so right in 2019. But still, some look at this approach and the values set as a compromise, or an acceptable add-on. I’m clear that we are early stage here, and it will take a lot of time before the whole industry starts changing practices.

What I’ve been very happy to see is that other entrepreneurs I talk to are very excited about the zebra ethos, and it resonates with them immensely. So hopefully that’s another signal to investors that they need to start adapting to this mentality, too, if they want to align with the people building the companies of the future.

JB: So what gets you excited about investing in Hearken?

MA: Quite simply, you and Hearken embody everything that an investor like me is looking for: a strong mission and sense of purpose, a thought leader in their industry of practice, and an amazing team and track record — having executed on the mission and shown traction within a couple of years. You’ve connected with 140+ newsrooms in 18 countries during a time of deep change and difficulty in this industry. What more could you want?

JB: How are you going to characterize success in this partnership with Hearken? What are your goals?

MA: That we drive transformational change for news media. That we succeed on newsrooms adopting a new practice to help them evolve and survive. And if that happens, we’ll also make money. But that’s the order it has to be in.


We Are Hearken

The Hearken team's thoughts on journalism, engagement, and tech. Hearken means: to listen. We believe that listening to your audience first, not last, makes for better everything. We're here to help: http://www.wearehearken.com/

Jennifer Brandel

Written by

Accidental journalist turned CEO of a tech-enabled company called Hearken. Founder of @WBEZCuriousCity Find me: @JenniferBrandel @wearehearken wearehearken.com

We Are Hearken

The Hearken team's thoughts on journalism, engagement, and tech. Hearken means: to listen. We believe that listening to your audience first, not last, makes for better everything. We're here to help: http://www.wearehearken.com/

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