Morning Brew receives approaches, but focused on organic scaling, co-founder says

Morning Brew, a digital news company focused on newsletters and podcasts, “gets emails all the time” from potential suitors, but isn’t looking to sell, said Austin Rief, co-founder and chief operating officer.

New York City-based Morning Brew has seen approaches from private equity firms, strategics, practically “everyone,” Rief said, declining to disclose specifics. The company hasn’t entertained approaches as its core focus is on scaling as a profitable media company, the COO added.

The company, which generated USD 13m in 2019 revenue, a USD 10m boost from 2018, was profitable in 2018 and 2019, Rief said. The COO declined to disclose growth projections for 2020.

It has also received USD 750k in a friends-and-family round from about 15-20 investors in 2017, the co-founder said.

Growth in 2020 will come in the form of launching an additional newsletter or podcast, Rief said, and eclipsing 2m subscribers by this spring. It’s currently at about 1.8m, he added. Additions of content streams is critical for revenue growth as the company’s sales are heavily reliant on advertising.

Morning Brew has four business newsletters, covering general daily business news, retail, emerging tech and the convergence of business and politics. It launched a weekly podcast with business industry guests last fall.

Rief declined to say what type of new newsletter the company will launch in the first half of 2020, but according to job postings on its website, the next newsletter will be named “Marketing Brew.” The position calls for a thrice-weekly newsletter covering the marketing and advertising industry.

Also based on job postings, the company is creating a team that will write internal newsletters for large companies. It says it has signed on its first partner, a Fortune 100 tech company, and the new writer will make a newsletter for the company’s “tens of thousands of employees.”

The bulk of Morning Brew’s revenue is derived from advertising, which comes in the form of a “Together with” branding at the top of its newsletter and sponsored content in the body of the newsletter. Examples of advertisers include, from last week, The Motley FoolWisebreadAthletic GreensJustworks and Commonbond. New York City-based human resources software company Justworks raised a USD 50m Series E last week.

According to a “partnership request” form on the Morning Brew website, the company lists five budget tiers for potential interest in advertising in Morning Brew’s newsletters in 2020: USD 20-50k, USD 50-100k, USD 100-200k, USD 200k+ and “other.”

Sales also originate from its e-commerce shop, which has clothing items, mugs, stickers and a keychain.

Rief said the company doesn’t foresee raising capital or being acquisitive in the near-term. Morning Brew is focused on growing “in-house.”

The company has about 30 employees, a 20-person increase from the beginning of last year, Rief said. Morning Brew likely won’t repeat tripling of its headcount, but will grow across the board in 2020, including editorial, sales, marketing and other areas, the COO added.

Morning Brew was founded in 2015 by Rief and CEO Alex Lieberman, who started the company’s original newsletter while the two were studying business at the University of Michigan. Rief declined to disclose ownership structure of Morning Brew.

True to its name, Rief said Morning Brew sees any media newsletter that takes up readers’ time in the morning as being a competitor. Rief said newsletters from digital media companies like Industry Dive and Axios are supplemental to one another — the newsletters have some overlaps in coverage but also cover different industries. Industry Dive, which publishes 22 publications covering 19 industries, told this news service earlier this month that it looks to be acquisitive in the coming 18 months.

In regards to activity in the digital news media landscape, Rief said 2020 won’t be as “big and flashy” as the larger consolidation trend that permeated in 2019. This news service has reported that a wave of consolidation happened in the space last fall as Vox Media acquired New York Media for undisclosed terms and Vice Media bought Refinery29 for a deal valued at USD 400m in cash and stock in October.

Instead, this year will likely see smaller acquisitions and roll-ups of digital media properties by non-media companies that are looking to buy niche assets. He pointed to bringing together content and commerce as an example. Deals would likely be in the range of USD 20m-40m, he added.

Albeit a larger example, Rief pointed to Penn National Gaming’s [NASDAQ:PENN] 36% stake in Barstool Sports for USD 163m last week as an example of non-media companies looking to tap into well-known brands to expand its customer base. The Pennsylvania-based gaming and pari-mutuel properties owner and operator’s ownership stake in the New York City-based online sports and pop culture media outlet will increase after three years.

Nomad Financial provides accounting services and Outside GC provides legal services.

by Kyle LaHucik in Chicago


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