The Accidental Entrepreneur: Interview with Medibistro.com's Laurel Touby

Filling a need is what a successful small business is all about. That’s how mediabistro.com got started. The company’s founder and president, Laurel Touby, a freelance writer who wrote for magazines such as BusinessWeek, Glamour, Travel & Leisure and New York, saw a need for herself and others like her: a way to network. The business began as an afterwork cocktail party in 1994. She steadily added products and services to service the media community. mediabistro.com started as a community of 10 people; the company’s database of those attending events is now more than 700,000 strong. The company has 30 employees.

In June, Laurel Touby reached a milestone that many small business owners dream of: she negotiated the successful sale of her business. The buyer was Jupitermedia Corp., a Darien, Conn.-based provider of information and images. The sale price? A cool $23 million for the company ($3 million of which is subject to a two-year earnout period). Touby, who owned 62% of the company, will stay on as a senior vice president at Jupitermedia. NY Report Editor-in-Chief Rob Levin sat down with Touby to discuss mediabistro. com, from its beginnings through its sale.

RL: Is mediabistro.com a company that was really founded by its customers?

LT: That’s a great way of putting it. Yes, I was the first member and I had a need to meet other people like myself and to commune with them, to hang out with them, and to have a connection with other people who were doing similar work. This allowed us to trade war stories, commiserate with each other, meet each other for drinks to share business information, etc. So I was the first person who was the customer. But quickly I realized that there were others like me. They came to the parties, and as more of them came to the parties, the bigger my database became. It started with 10 people and today the database is about 700,000.

RL: How does the company make money?

LT: In the beginning it was just the parties and we didn’t make any money and it wasn’t really a business, but that community went online in 1997. When I went online, during the first three years, the products and services were given away, they were freebies. They consisted of job listings, event listings, bulletin boards and resource pages. Basically, I just created, or my friend actually created, software for the community to interact — and that was the product. But the product didn’t cost any money in the beginning. It wasn’t until 1999 that I first determined that we could get money for the job listings and that became the core of the business. In April 1999, I sent an e-mail out to everybody who had posted a job that month and I said, “If you’re happy, and only if you’re happy, send a $100 check to this post office box and consider this an invoice.” And I went to the post office box that first month and out came eight checks. I thought, “$800 for job listings, not bad for pocket money.” And then the next month I did it again, and there were 16 checks the next month, and then 25, 35, 45, and before I knew it, I was making more money in this online job listings site than I was ever making as a full-time journalist at the time.

So here I was, and I had a decision to make: Do I continue to be a journalist and make a paltry living and express my creativity that way, or do I put all that behind me and start to become a business owner and try to get funding to do this right? Revenues at this point were around $30,000 a year. I knew that women-owned businesses often start with too little funding; I knew that I had to write a business plan immediately and get funding if I was going to do it right.

RL: How much money did you raise and where did it come from?

LT: I wrote a business plan with the help of business advisors. My goal was to raise $1 million, even though I didn’t need half of that. The funding came from a venture private equity hedge fund called Gotham Partners. A small portion of it came from Marty Peretz, who owned the New Republic back then, and some of TheStreet.com. At that time, I kept ownership of more than 70% of the company.

RL: How did you convince your investors to give you $1 million for less than 30% of the company?

LT: Unlike all the other dot-coms that were seeking funding, we were making money! We had customers, we had traffic, and we were real in many ways.

RL: Can you give us a timeline of when the different products and services from mediabistro.com came about?