Anika Anand just stepped down after five years from her post as Deputy Director of LION Publishers, a membership organization that helps more than 500 local news entrepreneurs build and maintain sustainable businesses.  

Anika’s been reflecting on some of the key insights she’s learned during the nearly five years she’s worked at LION including the need for outlets to be independent, meaning community-centered and independently owned. What that definition does not include, she says, is that outlets have to be non-profits to succeed. Equity and inclusion in media should extend to an openness around the tax status of outlets.

Here’s Anika’s essay:

The future of news is independently-owned journalism startups who identify as community-centered businesses. Not as catchy a headline as the more commonly referenced the future of news is nonprofit.” But the nuance matters. Here’s why.

The growth in nonprofit journalism has been extremely valuable because it’s shown journalists and those they serve what community-centered journalism can look like. But to assume that every single newsroom needs to be a nonprofit to serve its community well will impede experiments, and stall progress toward an inclusive, equitable and sustainable media ecosystem. Romanticization of nonprofit newsrooms can make prospective news entrepreneurs feel that this is the only way to produce useful, community-centered journalism. As Danya Henninger of Technical.ly recently wrote, “support local news done by good journalists. Don’t worry so much about their tax status.”

As of fall 2023, at LION– where I most recently worked–, about 65% of members identify as for profits, about 28% as 501c3s and 8% as for profits with fiscal sponsorship, but all we really care about is that these members meet our criteria of being “independent.” The way LION currently defines “independent” is, “You are privately owned and not primarily or majority owned by a publicly traded company, newspaper chain, hedge fund or private equity firm and/or political or religious institution.” This definition will continue to change as more business structures emerge in the industry, but at its core, being independent means you have full control over your budget and finances. 

In a 2022 Nieman Lab article, Josh Benton declared LION’s Local Journalism Awards showed the potential of the next generation of nonprofit news outlets. Except LION member Santa Cruz Local, one of two outlets who won the most number of awards, was an LLC, a for-profit newsroom. Josh awkwardly points this out as a footnote at the bottom of the post, writing, “Santa Cruz Local is not, technically, a nonprofit news organization.” Technically? You either are or you aren’t. And it’s this sort of “technically” language that is confusing to news founders when deciding whether to go for profit or nonprofit.

Santa Cruz Local is actually a great case study of a for-profit newsroom that has operated since its founding as a community-centered news business first, and is now— three years after launch— making the very intentional decision to convert to a nonprofit. 

Before they launched, cofounder Kara Meyberg Guzman said she had been spinning her wheels on the question of nonprofit versus for profit until finally a fellow founder told her she was just wasting time. He said start small as an LLC and just see if it takes off. “And that was the most valuable advice in those super early days,” Meyberg Guzman said. 

Here are three reasons why I think the industry should champion the future of independent news outlets, which includes, but is not exclusive to, non-profit news. 

The decisions that matter the most when you’re launching a news business are who your audience is, what their needs are and how you’re going to meet those needs. 

The advice LION gives to founders who are getting started is don’t get hung up on your tax structure — unless there is a very clear reason to care. An example is having a major funder ready to give you money (I’m talking at least more than $100K). Or maybe your publication’s ambition is to cover a large geographic area, like a state or region, or a topic for a national audience — both of which would require you to launch with a larger newsroom staff, which means raising a large amount of money at once. 

If founders don’t have an obvious financial incentive to launch as a non-profit, they can launch as LLCs, like Santa Cruz Local did, so they can be laser-focused on defining and delivering their value proposition. 

Additionally, there are opportunities to experiment with both and different models. Annelise Pierce, founder of Shasta Scout, said she ultimately decided to launch as a nonprofit because it helped establish trust with her community, but she’s constantly reevaluating that decision, and wondering if there are ways to partner with a for-profit newsroom or explore the idea of an information news district. “There are so many different ways to fund the news, and to do that, we have to be flexible and not committed to a single overarching model,” she said.

The bottom line: It is much more important to prioritize figuring out who you’re serving and your unique value proposition than to agonize over your tax status.

Small newsrooms don’t always have the bandwidth to get and keep their nonprofit designation, which can be a major distraction from the business itself. We hear from a lot of founders who didn’t realize just how much paperwork is involved in being (and staying) a nonprofit. It is a government tax-status after all, so there is a lot of documentation and bureaucratic hoops to jump through to be a 501c3. 

And if we actually care about serving news deserts in smaller cities and more rural parts of America, those newsrooms are not going to be the size of the Texas Tribune, VTDigger or CalMatters, which all have 30+ staff members. For smaller newsrooms without dedicated finance or operations personnel to help with the paperwork or staff to help recruit and manage a board, it can be way more work than it’s worth to be a nonprofit and, ironically, distract from their core mission. 

An option for small newsrooms we don’t talk about enough is fiscal sponsorship, which can allow for tax deductible donations while outsourcing a lot of this operational drain. A fiscal sponsor is someone who takes on the administrative work to allow a newsroom to accept grants and donations as tax deductible. 

Santa Cruz Local decided to get a fiscal sponsor about a year and a half after launching because there were three donors who asked about getting a tax deductible donation if they made gifts of $5,000 or more. The outlet set up the fiscal sponsorship and then built out their major donor revenue stream, which included getting some training on establishing major donor pipelines. The main reason they transitioned to a nonprofit is because they were so successful at raising major gifts–– by 2022, when Santa Cruz Local filed its application to the IRS, tax-deductible gifts of $5,000 or more comprised nearly half its revenue. On the editorial side, the news they were producing already met the requirements of being a nonprofit– they had never written editorials or endorsements. This intentional and thoughtful step-by-step approach to becoming a nonprofit, facilitated by fiscal sponsorship, is a case study for other aspiring entrepreneurs to learn from and for other industry folks to give credence to. 

Getting fiscal sponsorship is a trend that many social entrepreneurs across other industries are utilizing as well due to what Panorama Global’s Jahan Taganova describes as “the nonprofit hustle.” He writes, “There are thousands of incredible social entrepreneurs who come up with ground-breaking ideas for saving and/or improving the lives of billions globally. In reality, however, many of these innovative solutions either don’t move beyond the conceptual stage or fail to scale. These failures are frequently related to the intensive backend work around incorporation and regulations, including establishing a board of directors, creating bylaws, and applying to the Internal Revenue Service (IRS), among others — in other words, the nonprofit hustle.” 

We should be encouraging independent news businesses to adopt a tax structure that’s best suited for who they’re serving, the way they’re serving them and the organization’s long-term growth ambitions, so they can realistically get their businesses to sustainability. 

I understand the allure of buying into the narrative of nonprofit news. It holds the promise of producing mission-driven journalism that should be a public good to help make the world a better place. But the structure of nonprofits is just that— a structure. We should be incentivizing intentionality within the structure of independent news; not incentivizing an unrealistic one-size-fits-all vision as the future of news.

At the end of the day, I am rooting for all LION members, whether they are for profit or nonprofit, because they are all independent news businesses that have the full autonomy to control their day-to-day decisions. That’s the future of news I want to help support.