Atlas Obscura looks to raise $10 million at a $24 million valuation with help from smaller investors in a tough market

Travel publisher Atlas Obscura is in the process of raising $10 million in an investment round that includes 20 returning investors – and for the first time, smaller investors participating through the venture capital investing platform OurCrowd. 

Atlas Obscura CEO Warren Webster told Digiday last year that the media company wouldn’t go through another fundraising round until it reached profitability amid a tough media market. In an interview for this story, Webster declined to say whether the company turned a profit last year but noted it did at least “break even” in 2023. And even though market conditions haven’t improved all that much, the company has gone ahead with the current fundraising effort due to its own business growth in 2023, Webster said.

According to Atlas Obscura’s page on OurCrowd, the publisher forecasted a 19% revenue increase in 2023 over the prior year. Webster declined to share how much revenue the company made last year, citing ongoing accounting procedures. The company was on pace to generate $24 million in revenue in 2023, Adweek reported in August. Webster previously told Digiday that the company generated $18 million in revenue in 2022. (For the record, a 19% increase over $18 million would equal $21.4 million.)

“It has not been a good venture capital market lately,” Webster said. “But because the business is growing so fast and there’s so much opportunity for Atlas [Obscura] right now, it just seemed like it would be worth it to go out and raise… a reasonable-sized $10 million round.” 

It’s unclear how much of that $10 million the company had raised as of this writing. By Feb. 15, Atlas Obscura had raised 60% to 70% of the $10 million target, according to Webster. Of the $10 million total, the company planned to raise $5.5 million through OurCrowd by an initial close of the round planned to occur sometime this week, Webster said. The company won’t know how much came through OurCrowd until the final close, which will follow in “coming weeks,” he added in an email.

The current funding round values the company at around $24 million, Webster said. That’s a decline since its last $20 million Series B fundraising round in 2019, which valued the company at around $45 million, he added. But other digital media companies like Vox Media are raising money at about 50% of previous valuations too. BuzzFeed’s market cap was $36.2 million when markets closed on Tuesday after being valued at $1.7 billion in its 2016 funding round.

“We’re pretty much in line with the market. That’s also part of the reason why we’re not doing a substantially larger round,” Webster said.

Sam Thompson, senior managing director at mergers and acquisitions advisory firm and investment bank Progress Partners, said it was “rare” to see recent valuations of media and content companies continuing to climb.

“I’m not surprised by [Atlas Obscura’s] valuation. I don’t think it’s necessarily a knock on their specific business, I think it’s where the market is overall,” he said.

Leaning on smaller investors

Atlas Obscura is choosing a unique approach to this investment round. The company wanted to “find a way to open up… [and] allow accredited investors within our community who wanted to become shareholders a way to do that,” Webster said. 

One of Atlas Obscura’s current investors suggested OurCrowd, a platform that allows accredited investors (who have a net worth of more than $1 million, among other requirements) to invest in startups and other private companies.

As of the end of last week, Webster said Atlas Obscura community members who were accredited investors had contributed 30% of the money raised as of last Thursday – or roughly $2 million – through OurCrowd. Individual investments ranged from five to seven figures, he said.

Thompson described this strategy as a “final resort when a company can’t get funding elsewhere.” But Webster said the choice to raise some investment through OurCrowd was not due to troubles with the traditional venture capital fundraising route. Twenty of Atlas Obscura’s institutional investors are returning in this round, Webster said, including New Atlantic Ventures and AlleyCorp. He declined to say how many investors opted not to return.

“To me, it’s a signal that [institutional investors are] willing to put a little bit more in, but they’re not willing to put in a lot,” Thompson said. “They’re not getting them all the way there. So they need more money.”

Plans for the funds

Atlas Obscura is receiving more sponsor commitments from tourism boards and destination marketing organizations (DMOs). As a result, it needed new investment to scale the business, Webster explained. Revenue from DMOs had grown from about 60% of Atlas Obscura’s brand deals in 2022 to 95% of the business last year, thanks to several renewed seven-figure annual deals, Webster said — but he declined to share specific terms. The company had signed two seven-figure deals in the first half of January this year, he said.

The company plans to use the investment to grow its product and technology efforts, mainly to develop tech-powered travel itinerary builders for more destinations to expand Atlas Obscura’s offerings. Part of those initiatives will be powered by generative AI technology to build personalized tools, Webster said.

“This round will help build capacity,” he said.

What this means for the larger media market 

Andrew Perlman, co-founder and CEO of Recurrent Ventures – which raised $300 million in May 2022 but has laid off employees, shut titles and cycled CEOs since then – said the state of the venture-capital and private-equity market in the media industry hasn’t improved much in the past year. 

“The uncertainty in media does not feel like it has passed with an ad market that is just starting to come back to life,” Perlman said in an email. “And the impact of AI is still in question. I think the macroeconomic climate in 2023 kept new investors from taking risks they might’ve been comfortable with in 2022, and I believe those trends from 2023 are carrying into 2024.”

That certainly seems to be the case, with publishers undergoing rounds of layoffs over the past few months. According to data from capital market research firm Pitchbook, only five U.S. venture capital deals involved publishing companies (defined as providers of print and internet publishing services, such as newspapers, magazines and books) in fourth quarter 2023, with a total deal value of just $4.7 million. That’s about the same as in Q4 2022, which was the smallest Q4 deal count and deal value since at least 2015.

The largest media VC deal last year was a $50 million investment in The Messenger in February, according to Pitchbook data. The Messenger shut down less than a year after it launched, after the company ran out of money and was unable to secure additional funding.

Perlman said he expects publishers’ focus on profitability and optimizing operations (and less so on fundraising) to continue at least until the back half of 2024.

“Investors are remaining disinclined until there’s more data on how companies in our space have performed over the past few quarters and this year. I think new investments in media will continue to move at a slow pace for most of 2024,” he said. 

Recurrent has looked at “many” companies for potential acquisitions in the past year, Perlman said. However, “in many cases, the seller’s expectations have not aligned with recent performance. We’ll continue to assess the marketplace and make another acquisition when the right opportunity presents itself.”

https://digiday.com/?p=535412

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