The bomb-shelter mentality among startups is now so severe that even companies raising money are announcing layoffs in response to diminished economic prospects. Boston-based Helium just closed a $17 million series A financing about ten days ago, and then cut 30 percent of the organization (18 people) last week. CEO Mark Ranalli tells me:
We expect a deterioration of overall ad rates, and a slowing of the economy in general. Our approach was to take a third of every group across engineering, customer service, and sales.
Ranalli has been raising the $17 million piecemeal over the past year from hedge funds, family trusts, and wealthy individuals. The last $2 million came in two weeks ago. Combined with the current cuts, Ranalli believes he has enough to make it to profitability.
Helium is a reference site filled with general-information and how-to articles. It competes with About.com, but instead of hiring professional writers, Helium’s articles are written by members of its community. The best articles are voted to the top by the community, but in a way that makes it difficult to game the system. Instead of being able to vote up your own articles or those written by your friends, readers are given a random sample of articles and asked to compare them in pairs. This A-B approach filters the best articles to the homepage. (Helium spinoff OurStage applies this same system to finding the best raw musical talent.)
Since it launched two years ago, Helium has attracted 130,000 writers who have contributed 1.2 million articles. Most of those people only write once or twice and then go away, but Helium has managed to cultivate a core of about 10,000 active writers. And it has pared down that 1.2 million articles to 800,000. About a quarter of the submissions are just not even worth keeping. The writers get a split of ad revenues on their pages, which isn’t a lot given that the site gets on average $2 for every thousand pageviews. Ranalli plans on rewarding top-rated writers a little bit more by paying star-rated writers a token amount up front (50 cents to $2.50 per article), in addition to the revenue split.
According to comScore, Helium attracts only 859,000 unique visitors per month in the U.S. (Ranalli says the internal number is closer to three million a month). Traffic flattened for a few months when Ranalli decided to let the site grow organically instead of pumping up the numbers with marketing dollars. Now, he says, October looks like it is going to be Helium’ strongest month ever.
But advertising is not the only way Helium makes money. It also hosts a marketplace for freelance writers where publishers, newsletters, and even offline newspapers and magazines can bid for talent. Helium members can go there and offer their writing services and typically get anywhere from $30 to $300 per article, with Helium collecting a 20 percent fee. Says Ranalli:
It is only about six months old, and it just eclipsed our ad revenue.
These days, every penny counts.