Breakfast with Mike Brown of Virgin USA

“Learn what you didn’t know you wanted to know.” ~ Gordon Crovitz

Mike Brown is a close professional friend of mine revitalizing what is a quite unimpressive venture community in lower Manhattan.  I set foot this morning in the shockingly vibrant, but nonetheless welcoming (the brits don’t have it any other way, even on this side of the pond) offices of Virgin USA, the corporate development arm of Sir Richard Branson’s behemouth conglomerate. Virgin USA makes branded and unbranded investments in intrapreneurial and entrepreneurial ventures to build the Virgin portfolio.

A short while into the conversation I got to learning something I didn’t know I wanted to know about the email newsletter industry. Until this morning email newsletters meant nothing more to me than an old, trivial feature of thousands of websites across the internet that tends to annoy more than entertain recipients. I stand corrected. Daily Candy was acquired by Comcast (weird right?) for $125 million, Thrillist is on its way to a pile, and one of my newfound favorites, The Toilet Paper, is trying to follow suit. According to Mike, Daily Candy only raised about $3 million, implying just under a 40x return on capital and 20x to the investors assuming a 50% ownership stake. High quality content email distributions are garnering between 40-60 CPMs, much higher than content sites. The hyperlocal demography of email distributions, which tend to be in verticals, and the intimate setting of email allows advertisers to uniquely target customers. Simple math indicates that a successful newsletter with 2M subscribers can generate $28M – $43M in revenue annually. Mike claims that this can be done with as little as 8-15 people on staff. That’s what’s called a cash cow.

The icing on the cake is that if the content is right, email newsletters, unlike other mediums, tend to exhibit astronomical growth early on due to their inherent potential to be viral sitting in email inboxes. If the content falls on deaf ears, then it flops. But with a small amount of seed capital Mike has convinced me that the reward is well worth the risk, especially if you’ve got people around you who think the content is entertaining.

Email newsletters. Who would’ve thought.