L3C: A Flexible Funding Model for the Media Industry?

Why would anyone want to invest in the L3C model? And why could it provide a flexible funding model the media industry needs now?

Those are two of many questions asked on Friday as panelists John Plunkett, ceo of Harborquest, and Chicago journalist Sally Duros discussed with media entrepreneurs, journalists and nonprofit communicators how this new model of financing could create sustainable economic support for the media. The event was supported by The Chicago Community Trust and through its Community News Matters initiative.

Duros wrote about L3Cs for our New News report last year,

The L3C merges foundation money, specifically program-related investments, with investor’s cash in a mission-based business that puts purpose before profits…Under this model, a newsroom will pay a living wage to journalists and executive leadership while earning a return for investors. Most importantly, because it is mission-based, the L3C signals a return to the historical value of newspapers: local news.

Duros has advocated that merging foundation money with investor capital “will enable agile, sustainable knowledge-based newsrooms” and “puts purpose before profits.”

At Friday’s discussion, there was still some trepidation surrounding type of financial options available to hyper-local media vs. the traditional news outlets when using a L3C.

Branding media and/or news outlets as a social enterprise enables start-ups to get into the game, said Plunkett. While profitability is uncertain, Plunkett said utilizing L3Cs similar to a 501(c)3 “opens doors we never could in the past” and larger-known foundations therefore have an opportunity to fund struggling ventures.

Last August, Illinois joined the ranks with five other states allowing for the creation of L3Cs.  However, the issue of how the IRS would recognize media organizations as social enterprises utilizing L3Cs is another concern. Plunkett said the issue comes down to whether or not an organization is complying with their mission.

According to Duros, investments in social enterprises “were meant to fulfill much the same purpose as a grant, yet could possibly yield a modest return.”  However, she says she doesn’t see journalist operating the same as a NPO. Yet, she believes L3Cs are “more efficient” in providing seed money.

We invite comments from participants at the panel discussion and other interested parties. The L3C panel is one of a series of learning circles The Chicago Community Trust and the Community Media Workshop will host in the coming year. The next one will take form of a free Rountable discussion on June 10 from 3 p.m. to 5 p.m. at 1104 South Wabash at the conclusion of the Workshop’s annual Making Media Connections conference.

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3 Responses

  1. […] The Community Media Workshop held a panel May 7 on the future of news as a social enterprise and the L3C model. […]

  2. Sandy Herrera says:

    When will another L3C discussion be held?

  3. […] spans if there is no sound economic model created for them. Limited liability companies, or L3Cs, is a model that has been kicked around but isn’t catching on.  McBride says the model created […]