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VCs don’t love podcasting, but Gimlet Media has raised another $15 million anyway

Podcasts are popular, but the podcast industry is tiny. Here’s a bet it will grow.

Vulture Festival - Casper Podcast Lounge
Gimlet co-founder Alex Blumberg
Brad Barket/Getty Images for Vulture Festival
Peter Kafka covers media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.

You are used to reading about media companies raising money, but you haven’t heard much about podcast companies raising money. So let’s change that: Gimlet Media, the podcast studio/network behind shows like StartUp and Reply All, has raised $15 million in a round led by Stripes Group.

People familiar with the company say investors valued Gimlet at $55 million pre-money — that is, it’s worth $70 million now — and that the 80-person company is on track to generate something in the range of $15 million this year.

Gimlet had previously raised $7 million.

More details on the round — including a bold-face name or two — below. But let’s pull back a second and explain why we’re telling you about a funding round: Unlike web publishers, and definitely unlike web video companies, podcast companies haven’t attracted much financial backing yet.

That’s despite the fact that podcasting seems to have finally broken through to mainstream audiences in the past few years, driven by the success of shows like Serial: 24 percent of Americans say they listen to podcasts monthly. (That number seems awfully optimistic, but it’s also up 2x from four years ago. So it reflects some kind of growth.)

But when I first heard that Gimlet was raising money a couple months ago, I asked a range of venture capitalists whether they were investing in the company or any other podcast startup. I got lots of noes.

The longer answer: VCs had looked, but found various reasons not to invest. They were concerned that there’s no real tech in podcasting. Or that the industry is dominated by Apple, and Apple doesn’t seem terribly interested in podcasting. Or that the podcasting industry just isn’t big enough to produce an exciting return.

It’s certainly true that podcasting, driven almost entirely by advertising, isn’t generating enormous revenue right now: A recent study commissioned by podcast companies, including Gimlet, pegs the podcast industry’s 2016 revenue at $119 million.

That’s peanuts compared to the billions going into search and video. But the same study thinks that number will nearly double, to $220 million, this year.

The growth — both in terms of audience and dollars — can be particularly fast for some hit podcasters. People familiar with Crooked Media, the bare-bones company that launched Pod Save America and other political podcasts this year, say it is already approaching a $5 million annual run-rate. The Daily, the New York Times’ flagship podcast, launched in February and racked up 20 million streams in its first three months.

Seems to me that a small but fast-growing industry, with a product that’s distributed entirely through digital channels, would be attractive to lots of venture capitalists. But maybe that’s why I’m a typer (and podcaster), not a venture capitalist.

It may also explain why industry sources told me that Gimlet wanted a $75 million valuation when it first went looking for funding this year, but couldn’t find takers at that price.

Co-founder Matt Lieber won’t comment on valuation, but does say that the company was initially looking to raise $10 million but expanded the round to accommodate investor interest.

And he’s happy to explain why he thinks his company, and the industry, will grow: “Podcasting is the last frontier of digital media. It’s the last two, three hours of people’s day that’s untouched by digital screens” — and filling that void with a new form of media will be a valuable exercise. “You just don’t see this much time spent, in a medium that’s this effective for advertisers.”

Lieber’s also excited about Apple’s plans to start offering bare-bones performance data for podcast listening that happens on its platform.

More about the raise: Some previous investors are back, including Graham Holdings, which used to own the Washington Post but now has a portfolio that includes Panoply, another podcast startup; Betaworks, the New York-based startup incubator; and Cross Culture Investors, which is best known as Troy Carter’s investment shop.

One other noteworthy new investor: Emerson Collective, the investment/philanthropy organization headed by Laurene Powell Jobs, who you’ve been hearing a bit about lately, most recently because she bought the Atlantic magazine.

Lieber says Gimlet will use some of the money to build out new programs, train new podcasters, expand the company’s in-house advertising shop and work on exporting hit podcasts into other formats.

ABC already plans to turn StartUp — a documentary series that started by following Gimlet co-founder Alex Blumberg’s attempt to build Gimlet — into a sitcom. And Amazon is turning Homecoming, Gimlet’s first fiction series, into a TV show as well; Julia Roberts and “Mr. Robot” creator Sam Esmail have signed on.

But there should still be some cash lying around, Lieber says. “$15 million is a lot of money. At least in my world. We’re not going to spend it all at once.”

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