JDub Closure Highlights Need For Second-Stage Funding

The story of JDub, the not-for-profit record label soon to be described in the past tense, is in part a cautionary tale about the dangers for start-up organizations seeking to sustain growth, and take care of their core, beyond the first few years.

JDub’s surprising announcement last week that it was closing up shop has prompted Jewish communal leaders to begin a conversation focused on the lack of support for second-stage startups, those that are approaching their tenth anniversary and have grown to an annual budget of approximately $1 million.

“There’s no Bikkurim for second-stage ventures,” says Nina Bruder, the executive director of Bikkurim, the New York-based incubator of early-stage Jewish startups, which provided JDub with startup funds, as well as office space and access to knowledgeable consultants. “It just doesn’t exist.”

In an interview this week, JDub founder Aaron Bisman discussed how the now-lamented group began, grew and ran into insurmountable financial problems.

In 2003, when JDub launched, Bisman was a recent NYU graduate and former Hebrew school teacher who had joined the second cohort of the Joshua Venture Group, which provided the organization with $60,000 in funding over the course of two years, a healthcare stipend, as well as consulting help in the areas of capacity-building and strategic planning.

Bikkurim soon came along and helped. In addition, annual grants from the Natan Fund, ranging from $30,000 to $40,000, began flowing in. “Everything was falling into line,” Bisman said, as he described JDub’s growth trajectory.

When MySpace and iTunes debuted, and the music industry became an even tougher place to eke out a profit, JDub launched a consulting arm that brought in money to support its key mission: connecting young Jews to Judaism through concerts and culture – and media. In 2009, JDub acquired Jewcy.com, the irreverent, hip web portal that catered to young Jews.

As JDub’s influence grew, so did its budget, to $1.1 million. But there was trouble brewing below the surface. Since 2010, JDub’s revenues have been on the decline, while its expenses continue to climb.

In 2008, the Jewish Community Foundation of Los Angeles awarded JDub a $250,000 grant over the course of three years to develop a Jewish cultural scene in Los Angeles. The Richard and Rhoda Goldman Fund, which will shutter at the end of 2012, provided $225,000 over the course of more than three years to reach unengaged young Jews in the Bay Area. While these larger grants were a step in the right direction and included operating support to cover direct program costs, JDub sorely lacked the funds to improve its infrastructure.

“Finding funders who are willing to support a successful 10-year-old organization in core needs – there aren’t Jewish funders who do that,” Bisman said.

While Bisman is grateful to the array of loyal JDub funders, he said that pursuing one-year grants, $10,000 or $20,000 at a time “takes a lot of time and energy. We had no fundraising team; I had one development staffer. So there we were "raising money, reporting, stewarding and soliciting” – in addition to Bisman running the day-to-day operations of a $1 million nonprofit organization.

A forthcoming study commissioned by Bikkurim in partnership with Wellspring Consulting in honor of Bikkurim’s 10th anniversary found that there is a significant drop-off in funding and communal support to organizations in the post-startup stage – a stage when they are most in need of growth capital.

Growth, she says, “is not program expansion, it’s changing HR policies, hiring additional staff and transforming from an organization based in one city to one that operates in multiple locations.

“There’s a hole that needs to be filled,” she said in describing the need for second-stage funding. “Whoever steps into that space will be considered a hero.”

The Bikkurim report, which will be publicly released in the fall, recommends that funders and other organizations that support innovation collaborate with one another to better sequence the pipeline of funding and capacity building for second-stage Jewish startups, as well as determine which funders can offer expertise in the form of capacity building, strategic planning and other areas. Larger, long-term grants, in the form of core operational support, are needed, too. “

In addition to promoting proud Jewish culture, JDub tried to model how a progressive Jewish communal organization takes care of its staffers. The organization paid its nine and a half full-time staffers competitive salaries and provided both males and females with five weeks of paid parental leave, as well as an additional seven weeks of unpaid leave. “When I started JDub, I earned $20,000 a year,” Bisman said. “But I can’t pay other people $20,000 a year.” Staffers, including those who worked at JDub for less than a year, were granted one month of severance.

JDub’s flawed business model raises the question of how startups approaching their adolescence can grow diverse bases of support. But there are some success stories out there.

“Our initial funders need not be our sole funders,” says Rochelle Shoretz, the founder of Sharsheret, a national organization of cancer survivors with a budget of $1.3 million. Shoretz, who participated in the same Joshua Venture Group cohort as Bisman, currently serves on JVG’s board of directors.

In addition to cultivating individual donors, Sharsheret organizes benefit events and receives funding via corporate sponsorship as well as from family foundations. This year, the organization receives its first federal funding in the form of a three-year grant from the Center for Disease Control and Prevention (CDC), which is studying Sharsheret as a model of best practices. “It’s a whole new journey for us in fundraising,” she says.

When imagining how the Jewish community can provide “a lifeline of support” for startups, “it’s myopic to think only of dollars and cents,” she says. Education and training in the areas of fundraising, board development, and strategy are equally as important, if not more so than an infusion of cash. “We can throw them a lifejacket or we can teach them to swim,” she says.

For organizations like JDub that earn revenue from event attendees, more research needs to be done to determine how best to convert attendees, particularly young Jews, into donors and supporters. The leaders of Jewish startups “need to take some of the energy that goes into innovation and programming and turn it into innovation in fundraising,” Shoretz says.

In order to continue growing, post-startup organizations may need to rethink their strategy. “The business model of a theater company or a music distributer is sorely challenged right now even in the for-profit stage,” says Isaac Shalev, the executive director of Storahtelling, Inc. The 13-year-old organization fell on hard times in the wake of the Madoff scandal, when it cut its budget in half and laid off four people, including its director of development. The organization has since partnered with the 14 Street Y. “In addition to saving on rent, we found partners on the educational side,” Shalev said. “It’s not just a move that would help us on the dollar side, but would also push our mission forward.”

As part of its renewal process, Storahtelling shifted its focus. “We started as a performance organization that was really about arts and culture,” Shalev says. “We’ve since transformed ourselves into a training and education institute” that helps Jewish Federations and other organizations provide better Jewish educational content.

Shalev believes that funders could also help second-stage startups by facilitating conversations focused on mergers and acquisitions of startups with overlapping missions.

From the perspective of Joshua Venture Group, JDub’s failure as a viable organization does not translate into a failure overall. “Our key focuses are on building a sustainable organization and on building dynamic leaders for the community,” says Lisa Lepson, the executive director of JVG. She said Aaron Bisman is “a huge success” and “an amazing voice for young people in the Jewish community.

Email: Tamar@jewishweek.org