radioNUR [part I]

radioNUR is a webcast Baha’i radio station run out of Fresno, California. It has been operating since Feb. 2002 thanks to the countless hours of work put in by its founder Michael Eissinger, Corkey Eissinger as well as a handful of volunteers. radioNUR’s content is emitted 24 hours a day and is mainly spiritually oriented music performed by Baha’i artists. But it also has non-music programming which includes children’s programs, devotionals, as well as talks by the Hands of the Cause of God and audio versions of some William Sears books.As opposed to other Baha’i radio ventures (such as Payam-e-Doost), radioNUR “is not owned, operated, sponsored or controlled” by the Institutions. Evenso, its programming reflects the priorities of the Baha’i Administration; with supportive coverage of the global teaching plans, the Ruhi courses and other such topics. It has also received encouragement and guidance from the NSA of US as well as the Universal House of Justice.

In its first letter regarding radioNUR, the UHJ wrote to Michael Eissinger: “you should feel free, too, to explore the feasibility of making a commercial venture of this project.” I’m not sure if Michael actually went through with a feasability study or not. But I assume he didn’t because if he had, I fear he would never have had the werewithal to undertake such an audacious project.

radioNUR’s plan was to rely on advertising revenue from commercial sources, mainly Baha’i related businesses. But within a year, it was evident that such revenues were not forthcoming,. This forced the young venture into financial turmoil. So much so that it approached the UHJ and requested financial assistance. Although radioNUR is a most worthy enterprise, I agree with the UHJ’s decision to deny the request. Since radioNUR is a profit seeking corporation, such assistance would have been wholly innapropriate.

Although all start-ups have a challenging time getting off the ground, the majority of radioNUR’s financial difficulties can be attributed to the basic assumption underlying their business plan: that they could attract Baha’i owned and related businesses to buy air time. At first, one would think this would be a match made in heaven as no other media is targeted specifically to nor reaches, Baha’is all around the world. However, there is a clear mismatch between the needs of such businesses and the audience which radioNUR provides. While the listeners are dispersed around the world (in 110 countries), most businesses that are interested in reaching a Baha’i audience are local ventures and depend on customers geographically close to them. One could argue, with the advent of the internet and online shopping, this has changed. But sadly for radioNUR, not enough. Finally, the number of such businesses that exist, as well as the number of them which would have an advertising budget, is too low to be able to create a significant revenue stream.

After failing to attracting commercial interest, as per their original business plan, radioNUR then tried several new things: affiliate programs with other online companies, merchandising (t-shirts, mugs, etc.), an online bookstore, an online music store, and radioNUR records. But unfortunately most, if not all of these stop-gap measures, rather than helping, resulted in further losses.

Today, these early financial challenges have intensified to such a degree that they have put radioNUR in danger of bankruptcy. Recently, Michael Eissinger wrote a frank and open letter to his audience and told them of radioNUR’s predicament; if itsfinancial position didn’t improve dramatically, radioNUR could be relegated to a “historical footnote” in a matter of months.

Also included in this letter, was the dramatic decision of the current owners to invite new equity partners to join them and therefore build up a financial reserve which would give radioNUR a cushion with which to continue operating. The current owners hold 100,000 shares themselves and are offering to sell blocks of 10,000 shares at a price of $1/share. As radioNUR is a for profit corporation (incorporated in the State of California with 1 million common shares issued) that price would value the company at $1 million – assuming that there are no other classes of shares, bonds, debentures or convertibles, of course.

Michael and the other equity owners of radioNUR readily admit that any new investment in radioNUR at this juncture would be motivated more by the heart than the pocketbook. Even so, it is not reasonable to value a company that was started with approximately $60,000 seed capital, one that has no significant fixed assets, one with a history of losses and one that is in imminent danger of insolvency, at such a lofty number. I fear that such a staggering valuation gap between the intrinsic worth of the company and $1 million will present an insurmountabe obstacle for even the most kind hearted individual.

So what is a fair valuation? I’m not really able to arrive at an informed conclusion because valuation is both an art and a science. There are many things which can be quantified (equipment, inventory, etc.) but others which are notorious to quantify (the value of the radioNUR name, logo, and goodwill accrued over the years) My guess, (a blind man groping in a dark room) would be somewhere in the $90-110,000 range. And that is quite generous because I’m biased; I like the nature of the business and wish to honour the hardwork of those involved.

I do know that the decision for any entrepreneur to invite new partners, and dilute their own holdings in a venture, is usually a bitter conclusion that is arrived at only when things look desperately bleak. Yet, this newest solution is just as superficial as the past ones and I fear it will do no better at making a positive and lasting difference in the fate of radioNUR.

I hope I don’t appear unkind when I discuss these matters so bluntly. But the solution of selling equity is truly cosmetic because it does not at all address the real problem at radioNUR; the continuing shortfall between revenues and expenses. Instead it seeks to simply gather up more assets so that they can then be lost, drip by drip, through the unprofitable operation of the company. Even if the already mentioned valuation gap didn’t exist, no intelligent investor would contribute to an enterprise organized in this way because it only means delaying the demise of the venture a little longer, rather than securing its future survival and growth.

As well, I would caution radioNUR regarding the language used to offer its common shares for sale. I’m not a securities lawyer, but unless radioNUR is filing under the SEC’s California Limited Offering Exemption- Rule 1001, the wording on their website may be illegal. And even under Rule 1001, the securities can not be sold or even offered to residents of other states without first receiving an exemption or registration from those states. In any case, it would be prudent to soften the wording in the public letter to not be so solicitous, remove specific references to quantities and prices/share and (as required by law) feature a prominent phone number at which interested parties can obtain further information.

In and of itself, raising equity is not a bad idea at all. As long as we consider first: a more reasonable pricing of the equity shares, a careful approach to selling the shares (in keeping with SEC regulations and state laws) and most importantly, setting up the company on a course which would, at minimum, allow it to operate at break-even and stop the hemorrhage. When these issues are successfully dealt with, attracting new investors will be a much easier endeavor and lead to a lasting and effective solution.

All in all, I actually do think this challenging situation can be turned around. As to how, I’ll leave that for the second installment.