The Ozy Media collapse, explained

Ozy Media raised $70m+ as the next great media startup. But it all collapsed after the NYT reported that its COO potentially committed securities fraud during a fundraising episode with Goldman Sachs.

A somewhat ironic clip from the featured video on Ozy Media’s YouTube page (Source: YouTube / Ozy Media)

The Ozy Media collapse, explained

A week ago, The New York Time’s Ben Smith published a shocking story: The COO of Ozy Media impersonated a YouTube executive in an effort to secure a $40m investment from Goldman Sachs.

Absurdly, the Ozy exec’s deception included the use of a voice modulator app. Goldman eventually reached out to YouTube and — when the parties uncovered the potential securities fraud — they contacted the FBI.

Ozy framed the episode as a “mental health issue” but the blowback from the report was immediate. On Friday, Ozy Media shut down.

How did it happen so fast?

Axios’ Sara Fischer says the company was built on “years of lies” pushed by its CEO Carlos Watson and COO Samir Rao. To close advertising deals and attract talent, Ozy faked audience numbers:

  • 95%+ of the traffic to Ozy’s flagship YouTube show (“The Carlos Watson Show”) was paid
  • A 20m+ email list was created by “dubious” marketing means, and reader requests to unsubscribe were ignored
  • Attendee numbers for its live event (Ozy Fest) were grossly inflated
  • The following on its social channels (i.e., Twitter, Instagram) were almost all paid for and showed very little engagement

Ozy Media was founded in 2013 to great fanfare

Helmed by Watson — a Black American entrepreneur with Harvard, Stanford, MSNBC, and Goldman Sachs on his CV — the media venture has raised $70m+.

Its backers included heavyweights like Laurene Powell Jobs (Steve Jobs’ widow), Ron Conway (VC legend), and German publishing giant Axel Springer.

Pitched as a destination for undercovered news stories, Ozy eventually became a vehicle to raise the profile of Watson, with millions in marketing dollars put behind his YouTube show.

The ‘cult’ of Carlos…

… is how a former employee explained the toxic work environment to CNN.

In addition to fake traffic figures, management lied about lucrative TV deals with the likes of Amazon and A&E. The house of cards collapsed after the NYT story:

  • Ozy’s chairman stepped down
  • Katty Kay — a star journalist who joined Ozy from the BBC — resigned
  • Conway’s fund (SV Angel) gave back its shares in the company, which is almost unheard of in the VC world

Watson himself pulled out of hosting duties for an Emmy’s awards program and left the board of NPR. Now, he will unwind the company, leaving its 75 full-time employees in search of new jobs.

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