Scout Media, Inc.

SOURCING THE INVESTMENT
In October 2004, NLM contacted Scout Media, Inc., a publisher of college sports magazines and affiliated websites through their central website, scout.com. NLM partner, Randy Chappel, was a subscriber to The Bootleg, the magazine and website devoted to Stanford University sports that Scout Media owned. The initial phone call led to meetings, due diligence, and a site visit. In a short period of time, NLM made a commitment to purchase preferred stock in Scout's next equity offering consummated in November, 2004, and Randy Chappel joined Scout's Board of Directors. NLM later participated in a bridge financing to the company to facilitate a strategic sale process.

MANAGEMENT TEAM
Scout was founded by Jim Heckman, a Seattle-based entrepreneur who had been in the sports media business his entire career. Prior to Scout, Jim founded and managed Rivals, Inc, a similar business which was founded during the dot.com era. Rivals raised substantial capital but ultimately failed for many of the same reasons that befell other of its dot.com contemporaries. Heckman's experience from that situation however led to improvements in the business model when Scout was formed several years later. The full-time Chairman of Scout was Brian Kosar, an experienced financial professional and the brother of former NFL quarterback Bernie Kosar. Brian proved a terrific management partner for the entrepreneurial Heckman.

THE BUSINESS
Although it is unusual for NLM to invest in a business without positive cash flow, Scout had a powerful business model, tremendous economies of scale and superior leadership that pointed to meaningful growth in revenue and EBITDA quite rapidly. These characteristics provided support for a clearly articulated plan outlining how and when Scout would reach near term profitability. By the time the company was sold a short time later, Scout had already achieved significant profitability.

OUTCOME
Due to its increasing size and market position, the company attracted the attention of several large media firms and was ultimately sold to Fox Interactive Media, Inc., a division of News Corporation, in October, 2005. At the time of its sale, Scout had over 200,000 paid subscribers, more than 2 million unique online users, 45 wholly-owned magazines, and owned or was affiliated with 285 independent college and professional team websites. NLM made a gross return of 2.7x and an IRR of 180% on its initial equity investment and 1.3x and an IRR of 75% on its subsequent bridge financing.