Megan Lightcap: The Playbook To Building “Cult-Like” Creator Businesses ($750m+ Invested)

So one of the interesting things about Taylor Swift, and it's Taylor, like, true Taylor fans, they can almost like quit and be fans full-time because they dedicate that much time to it. They have that much influence within the community and are kind of like mini CEOs of like their own pocket.

So adherence to a cult personality sort of naturally forms themselves into a hierarchy that works towards the greater vision of the cult.

Yes, exactly. Exactly.

Welcome to The Creator COO, the show where we surface the operators behind your favorite content and creators. I'm your host, Matt Estes. Today's conversation is with Megan Lightcap, principal at Slow Ventures. Slow Ventures is an early mover in backing creators directly through investment, and the strategy is a natural extension of their seed investing, where Slow has invested more than $750 million in over 500 seed-stage companies. In this episode, we explore why some creators should raise capital, but why most should not. And we discuss the modern type of creator who is focused on building billion-dollar businesses beyond content. So with that, I bring you Megan Lightcap. Let's dive in. Megan, welcome to the podcast.

Thanks. Thanks for having me.

Thanks for being here. So There were a lot of reasons I wanted to have you on this podcast, but one of them is I don't think I know anybody who is reclaiming or reappropriating the word cult more effectively than you within the context, of course, of digital cults.

It's funny you bring that up. So I wrote about— this was, I guess, after the MetLife Night 3 Taylor Swift concert, and I wrote about how she's basically has conjured up like a modern-day cult. And I sent it to a couple people and everyone was like, oh, it's like really interesting, blah, blah. But they're, you know, one of the pieces of feedback I got was the use of the word cult. And I was like, no, no, no. Like, I know it has a negative connotation, but like, if you look past that and look at all the properties of her fandom, like there's actual cult-like properties. Yesterday I was reading the Time article for her being Person of the Year, and they liken her fandom to a cult. So I felt extremely vindicated, and I need to, uh, I need to follow up with my, uh, with the people who gave me the feedback on the first round.

So it's a good descriptive word. You know, you go back in time, very, you know, ancient times, like the cult of Dionysus. Maybe there was a little less different baggage, I think, to the word historically. But unfortunately, Warren, Warren Jeffs and Charles Manson ruined it for us. I want to come back to that in a little bit, but sure. First, to get started, tell us a little bit about yourself and what you do at Slow Ventures.

So I'll give the brief overview on Slow and then can talk about myself and how I ended up there. But just broadly, Slow is a generalist seed stage fund, so started by bunch of early Facebook employees, probably like a decade ago at this point. They were doing personal investing, decided to formalize it, take on outside capital. We're now on our 5th fund and kind of back, back founders and entrepreneurs, you know, in their earliest days investing across, across industries. My background and kind of how I got to Slove. So have always been in the consumer world, spent a little time in, in banking and then on the private equity side or growth equity side, and then a couple years on the operating side, but met the Slo team. They had pitched me on what they were doing with creators. I had very little experience in the creator world. And I actually said to them, I was like, you guys should go hire someone from, you know, UTA or CAA. Like, why are you hiring someone with a consumer background? And they were like, that's exactly the point. You know, you think about the businesses that creators are building, both in terms of what they're doing on the media side, but also on the brands and services side, they kind of pattern match to traditional consumer businesses. And so, they wanted someone who can think about underwriting these things like more traditional consumer businesses. So I met the Slow team, they asked me to kind of come on board and stand up this creator investing effort, which we can get into. And so I've been here just shy of 2 years. Doing just that. Wow.

And I'm sure it's been a fun and interesting 2 years because it's the 2 years that overlaps with some pretty crazy market developments.

Yes, both on the investing side and on kind of the creator side as well.

What's the Megan, Slow Ventures, creator plus consumer thesis?

Well, there's like the academic thesis, which is should individuals, people actually raise equity instead of debt and kind of the idea that equity is a much better fit product for to accelerate kind of people's outcome than, than is debt. You know, I think debt's a great tool for very steady, stable things to underwrite, but as the world gets like weirder and weirder, and, you know, I think what we've seen in technology, particularly AI, is only accelerating that. There's an argument to be made that equity is actually a way better fit product for that sort of volatility. So kind of putting that aside though, kind of the academic piece, what we're doing with creators and kind of our basic thesis is that we've kind of entered this world where like individuals are more influential than institutions, even like across industries, like in politics and technology. And, you know, like you think about the power that Elon Musk has over He has like a chokehold on people, right? And in many ways, he's way more important than the companies that he leads. Even if you look at kind of AOC and kind of her relationship to the Democratic Party, we've just— and largely because of social media and just visibility, we're in this world where, yeah, people are just so top of mind.

Why do you think that is? Why? What has caused this environment that we live in where the individual brand has in a lot of, in a lot of spaces surpassed more traditional institutional brands, government, church, religious institutions, educational institutions?

Yeah, I mean, I think in short, right, a lot of it is just the internet, right? And what that means for visibility and a person's ability to connect with another individual and really understand how they view the world and kind of the ideas that they put forth and whatnot and kind of the ability for a consumer to identify with that person. And then on the flip side, I think there's also been this like somewhat breakdown of trust of institutions and corporations, right? Like COVID, like really exposed a lot of things, which was like, you know, one moment you're telling us to quarantine and the next, like vaccines are fine and they're not. And you know, there's all this mixed messaging. And I think it was this moment in time where people were like, wait a minute, like, Who can I turn to? Like, who can I trust? And I even remember myself, you know, trying to get the latest information. Like, I was not following the, like, major government entities on Twitter, right? I was following doctors and people who were seeing— they had, like, real-time, more real-time information. So I think there's a little bit of that. And then I also think, too, it's people's ability to, like, seek out individuals that are more fit for the way that they view the world in, like, weird corners of the internet, and they're just more accessible.

Going back to that trust piece for a minute, that's a thread that I find comes up in conversation more frequently than you might think when talking with folks about building out their creator holdcos and just generally the, you know, you get into that futuristic mode, you're talking about AI and, you know, predictions and stuff. And we probably both live in bubbles in some ways, like cultural, political, sort of value, you know, value-based bubbles. But one thing that I've sort of heard over and over again talking to diverse people in the space is that if you ask someone if they think that traditional institutions are decaying in some way, or like trust in those institutions is decaying, regardless of where they sit on different issues, most people will agree with that statement, whether you're on the right, the left.

Yeah, I mean, I think that's, I think that's true. But, and not, I don't want to go like so far, far, far down this path and say, you know, there's no place for, for institutions or brands or corporations. Like obviously they exist for a reason. And, you know, I don't think we're fast forward 30 years, I think they will continue to persist. But yeah, I do think it is a widely agreed upon sentiment for sure. Individuals kind of at the forefront here, they have crazy ability to earn distribution and kind of community build and audience build. And as a result, they're, they're, they're kind of building these mini enterprises, right? Like around themselves and their personal brands. The distribution is kind of leading to opportunities that wouldn't have necessarily otherwise exist. And so our whole thesis is like, there's going to be a cohort of very enterprising entrepreneurial creators. And we can also talk about like how we define the term creator who are going to go on to monetize that community in various ways. And so giving them a little bit of growth capital to do so seems like a pretty interesting trade.

That seems like a good segue. How do you define creators?

I mean, I think when you pull someone off the street and you're like, what's, what's a creator? Their mind generally goes to like a YouTuber and MrBeast and kind of people that are more notable and in the news. But I think it's really someone, anyone, right, with distribution and a highly engaged community, kind of irrespective of platform. And so you know, obviously YouTube is a big component of that, but I think, you know, there's, there's even people on Twitter or other platforms where you're like, hmm, like, you know, they have a very loyal audience who follows them for a very specific reason and deeply going back to our trust comment or trust conversation, deeply trust them for certain things or within a certain capacity. And they're going to build some like pretty interesting things on top of that.

A lot of these creators have, especially if they've been successful building an audience to start, some of those businesses can throw off a lot of cash. Without getting too academic, like, why should creators who have built these profitable lifestyle businesses, who maybe have some bigger aspirations, why, why should they raise capital?

Well, if they're throwing off tons and tons of cash, they shouldn't, right? They should, and they have ambition to kind of build businesses and reinvest that capital and they have the ability to do so, they 100% should. In the same way that if you're a founder and you have a pool of capital available to you and you're able to bootstrap, like totally, they, you know, they totally should do that. I mean, I think there's a couple of reasons. One is there's like the kind of like psychological component of, you know, having more of like a rainy day fund or you know, not necessarily feeling like you're reinvesting something into a riskier project that is, you know, entirely off of your own capital. So that's one, but I think probably the less compelling reason, I think what we've heard more so is that a lot of creators are throwing off cash from, or earning cash from brand deals and sponsorships and more ad advertising-based revenue. But if you want to build a business, whether it's a brand or product company or service company, there's this natural like time trade-off that happens where you just have less time to do the incremental brand deal to actually fund the building of the other thing. And so there's this like capital mismatch that we hear a lot from creators.

So it's like your time is a— it's a zero-sum game to some degree. You only have so many hours in the day.

100%.

If you want to maximize your ads earnings, then you're probably spending all your time making the next YouTube video and going out and building the sponsorship relationships. And then I guess what I'm hearing you say is if you're going to go build another business like a consumer business or a services business, you're not going to be spending your 10 hours a day, whatever it is, creating content. You're going to be building a business.

Yeah, at least some significant portion of your time. Correct. And we talk about this with creators because a lot of the creators that we back, I'd say a vast majority are either building something or are about to have ambitions to do so. And it's this conversation time and again of this time tradeoff. And, you know, how do I actually prioritize my time against content and more traditional creator activities versus business building?

At the point you invest, how often do you see an operating partner or operating role being involved before you invest versus maybe afterwards?

Yeah, it's a good question. It's like 50/50, to be honest. Where I'd say in 50% of cases there's some, some sort of business partner. I wouldn't necessarily classify them as a COO in the way that I think Mark over at MrBeast or Brian over at Mythical.

How would you classify them? Like, what is their— what does their title look like? What does their background look like?

The title almost doesn't matter. It's someone who's like the right hand to the creator and is like executing super well, but are You know, they're full-time with the creator. Like, it's funny, I don't even think they have titles. They're just, you know, very much in our conversations and very much involved in the business. But they're not the ones obviously in front of the camera driving the content.

There's some trusted confidant or consigliere that's usually involved, 50% of the time maybe involved.

Generally, they were in some sort of like ops role before, or sometimes even like business management. Depending on their skill set. So, but it's someone— yeah, exactly, you know, some kind of consigliere to, to the creator.

You're investing in, in creator— sort of creators plus consumer. One of the topics that comes up a lot when I talk to creators is, I think, sometimes concerns around durability of their brand, or like the life cycle of their brand. Uh, and I've heard people bandy about estimated life cycles of creators anywhere from like 4 to 7 years. Who, who actually knows? I think it depends, right, on you you as a creator and maybe the segment that you're in. But how do you think about that when you're investing, like the creator lifecycle? And then on the consumer side, sometimes you see those S-curves with consumer products too. So how do you get comfortable with those kinds of risks?

Yeah, so I think on the creator side, in a perfect world, they, they build their personal brand to be bigger than themselves. And, you know, someone who's done this really, really well is Steve Rinella.

Sure.

Over at MeatEater. And I, you know, I, I've talked about him in the past, which is you may not even know as an average consumer, you may not even know that MeatEater was started kind of like the founding story of Steve kind of on YouTube and kind of in the media space. And so I think like the perfect outcome is, is you build the empire again bigger than yourself such that you could actually step away from the business.

So you're, you're Kevin and you build Epic Gardening. You're Steve Rinella, you build MeatEater. You're Chip and Joanna Gaines, you build Magnolia Network.

Totally great examples. I think that it is like, to be sure, you know, a Herculean effort to do so. But I think it's kind of the ultimate, ironically, the ultimate way to avoid this burnout, which is like, oh my gosh, I need to spend, you know, basically hours in, hours out. You know, you know, it's just like a one-to-one kind of input-output equation, which is for every hour I'm in front of the camera, this turns into, you know, Y, Y output versus, building a brand kind of gives you the ultimate operating leverage. And so I think, again, when we think about the right types of creators, they, they know that and have like deeply internalized that. And, you know, that's kind of what they're striving for versus, you know, again, optimizing for brand deals, sponsorships, just simple ad revenue.

So there's a lot of creators you're talking to, they sort of, whether they've maybe articulated out loud or not, they sort of feel this pressure and they probably want to build something, some kind of brand umbrella that's bigger than themselves in a category.

Yeah, but it's not even— they don't even necessarily start there, right? That's kind of the outcome of it. But it's inevitable. It's inevitable because without giving away names, you know, we're having a conversation with the creator now. He's like so deep in his category and he obviously lives and breathes it and is talking to consumers in that category all day long. Yeah, that he sees this like really interesting whitespace opportunity for a business to be built. He's like, no one is doing this. Like, there's absolutely no reason this shouldn't exist. I have the embedded distribution to go build it and like the industry know-how and kind of connections and knowledge. And he's like, it would be a disservice to the world for me to not at least try it. And so it's not even like he started with the idea of like, let me build something bigger than myself.

Totally makes sense. I mean, what about the lifecycle or like durability issue on the consumer side and give you a little context for why I'm asking this.

Sure.

We've kind of seen this rise of like creator incubators or studios, sometimes supported by agencies, where I think there's pros and cons of this, this approach. But, you know, it's like take a creator, figure out a CPG product, right, in a category.

Yeah.

Put them, you know, put them together, and then voilà, you've got a— yeah, you've got a business that like I guess in theory has a better margin profile than your average CPG business because you've got distribution advantages. Okay, totally get that. I do wonder sometimes what— how durable are those? How durable are those CPG products going to end up being? Are you really going to create a ton of enterprise value with, with these or not?

I think what it gets you, again, depending on who the creator is, I think what it gets you is like you can kind of shortcut a lot of brand awareness hurdles that, you know, any other CPG upstart may have, which is maybe it gets you, you know, in the door at Walmart or Target earlier than you would have otherwise. So you get kind of early, earlier retail distribution, which is like highly, highly valuable, right, in this world. But yeah, I mean, look, I think consumers are smart and like, I think they can really, really quickly sniff out when something is like kind of just like a glorified endorsement licensing deal versus it being like, again, there's like a real white space and like a real reason for this to exist. And like, I see something that no one else does because of the area or the space that I operate in. The thing I'd say too is of our creators, I think one is building kind of in the pure product space, but not even in like food and bev or—

what are the other ones building in?

Services, um, more marketplace, like, you know, in and around consumer but not necessarily pure-play consumer products, which I think to me are like a little bit more interesting of businesses.

I agree with that. Can I, uh, can I Shark Tank you real quick?

Okay, sure.

So I was talking to another big investor in the creator and media space, and I won't, I won't name the firm or the person, but we were talking about a meeting that this person had with Andrew Huberman, and they pitched Andrew on a— on something that seems like probably an obvious natural extension. It's like vitamin supplements, supplements, totally nutritional stuff.

Yeah.

And you hear that and you're like, okay, yeah, I mean, this guy's got a ton of distribution. You've got this whole like cult thing with the Huberman husbands, right? This guy's got—

it's so funny.

It's great. And he's built a ton of trust with the audience.

Yeah.

But my initial reaction back was, okay, I've invested in fitness and supplement businesses in the past. Very high margin, not the most durable product category sometimes. Why not pitch Andrew Huberman on building the next LabCorp? Like, to me, that sounds like a more interesting idea. I'm curious your take on that whole problem space.

Yes, I 100% agree. I almost think it's like, do the harder thing first maybe, and then you can like layer on products after that. Like, I completely agree with you. Yeah. I mean, I just think that there are more, more interesting businesses to be built. I mean, if you think about like primary care, right?

And like you're talking about the direct care model, the membership subscription model that's just blowing up right now in primary care.

Yeah, right. So it's like I would love to pitch Dr.

Mike on building direct primary care franchises.

Totally. And like all these like telehealth practices, right? They kind of, at some point you cap out on like your CAC has a natural floor, right? And so it's the same customer acquisition problem that I think pure-play consumer had, where I think creators can actually play a pretty interesting role. You know, we've seen it with David Sinclair and, you know, he launched Tally Health. And Frank Lippmann actually, who's a functional doctor, kind of one of the OG holistic doctors in the space. He launched, I think he did, he did this in New York City and was very early to it. Or, you know, another guy, Walter Longo, who's like one of the leading thinkers in longevity. He founded this company called El Nutra, which manufactures kind of a fasting mimicking protocol called ProLon. And, you know, that business is huge. Is huge. And so it wasn't, it wasn't necessarily creator in the way that we think about it, but it's creator insofar as, again, like massive distribution, highly engaged audience, like almost like cult-like following, right. For this specific category or, you know, in this specific capacity. And there was like some really interesting things that came out of it. It was, I was on Twitter before this and do you know the guy, More Plates More Dates?

Yeah, yeah. He's got his TRT business.

Huge. I mean, he's— he has like a sneaky huge business.

Americ Health, I think it's called.

Yeah. I mean, he has— if you actually like dive into kind of his business, he has, you know, 4 or 5 things underneath kind of his umbrella.

I think he started with like supplement stuff 4 or 5 years ago. And yeah, he's an interesting character.

Or even like what Bryan Johnson right now is doing with the Blueprint stuff. And granted, he doesn't necessarily need capital.

My wife and I are obsessed with Emily Oster because we're new parents. Yes. We love her newsletter and her books and all the data around parenting. And my wife, who works in like women's health tech, uh, like Emily Oster, in my opinion, needs to build a femtech business.

100%. Wait, can we go talk to her together?

Yeah, sure, sure. My wife has a lot of expertise in the breastfeeding sphere.

It's kind of her niche. I've been pretty much to— slow is like all— a lot of guys on my team, and I'm like just hammering this parenting category home being like, it's so important. There's like this massive information gulf between, you know, I think what you're hearing at your pediatrician versus like on the ground, like what you need to know in the moment. And I, you know, you've seen even the likes of Dr. Becky, right?

And Dr. Becky, sure.

And I just, I think there's a ton of opportunity in the parenting space and even breaking that out both like longitudinally. So, you know, even when you start to think about conception versus, you know, all the way through, you know, childhood behavior and rearing and development and all that stuff. And then even kind of the different categories within, so food and/or sleep and cognitive development. Like, there's so many different ways to slice it. Yeah, I just, I think there's a ton of opportunity.

I want to double-click into that. So you said something in there about there being a big information gap, and that reminded me of a, of a, I think it was a tweet that you that you published, and you pointed out, I think you were sort of thinking out loud and trying to develop like, what are the sort of categories of interesting niches where people are building cults? One of them was like big information gap. One of them was sort of taboo topic.

Oh yeah. Yeah, yeah, yeah. Gosh, I should like have this committed to memory. It's like hobbies, information gap, taboo topics.

Cultural milieu, I think was the last one. You mentioned like, Like Orthodox Christianity, for example.

Yes, yes. Yeah, yeah. And then the fifth one was paradox of choice.

Paradox of choice. When you're evaluating businesses, what is the framework or lens that you typically apply? Like, I assume you're looking for sort of potential category dominance, but then you kind of have to define like, what is a category? How niche do you go? I guess market size comes into play. Help me understand how you think through that stuff.

Yeah, I mean, I think there's, there's a couple of layers to it. The frameworks that I, that I kind of enumerated on Twitter. I think that was more the way we think about why a consumer might attach to a creator and like what is the basis of that relationship, whether it's you are a crazy enthusiast for road biking and, and, you know, your nights and weekends are spent just like flipping through Road Bikers Digest and, you know, follow, watching YouTube videos, right? Like that's, that is a basis for a relationship with a creator, with one specific relationship with a creator. So there's obviously like the, the why I think that we evaluate, and then there's kind of like evaluating the creator themselves. And, you know, this is just things like how entrepreneurial are they and who's the team around them and even just like quality of ideas and, you know, a lot of like more founder assessment type stuff. And then there's category analysis too, which is like, you know, are there some interesting things to be built in this category and why, and what are the different kind of properties or dynamics of that, of that category. Yeah, that's kind of where like the more traditional consumer investment framework comes into play.

My personal framework for thinking about the cult thing is, um, and I think there's multiple frameworks you can apply, but one heuristic I like is creators need to hit on health, wealth, relationships, and meaning. Okay, those are the big four. So it— I'll give you a couple of interesting examples of this. Tony Robbins, are you familiar with the motivational coach?

Yeah.

So if you look at his products, the stuff that he puts out and things he talks about, it's health. It talks a ton about fitness, stress management, wealth. Hey, I want to do better in my career. I want to make more money. I want to start a business. Relationships. He talks a ton about marriage advice. He's like, he's just generally big on marriage. And then meaning he has— he would self-identify as a Christian and he has like a very— it's not like overt, but like a pretty clear Christian undertone.

Mm-hmm.

So yeah, I would say that it's not the only heuristic, but it's one of my favorites because you can look at a creator and you can sort of apply the 4 categories and say, hey, like, what are they spiking on? I'll give you another fun one. I think a lot of people would agree this person's created somewhat of a cult-like following, but Jordan Peterson.

Yeah, yeah.

He's launching this huge Jordan Peterson Academy pretty soon.

Oh, I didn't know that. Cool.

And my favorite example for him is he's like so deep in the carnivore diet.

Yeah.

So he just— he nails the health.

Yeah.

It's funny. So if you start lining people up that have these cult-like followings, you see every category.

Really? I really like this. I think I need to loop you into like co-write something about this because I think you're exactly right. I mean, one of the other— it's just like enablement. And because I'm trying to— as you're talking, I'm like, okay, wealth, like, how do I— how do I retrofit some of the people that we've seen kind of into that thing, or even like, right, writing about Taylor Swift. And it's one of the ways to think about it is like these self-formed roles within the community. So one of the interesting things about Taylor is Taylor, like true Taylor fans, they can almost like quit and be fans full-time because they dedicate that much time to it. They have that much influence within the community and are kind of like mini CEO, CEOs of like their own pocket. And so it's this like, okay, are you actually— is there enough substance for people to grab onto and say like, I'm actually gonna like, you know, stamp out this little corner of the world or of the community and say I own this and kind of step into some sort of like leadership role within?

Yeah, so people— so adherence to a cult personality sort of naturally form themselves into a a hierarchy that works towards the greater vision of the cult.

Yes, exactly, exactly. Which, like, if you want— I mean, I watch a lot of, like, these cult documentaries, and it is— that is like, who doesn't love a good Warren Jeffs documentary? That's the one I most recently watched. Oh, there's this one called, like, Twin Flames. Yeah, that was good. So scary.

Yeah, he was— they were, they were super creepy. The hierarchy thing is right. I mean, I think the I'm biased, but I'm a big proponent of community, and we have productized community. And if you think about inherently, well, there's a few different things that matter in community products, but one of them is you have hierarchy, you have community admins, you have channel admins, you have—

Totally, totally.

You might have certain people in the community who are specifically designated for onboarding new community members.

These things run like a mini— I mean, they run like a business. You know, people have functional roles and responsibilities. And yeah, it's, you know, very clear reasons to, you know, exist and kind of continue the community. But yeah, I completely agree.

One of the things I've seen in working with a lot of creators is like, for every creator that might want to or can create a cult of, you know, a digital cult of personality or a community, some people don't want to, and that's okay. Like, it's fine to just be a woodworker or a a carpenter and create educational content if that's what you're going for. But then perhaps if you're aiming, if you're aspiring to something bigger, if you want to raise money for Megan and Slow Ventures, then perhaps the, yeah, the cult thing becomes more important.

Yeah. And by the way, I want to be 100% clear, like, I think I don't want to overemphasize, you know, creators don't have to go build businesses. Like, they don't have to raise money. They don't have to do all these things. Like it is a perfect, perfectly reasonable and like admirable thing to be a creator and just make content for the sake of making content and the art form of it. And like, do the brand deal thing, do whatever. You don't have to necessarily go like raise money and hire a team and launch a business. And I do think that there is, there is a little bit of like undue pressure to do that. I would never want to contribute to that. So I just want to be super, super clear that like, it's definitely not for everyone.

That kind of pressure has existed for a long time in the, in the SaaS world where I think we're finally— we've plateaued on that a little bit and coming back down to earth, I think. But yeah, to your point, if we can avoid that in the creator space, it'd probably be great for everybody's mental well-being.

100%. Yeah. And like there's, there's beautiful art and you don't need to like, you know, bastardize it with capitalism.

Yeah. Like I think, I think Emma Chamberlain is an example, has been a creator who's been pretty public about The fact that she views herself as more of an artist.

Yeah, well, she's also literally doing every brand partnership right now, so yeah, maybe she's talking out both sides of her mouth. Yeah, she's definitely a capitalist at the moment.

I love, I love that. Nothing wrong with that. I imagine when you're talking to creators about potentially investing, you're talking through this type of conversation. Hey, what, what do you want out of life? Where do you want to take this business? Totally. So How do you, how do you separate people into two piles? Like, is it the lifestyle pile and the investable pile? How does that process work?

Look, I think there's like a natural filter too. Like if you get to, if you're having early conversations with us, you know, more than one, like you probably have some sort of entrepreneurial spirit or inkling, right? Like I think it's pretty self-selective by the time they get to to our email or inbox or whatever. Not always. I think there's a lot of like exploratory conversations. But yeah, I mean, I think it's kind of understanding, you know, why, why take on capital? You know, what's the use of funds? How do you think about even like phasing and prioritizing the different opportunities that are available to you? One of the other things that we consistently hear or consistently see is that the very entrepreneurial creators have like many, many ideas, some informed kind of by opportunities they see, but then many informed by what their audience is asking for and what the community is asking for. And in addition to kind of this time prioritization between content and business building, there's also this tension between what are the different— what's it— what are the sequences of businesses I want to build and why, or things I want to launch and why.

So, so there's a, there's a, there's a strategic sort of long-term planning thing, maybe a focus issue too.

Yeah. Yeah. I wouldn't necessarily call it an issue, but I think it's something that we talk with creators about all the time.

I would probably call it an issue. I mean, I—

Yeah, it could be an issue.

I mean, maybe for some and not for others, but I do think that— and maybe we can bring the conversation back around to the CEO persona for a second.

Sure. Yeah. Yeah.

I do find that creators psychographically tend to be more of the visionary type.

Yes.

And then usually there's eventually some operator persona who's more the hyper-conscientious integrator type of a personality. And when I talk to a lot of creators, mostly bigger creators, you know, I'm mostly talking to YouTubers with like half a million plus audience size, roughly half a million to like 20 million. I still see creators with surprisingly large audiences and businesses have focus issues.

Yeah.

Part of it is because I think they do have an audience that's like, hey, I want this, I want that, you know, and the good, the good creators are, they're listening to their audience, they're taking feedback in and incorporating it. But when, when I talk to the integrator, the COO, I think one of the, one of the places I see the most value being added consistently is in focusing down the priorities.

100%. And yes, and actually like going to, to make that thing a reality of like, okay, that's almost like PMing it, right? Like, here's how you like step 1, what do we need to do? Step 2, like how do we actually bring this thing to life? But yeah, I echo the creators as like the bigger picture, obviously the creative thinkers, but like the more visionary mind in the equation and then the desperate need for the COO or GM or whatever you want, president, whatever you want to call it.

How much time do you spend with the COO/GM persona?

It depends. If they're already heavily involved in early conversations, then a ton. But if they are kind of like an add-on, you know, post-investment or whatnot, then, you know, not as much.

Interesting. Do you ever help place COOs at portfolio companies?

We haven't, but we're early. And so it's, I know that you and I have spent a lot of time talking about this, but I do think that there is, um, you know, an opportunity to, to, to do that in the future as we, you know, obviously continue making these investments and getting more involved with the businesses.

Yeah, I could see that being less common. Like you said, you're investing at an earlier stage and—

well, we're also early to this, right? Like this being—

to figuring out how to solve a certain set of problems, one of which might be the operational angle.

Totally, totally.

When you're talking to creators and you're thinking about investing, how do you underwrite? And I know this can sometimes— these conversations can get really technical, which I actually think is fine. I think probably a lot of people listening are reasonably technically savvy. How do you think about underwriting? How do you think about the return?

Yeah.

Where does the return come from? Where do you get liquidity? How do you think of the whole basket of stuff?

So it's kind of a sum of the parts exercise a little bit because you have to think about creator businesses in different components. So there's like the pure content side of the business, which is Basically, you're just modeling cash flow, obviously with certain expenses and kind of in conversation with the creator, you kind of like figure those out. You can run like a pretty simple like growth scenario analysis, which is you build like a financial model. Yeah, literally. Yeah. And then kind of like run a discounted cash flow and evaluate it back to today. So that's kind of how you think about more like a cash, the content side of the business. And then I've literally like taken precedent transactions and, you know, doing like comps analysis on, on like an actual business that they may have that's kind of underneath their holdco.

And so for anyone who doesn't know what precedent transactions are, you're basically looking at all of the investments that have been done in the space, private market investments that are sort of relevant in the space over a period of time, looking at the check size, the valuation, the implied multiples and then trying to extract out some, some value valuation.

Correct. Applying that to the existing business. And then I think the third component is kind of this like venture premium, which is like, okay, you have a ton of opportunity ahead of you. Like you get credit for that, obviously, which is the squishiest, you know, transparently the squishiest part of this whole thing. So that's kind of the way we think about it. And obviously, it highly depends on kind of what's in place today at their business, the category they're operating in, like how far down the path they are with, with certain businesses or ideas that they have. So, I mean, it varies creator to creator.

When it comes to like return, when you think about returns of the fund, is this— I know you're a bit in the earlier stage. So are you thinking about it as Hey, I need, I need this investment to return the fund, or because presumably the failure rate on other things is disproportionately high, or is there some other perspective you bring into it?

So I think it's actually like less of, whereas venture is, you know, you need 1 of every 10 investments to work out.

And then work out really big.

Work out really big. And the rest of these years, I think it's actually a little bit different here. Where because of the cash component, like, unless a creator literally says, I'm done and I'm stepping away from my creator career and going back to law school or whatever, there's probably always going to be some sort of return. Like, you may make back 1x your money and, you know, even as a negative IRR or whatever, but it's very unlikely that these things are going to go to like absolute zero. It's kind of the way we think about it. And I'm very soberheaded in the sense of like, I don't think they're going to have software-like outcomes. I think, you know, you're kind of—

Maybe your top end is capped a little bit more than like a pure software tech bet, but then your downside's a bit more protected as well.

That's exactly right. That's exactly right. And then I think if you, you know, what drives those outcomes, it's the most obvious answer is like, okay, there's some exit. Of a brand or company that they spin off, right? That's like the obvious answer. But you could get into a world where, I mean, Martha Stewart went public, right? Martha Stewart Living. Like, could, could this basket of things, right, this personal brand end up going public? Or, you know, could you basically securitize the cash flows that are from content and whatever and kind of sell that off to some—

I guess you could do a dividend recap down the road to get liquid. There's a lot of ways to get liquidity.

Right. I know Sam has thoughts on, you know, what does this look like from a, from a crypto perspective? There's ways to achieve liquidity that way.

I think you have a pretty defined perspective on this. I think it's maybe the risk-reward profile a little bit, which is why I'm bringing it up. The, the concept of like, you know, do you invest in the creator holdco or the topco or do you invest in a subco?

Right.

What's your perspective on that?

So we very much prefer the top co for two reasons. One is that it gives the creator the utmost flexibility to invest in the thing that is like the best use of their time, money, and attention.

Basically, this gets back a little bit to what we were talking about with the— you've got a fixed number of hours in the day and totally they're so core to the business. You need their time and attention focused on the thing that matters.

The thing that matters, right? And from an investor's perspective, like you don't want to be in the business of picking the project, right, that is ultimately going to work. It's like, eliminate that risk and just say, you know, we want to be appreciating that these things are like very synergistic too. Like, we kind of just want to be backing the creator themselves. And like, even you saw what happened with MrBeast Burger, how, you know, the quality wasn't there from the partner. And granted, that business didn't have outside shareholders, but if it did, like You'd be bummed, right? And you're like, damn, I totally should have picked the other, picked Feastables over Beast Burger. Like you had no foresight into that. And the other thing too is what we see time and again is the success of a project or business or thing is so one-to-one with the creator's focus on it. And so you just don't, you don't want to be at the whim of that. So we very much prefer this top coat model. Not to say that we'll never invest in, in, you know, a subcompany, but, um, more so than not, the top coat.

Makes sense. From the creator's perspective, as they're thinking through that dynamic, how do you think they should think about it?

Like, what's the benefit to them?

Yeah, pros and cons. Uh, like, you know, if you're— I've always thought that taking venture investment in some ways is like getting married because it's it's kind of a one-way door decision, right? It's hard to— I guess marriage isn't truly a one-way door, but you get my point, right? It's harder to sort of extract yourself out of. So it's a decision that warrants a lot of consideration. From their perspective, what should they think about, like, pros and cons of the sort of top co versus sub co thing?

Yeah, I mean, I think if you— it's an interesting way, like, if you have a company or an idea, right, and you go out to market Like what I'd actually say to creators, like if you have a brand or whatever and you want to go raise for it, go do so. And like, just use, use the market to basically test the validity of the idea. And, but, but I think what's interesting is, you know, raising at the top basically doesn't necessarily beholden you to, you can be like, screw you guys. Again, I see something you don't, I'm going to go fund this in part by myself such that I don't need to raise either as much capital or whatever it is.

Okay, let's think that through. So if you're raising— let's say you want to launch a CPG product and you're even have a subco that is doing the CPG thing, you're going to go to a very specific subset of people who invest in CPG. And then I guess if you were to change your mind down the road or it didn't work, you're pretty locked into that idea.

Yeah, you have shareholders. You have shareholders who care about that specific Their incentive is to have that company work.

Gotcha. And so in some ways, taking, taking the money at the top co gives you a bit more freedom, operational and intellectual freedom.

Yeah. I mean, and this was the point I was making before, which is, yeah, I mean, you basically, it's almost like raising at an incubator, like a sandbox or incubator level versus raising for a specific idea. And it's not to say you can't ever go raise for a specific company, you know, down the line. I think that's actually like the way you should do it once you have traction. But I think when it is so early and when you are experimenting and being iterative and you have so many opportunities, like there's something to be said about just quick testing and like getting quick feedback that this capital allows you to do pretty effectively without having to go like raise a little bit of capital for every idea that you may have. So it just, it, there is this sense of, yeah, flexibility and freedom that I think the creator can access.

Yeah, the freedom thing resonates with me. It makes sense. It's like, not that dissimilar to maybe if you're backing a very, very early stage tech entrepreneur, you're backing the person often more than the idea or the category or the product that may or may not exist yet.

Yeah, well, it's kind of like, you know, there are— you meet these whiz kid entrepreneurs and you're like, I don't know what the hell they're going to go do, but they basically have an open checkbook if they want it. And it may not be that, you know, the first idea that that is the actual big outcome, but you kind of continue investing alongside just backing them in their ingenuity.

Yeah. What's the, what's the most extreme example of that? The Thiel Foundation, maybe? I'm trying to think of a really extreme example of that.

Totally. Thiel Fellow. Yeah.

We try to wrap these conversations up with some very specific advice for our audience on this, this podcast. And our audience tends to be creator COOs and creators. So the first question for you is, what's your advice to a creator who's maybe sitting on the fence between, hey, I want to operate this as a lifestyle business and/or I want to, I want to play big, take a big swing?

Yeah, it's a very personal decision. I, you know, I think it's— I would— my advice would be honestly go talk to founders, entrepreneurs, other creators who have done it on both sides, right? Who have kind of made the decision to say no, you know, I, I'm going to go pursue this one path or, you know, I'm going to go pursue the more entrepreneurial path. So like, there is no— there's no real kind of silver bullet advice that's going to give you an answer. I think it's very much like a personal exploration and, you know, also personal circumstances. Like, are you even in the place to have employees and build a business and take on capital?

It's a personal— it's a very— it's a personal decision that requires a lot of reflection and Maybe some conversations with people that you trust in your life, that you trust and love.

100%.

Cool. And then last question for you. What's your advice for creators who may not be operationally savvy themselves, who, uh, I imagine some of them might be— feel a little daunted by the prospect of building out a business that's more operationally complex? What advice would you have for for them?

Like, just start to talk to people and bring people on, even if they're not the right ultimate fit. I think in the same way startup founders go through this, you know, the advice that your first few hires are probably not going to be with you the whole time and just like, just start the process of bringing people into the fold, seeing how you work together, seeing what skills you may or may not have, or, you know, what holes you need to fill, just like, start is what I'd say, because I think, you know, the sooner you can do that, you just learn a lot through the vetting, interviewing, hiring process versus kind of just sitting there being like, you know, analysis paralysis. I don't know where to start.

So focus, focus on building the team and then don't get paralyzed by the prospect of building out the right team. Start talking to people. Yeah.

Knowing that it's going to change down the line, probably inevitably, you know, as you grow, as your business grows.

Cool. I love that. Love that. Hate analysis paralysis. So resonates with me. Any, any parting thoughts?

I think there's a lot of like really interesting businesses to be built outside of just CPG is kind of what I'd say. And I, you know, we get obviously the most excited about those types of opportunities. It definitely takes public examples to kind of unstick it, but I think we're starting to see more and more. So just keep your eyes peeled and Inspiration can come from wherever.

Interesting businesses outside of CPG. So yeah, you're in Shark Tank, Andrew Huberman taking on LabCorp, $2 million, $2 million cash in at $5 million pre.

Let's do it. Let's do it. All right. Sold.

And then Emily Oster is next. Yeah, Emily, we're coming for you.

Exactly.

Cool.

It's very funny.

Thanks for taking the time, Megan.

Yeah, this is really fun. Thanks for having me.

I hope we do it again soon. This was a blast.

Yes. Total blast.

Thanks for listening to this episode of the Creator COO. If you found this valuable, you can subscribe to the show on your favorite podcast app so you never miss an episode. Also, please consider giving us a rating and a review as this helps other creators and creator COOs like you to find the podcast. This episode was produced by Rebecca Donovan at Uscreen with support from the team at Share Your Genius. It was edited by Chandler Chapman. With artwork designed by Spencer Marsh. I'm Matt Estes, and you've been listening to The Creator COO. See you next time.