The Art of Choosing The Right Creator To Back | Megan Lightcap, Slow Ventures

Honestly, one of the things I'm like pretty inspired by is to this point, bringing in strategic angels that I think can actually be really helpful. One, we've seen this work really well. There's a business we wrote a small check into called Indefi. The whole premise is the strategic funders deliver crazy outsized value and really de-risk the success of the, the project or the EP or whatever it is. And so I think a similar thing can be done here, which it's not just smart money, but it's highly strategic money. In the version where you're, we're backing an entrepreneur, I'd say if you like are so So far along on an idea, like just go raise for the idea. I think your cost of capital is going to be better, right? Just raising for that entity. To the extent you're working on multiple things or are not quite sure you want to go all in on one thing just yet, raising at like this, whatever, holdco or topco level is really interesting. In the creator version, I'd say it really depends how much time you want to spend on the content top of funnel growth engine versus the day-to-day operations of business. I mean, I had a deal come across my desk where creator, influencer is launching a consumer business. My one question was, well, how much time is she going to go spend on this new thing? You basically want to have flexible capital to deploy against like the highest ROI activity, whether that's doubling down on content, whether that's investing in R&D. But if you're like, no, I really just want to like go all in on operations and run this thing, it probably makes sense just to raise at the company level.

Welcome to Media Empires, where we sit down with the most influential media creators right now to learn exactly how they built their empires. Our aim is to extract the secrets of top-tier podcasters, newsletter authors, and media creators who are breaking the old rules for media success. Whether you're looking to start your own empires or simply curious about the nuts and bolts behind media businesses, you'll find valuable insights and tactics in each episode. Grab your headphones and let's dive in. This week on Media Empires, we're sharing an interview I did with Megan Lightcap back in early 2023. Megan shares valuable insights on the digital creator economy and how Slow Ventures goes about investing in the right creator. We talk about the challenges that come with backing up humans in the digital sphere, compare investing in creators with startups, and explore the future of creator financing as a whole. Without further ado, here's Megan.

Megan, welcome to the podcast. Thanks for joining. By way of introduction, for people who may not be familiar with your work that you do at Slow, why don't you introduce what you do funding creators thesis behind it, and maybe a little bit of the story.

Sure. So I work at Slow Ventures on the investing team. I joined basically to head up a new strategy that we're pursuing, which is premised on the thesis that humans deserve capital. And so there's kind of two different flavors of that. One is funding multi-time entrepreneurs or just like product builders in effectively what looks like an incubator. And so giving them kind of no strings attached equity capital where they could deploy it against any project or use it in any capacity. And it's really just, it's a bet on the person. The other version of that, which is where I spend more of my time, and we can kind of get into the split of time and all that stuff if it's interesting, is basically backing creators. So thesis being people follow people. If you think about, you know, who kind of controls consumer mind and wallet share today, there are influencers, creators, people you just love to follow in random rabbit holes. And so what would it look like if you could actually give those people capital to build interesting operating businesses and commercial opportunities on top of, you know, their personal brand? Again, similar structure to the first one, which is no strings attached capital. They can use it for whatever. And yeah, it's really a bet on the person. So that is my focus at Flow.

Yeah. And, and to, we'll get into both of those in this episode, but let's start with creators. I mean, zooming out, it, it seems that a lot of people are are realizing that, you know, acquisition costs are only getting higher and that distribution is more and more important and that creators just have this inbred distribution channel, basically close to zero CAC. And they're also seeing, you know, people, creators like MrBeast create businesses that transcend themselves and creators realize that their shelf life might be limited. Even separate from that, they just want to go bigger. Like, why not be able to partner with other people who can make businesses that expend beyond themselves, and there are examples of people doing it. And so it feels like the opportunities, the factors, incentives are converging from all sides to make this happen.

That's exactly right. I mean, the thing that's like really exciting, not to nerd out for a second, but like, I think when you think about the P&L of a business, so much of the spend and the margin is basically marketing dollars. And so if you can rethink how those marketing dollars are spent, or basically like what is contributing to marketing broadly. And you kind of start to see you're fundamentally changing the P&L structure and the margin structure of a consumer business. And so, and it's not for forever, right? Like at some point the CAC advantage plateaus or what have you, but in the early and medium term, like that gives you a massively competitive advantage to then redeploy that capital elsewhere, whether it's product development or hiring or what have you that would've otherwise went to marketing.

Yeah, it's fascinating. In a Web2 world, it goes to, you know, Facebook or whatever, you know, platform you want to use, marketing channel. In a Web3 world, some of that money, you know, went straight to the users in the form of tokens, perhaps, you know, in the creator world, maybe it goes, you partner with a creator, and now you don't have to pay, own them in a long-term, organic, authentic, you know, way. And so you guys, I see you guys as pioneers in this space, in both income share agreement more broadly, or funding humans and creators. Let's deep deep dive on creators. So you guys been doing this for, for a while now relative to this space. What have you guys learned? What's evolved in your strategy or the approach?

Yeah, I mean, let me caveat this by saying it's still evolving and I think it's going to continue to evolve. It's still like such a nascent asset class, if you want to call it that. I mean, one of the biggest unlocks for us, at least I think with respect to getting this thing off the ground, is who's the right creator to back.

Yeah.

Because I think there's considerations from like, why do they need capital, right? Like, are they— is there actually like a product to sell? Product in this case meaning money. So is there like, who is the right creator in terms of why do they need capital? How do you underwrite the business? Where can you be supportive? How do you actually like assign evaluation? And so the place where we've gotten a lot sharper are the types of creators. And so I think when, and it'd be interesting, I actually, cause Sam did some of the deals before I joined, so it'd be funny to like have he and I both on and kind of take it, get his perspective. But like, yeah, I think since me joining, we've gotten a lot sharper on backing creators that sit within a vertical or a niche. Cause you can like, you don't have to squint very hard to like see what kind of businesses they could build and like where, like, okay, the products that they can launch, the adjacent categories that would make sense, like how the flywheel kind of gets going. And so. Just having a more of a point of view on the types of creators. And then I think all the while it's becoming more and more apparent that like those that are simply just in like the attention game are really bad investments. One, I think it's just like, it's really hard to sustain and it's just like, I don't know how you quite underwrite that.

So let's give examples of creators that you've either backed or would, would back and maybe ones that, you know, may be compelling, but maybe not for your thesis. Like who are you funding versus who you're not funding?

Yeah. So we've backed, we've done a handful of deals. The one that we've talked most publicly about is Marina Mogilko. I'll only spend like a minute on her because I feel like there's like a lot of her out there, but she's super interesting story. She immigrated from Russia to the United States, documented her life as an immigrant, applying to a graduate program, starting a startup here. And like, turns out there's a whole bunch of people in the States who like are pursuing the American dream in a very similar way. And so. That is kind of her niche, which is language learning and what it means to be kind of an immigrant in the States, basically pursuing like business building and wealth generation and all that stuff. So she's someone that we've backed. We have also backed someone here in New York. We haven't publicly disclosed, but this person sits within like the fitness wellness, kind of like holistic space. And she's just done an incredible job building a business on absolutely no marketing and just like kind of like building this umbrella brand under which she can like so naturally grow into different adjacent categories. We backed someone in the trick shot space and closing a deal now with someone in a slice of like home DIY. So super excited about that.

So you're not trying to get the next MrBeast, you're trying to get the next whoever owns specific categories and build businesses on top of that.

Yeah, it's interesting. I think, and I'll answer your— sorry, I forgot to answer the second part of your question, which is like who we wouldn't back. But on the MrBeast point, I have like a draft of a newsletter written on this, which is like a clickbaity title of like why we would not have invested in MrBeast. He's— I mean, I could sing his praises all day long. He's amazing and a phenomenal entrepreneur. But like, if you think about MrBeast, like, I don't know, 5 years ago, like, it's not actually clear. Like, you couldn't have sat there and like said with 100% confidence that he was going to launch like MrBeast Burger, right? Or Feastables. Like, it just like wasn't that obvious. And so that was like a very like weird, spiky, like discontinuous outcome, which I think is like pretty well suited for venture, but it just like, it wasn't clear at the time. So it's fun to like do the postmortem on that one to say like, okay, would we have actually done that? Why or why not? But yeah, I think people that sit more within a category, but that's not to say that we would invest in some, we wouldn't invest in someone that's like culturally relevant and has like a ton of different business ideas. I think it just like. There's some nuances to it. I'll give you an example of someone— I'm not going to mention the name, but someone we passed on. This person has a massive following, born on like TikTok, kind of in that world, and has parlayed that pretty nicely into other platforms. The thing I just like couldn't get conviction in, despite his like massive audience, was like, what does he stand for? And like, how do I— like, I couldn't quite get wrap my arms around like, why would people buy whatever he's gonna go do, if that makes sense? Like, it still felt like he was trying to figure out like what his thing was. So, I mean, great person, like super talented in many ways, but it was just hard to, it was a hard one to underwrite.

Yeah. So is, is that your answer to people, the type of creator you wouldn't fund, which is not specific enough or not niche enough, basically?

Yes, but I, not, I don't wanna put anything like fully in blood. Yeah.

But that's a good one.

Um, right. No, I think it, but like broadly, sure. Yeah. Yeah.

And are you really focused on YouTube as a platform? Like, are there any creators you funded who are just not on YouTube or not big on YouTube? Or how do you think about different platforms?

And yes, so YouTube's an obvious one. I think there's like, you can obviously just get like early signals from monetization given their mechanism is great. But I think Instagram is also quite interesting within specific categories. Doing a deep dive now into the parenting category for a whole lot of reasons, but most moms are on Instagram. Like not a lot of moms are spending time watching YouTube videos, super time strapped. And so in that instance, like, you know, most of these people sit on Instagram and like that's really where their following is. So it's not YouTube only, but really focused on YouTube and then some Instagram. TikTok to me is like a little bit of a distraction. I think the followers don't really mean the same on TikTok and it's just like so fad-driven and like so trend-driven. It's— I don't know, I tend not to spend much time there.

So say more about what categories you're excited about in Instagram or what businesses you feel like could be built there and maybe say more about parenting, like what's the white space or what's the opportunity?

I mean, I think like even without like diving to parenting specifically, I think any categories that have this like knowledge gap, quite frankly, between the consumer and the creator expert, what have you, we're like, okay, otherwise, like if you're a parent and you just had a baby, you are like super time strapped, like basically have no, you know, you're like bleary eyed. Sleep deprived, whatever, you could read mommy blogs, like text your friends, read reviews on like what's the best stroller, or you can just like follow a creator that you love and trust in the space on like all things like travel accessories. And so to me, I just think that there's a lot of like interesting subcategories within parenting where people are filling a void that like pediatricians aren't addressing, you know, nurses and doctors and whatever aren't really like giving people the right information. And so to me, it just presents an interesting like commercial opportunity, both in terms of like digital courses or like digital products, be it courses or subscription or what have you, and information. And then also like actual products.

Yeah. I'll, I'll put you on the spot if appropriate and let's diligence. I have a friend who's an Instagrammer. She also is big on TikTok. She's a model or actress. And this gives you a, a sense, like how would you, what questions would you be even asking as an investor? To see, hey, does this person have, you know, is this person a potential fit or is this not the type of creator that you would target? Like some of the beauty space.

Yeah. I mean, it's not immediately granted. I've spent all of 25 seconds reading this, but like, it's not immediately clear what her thing is outside of modeling. I mean, to give you a counterexample, just cause you mentioned it, like there's a beauty influencer creator on Instagram who I have converted on. So I'm not even like a beauty person. Person, and I just convert on so many of her products because it is incredible education for me and my friends. That's someone where if you pull up her page, it's immediately clear what she does. She has crazy engagement. She launched a paywalled platform. She's launching a tech app. She has her Geneva community. She's doing meetups. There's so many pieces of this puzzle, and you start to be like, okay, is this a version of— I assume you don't know the beauty category, but correct me if I'm wrong.

No, I don't know.

Okay.

Yeah, I don't know.

Like, for example, it's very funny. Back at when I was, I worked at a consumer fund called Elkatterton and one of the deals that came across our desk at the time, this was, you know, probably 5 years ago at this point, was Pat McGrath. Pat McGrath is a celebrity makeup artist to the stars, like super well known. She is phenomenally talented and she wanted to launch a brand, like her own makeup line. And at the time we were like, haha, like how can you invest in a person? There's no company. And then it's like, cut to like, this is the whole thing. And so for this beauty person I follow now, she is driving insane levels of, of conversion on products she likes and reviews and uses in her day-to-day client— clients as like a makeup artist. And so maybe she launches a beauty line, right? Like, I have no idea, but she's— you can start to see like she's building pieces of her like beauty empire. And then I am willing to bet that the eventual thing will be launching her own line. So like, that's an example of like, you know, that it's immediately clear what the niche is. The, she's already starting to demonstrate like commercial, first of all, like commercial minded, she said she's commercial minded. And then 3, you could like pretty easily underwrite it. Like there's the content business, there's the potential consumer business or the beauty business, CPG business. And like, you can kind of wrap your arms around what it is versus the person you just pulled up, like not. Super clear to me.

Yeah. A clear trend, it seems, is commerce, you know, on top of creators. Another clear trend is like courses. One question I have is like, can they really build marketplaces? You can some like, you know, real estate influencer build like the next Zillow or something like, or can they really build software products that can achieve real scale? Or is it just this bundle of kind of, you know, $10 million businesses here and there? Like, and obviously, you know, some of the biggest creators have launched, you know, clothing makeup lines or whatever that, you know, are worth, you know, hundreds of millions or billions of dollars. But how do you think about that? Or is that something you, you are asking yourselves?

Yeah. I mean, I, I think it can be done. I mean, I think we've seen examples of this. So there's a big fashion marketplace. There's multiple, but I'm pretty sure it's Moda that got their start with this woman, Lauren Santo Domingo. She's like kind of a socialite, like a name in New York, blah, blah, blah. Like so much of, I think the start of that was who she was as a person. Right. And just like. Super plugged into the right communities, got the right people on it. I mean, obviously she had to have some level of entrepreneurial in nature to do that, but I think it's entirely possible. I think it just takes the right person. I mean, we've seen an example of this, not that it's a marketplace, but it's a software tool. Ludwig, who's like a huge streamer, he launched Mogul, which is, you know, it's basically a software product. And so it's like, okay, well, instead of using your influence to drive like conversion on product, like what if you actually use your influence to drive conversion on like installs? So like, I think that's kind of interesting. I mean, you can take this concept and apply it to like any category, which I think is like the interesting opportunity here. I mean, even within like consumer health, right? Like Parsley Health is a, a business here in New York founded by Dr. Robin Berzin, who is like a pretty big name in the like functional medicine space. I certainly learned about the business because of her and like, I mean, I'm, you know, a small sample set, but like, I don't know, we're in a very different world now. Like, who's to say that like that can't happen again? So I don't know. I think the opportunity is like much bigger than just CPG. And I think, I think the thing that gets us there is just more examples coming online of like people doing interesting stuff, whether it's Ludwig or, you know, profile on Robin Berzin or some other doctor doing something interesting. Like, I think you just kind of need neat examples.

Totally. And so how does it compare kind of creator investing to investing in startups? Like investing in startups, you know, they say, you know, you're looking at the quality of founders, you're looking at the team, you know, the market, the product, you know, can this get to, you know, $100 million in revenue? Like, yeah, what, what are the comparative questions when you're evaluating creators?

Yeah, I mean, it's a, it's similar to investing in startups with respect to like, okay, is this an attractive market and why? Is this growing? Why? Like, What, what do you have to believe for this thing to like exist within the market? Fine. Then I think it's, there's like some level of underwriting against any existing business that happens. And then I think like the squishiest part is really how do you assign a value to the things that don't yet exist that like can be created by the creator or launched by the creator, which is basically where like the premium comes in on top of like any value you get to in underwriting existing assets. But that's the hardest part. I think, I mean, the other part is like a lot of creators, you know, they're new to this business building world. You know, a lot of them have founder DNA, but a lot of them don't. And so I think it's evaluating too, you know, are they thinking about like how to build the empire over a 10-year horizon or are they just focused on like the next brand deal? Right. And it's so, it's just spending time with them and like really trying to deeply understand like what their motivation is. But. I'd be lying if I said I had it all figured out.

I'm curious how you think this creator financing space is going to kind of play out more broadly. Like, is it fair to say that you guys are like Series B investor, or how would you consider yourself?

I think we're like, I mean, you could call us seed, but like in reality, a lot of the, a lot of the people that we back already have existing businesses. So I don't know, like C+, Series A maybe. But then you see a lot of like CreatorDAO is doing super early stage stuff. Everbloom just launched. There's a handful of others I've recently spoken to that like, they're putting in $40,000 in some instances. So it's micro micro transactions. Yeah. So it's fun to see like how the ecosystem is evolving at like a very rapid pace all along the spectrum. And then obviously on the high end, you have like Knight Capital, TCG doing like full majority buyouts of these types of businesses. Yeah.

So I, I wonder if there's an opportunity. To, for a player to come in and help these creators find COOs or co-founders. Yeah. Because you, you'll give them capital and you'll support them, but they kind of need someone to do it. Right.

Totally.

How do you think about that?

Yeah, I think it's a real opportunity. I think people are starting to build against that opportunity just from recent conversations I've had. I mean, I also, I'm like kind of on a soapbox about this, so I'm sure you can find this elsewhere on the internet, but like, It's crazy that HBS doesn't have a guest speaker that's like, hey, type A student who wants to go be a GM at Uber and run their own business line, forget that. Basically just go pair up with a creator and run their business. I mean, I think I was talking actually to Josh Kaplan about this last week, which is like, there has to be some, they have to paint some vision of the economic trade, which is like, okay, if your total compensation at Uber is cash plus RSUs, like what is the equivalent like path to liquidity effectively in a creator business. And so that I think is going to be like the hurdle in bringing on like really talented people. But I think we're like, I think it's going to happen very soon, but someone should do it.

And I, I think one path might be partnering with a management company, say, hey, you guys know how to attract great talents, how to keep them happy. We'll focus on like incubating businesses on top of it and give you you know, a huge stake in that, that you weren't going to do otherwise, perhaps.

You mean having the management company find the COOs?

Oh, I'm saying that you mentioned the person HBS, like someone who wants to do this, maybe joining a management company or partnering with, you know, people who manage creators already and saying, hey, the management company is focused on management and brand deals and kind of more local opportunities. Why don't we expand an incubation wing to it? Yeah. Otherwise it's going to be hard for that. Person to just find talent, build a relationship with talent, you know, convince them, et cetera.

Yeah. I mean, I think, yes, I think that is a, an entirely reasonable path for this to exist.

Yeah. I'm curious how you think about business creators or even like, you know, Workweek, for example, is trying to create different media properties within tech or business more, more broadly. And I'm curious if that's something, you know, they're kind of newsletter first, maybe sometimes podcast first, and then they're putting courses and other business on top of them. I'm curious if if that's something that you'd potentially get into or how you just, how you think about those opportunities generally.

Yeah. I mean, I think one of the things we're kind of careful of is like, we don't necessarily want to invest in just a media business. Those are obviously like not super, I mean, they're just like from a business perspective, they're not like the most venture-backable. It is certainly one aspect of what could be a really interesting total composition of a business, but I don't see us investing in the pure media property.

Would you have backed someone like Lenny Rachitsky? Today he has a media property that has 7 figures, but in theory, and maybe he wants to do this, I'm not sure, but he could build a product that sells to product managers, or if someone is a sales creator, they could build a Gong competitor or something, you know, HR Lattice competitor you could imagine.

To the extent they articulate that there's stuff beyond just a media property, 100%. Think about like Harry Stebbings is an interesting example of this. Launched the podcast and then now he has the fund and yada yada. It totally depends though, what's the endpoint? Again, How do you build the empire and like what's part of the empire, I suppose. But I think there's been a lot of con— we've had a lot of conversations with creators that are really just building like media properties. They're pretty upfront that like there's not much beyond that. That's really what they want to focus on. And I think they're amazing, but I, it, they're just kind of hard to, for us to talk, right?

You did a recent write-up on creators as franchises or talk about why that mental model is helpful or unpack that.

Yeah, that was like one of these, I don't know, like 20 minutes during a meeting and I was like, this is kind of an interesting idea. We, cause we were somehow we were like talking about franchises at Slow. I mean, I don't know, to me it's like, and Kevin over at Epic Gardening made the initial point that like sparked the idea, which is this bundling of creators. Cause I think you're going to see a lot of creators rise to the top in certain categories. And I think there's like an interesting value exchange to be had between creators and smaller creators in that category to grow the overall pie. And so I don't know, it just feels like a natural place for there to be like, okay, I give you a rev share, but in return you give me the business in a box, the playbook, the whole thing. I like benefit from the mothership and vice versa. I don't know. It's kind of an interesting expression. And again, on my trope of this is really just consumer reimagined. It's kind of an interesting way to play it.

Yeah. I want to talk about the deal that you guys have. How did you— what do you unpack? What is the standard deal, or even what are examples of deals, and how you came— how you've evolved that deal? And I'm sure it'll continue to evolve over time, but what do you want to share some of that?

So the high-level structure of the deal is that there is a joint venture, holdco effectively, that the creator owns in its entirety. And then we basically put capital into that JV, which makes it a JV, and in exchange we get a percent of future earnings. So could be on revenue, it could be on some negotiated, you know, line on the P&L, whatever it is. And then any equity stake that the creator themselves has, we basically— our ownership would be reflected in them. So the simplest way to think about it is like whatever ends up like hitting their pocket, whether it's equity shares in something, cash, we get a small stake in. And it's generally 5 to 10%. We don't really want to go above 10%, and we'll put in capital anywhere from half a million to $2 million on the high end.

Yeah, my— you've probably already considered this, and maybe you're doing it or it's too complicated, but my one thing that would be interesting is if you also allowed kind of angel investors to, to get in who are either fans or curators or other people, so that, you know, 10 years from now or 20 years from now, there isn't this like creator, in case there's a dispute, there isn't this like creator versus low where it's like, that was kind of Taylor Swift-like situation. I feel like that can be a way to de-risk that and kind of just align incentives more often.

Honestly, one of the things I'm like pretty inspired by is to this point, bringing in strategic angels that I think can actually be really helpful. One, we've seen this work really well. There's a business we wrote a small check into called Indefi. Yeah. Um, and it's, are you familiar with it?

Yeah. Yeah. Music company.

Yeah. But like the whole premise is the strategic funders deliver crazy outsized value and really de-risk the success of the project or the EP or whatever it is. And so I think a similar thing can be done here, which it's not just smart money, but it's highly strategic money. So yeah, that is something that I would love to do in all of our deals.

You could even have the creators, you know, invest in each other or have some equity share, like so that they're incentivized.

And interestingly, we're having some like cool conversations on that front. So stay tuned.

Yeah. So, you know, we're at the early stages of kind of creator financing. You, you guys are pioneers. When should someone raise as a person or in this model ver— as just a normal business that doesn't give up, you know, everything they earn? What's the mental model? How should we think about that?

Yeah, that's a really good question. And I think the answer differs, I think, for a creator than for a multi-time entrepreneur. So in the version where you're— we're backing an entrepreneur, I'd say if you like are so far along on an idea, like just go raise for the idea. I think your cost of capital is going to be better, right? Just raising for that entity. To the extent you're working on multiple things or are not quite sure you want to go all in on one thing just yet, raising at like this, whatever, holdco or topco level is really interesting. In the creator version, I'd say it really depends the, like, how much time you want to spend on like the content, like top of funnel growth engine. Versus the day-to-day operations of the business. I mean, I had a deal come across my desk this week where creator influencer is launching a consumer business. And my one question was, well, how much time is she going to go spend on this new thing? Right? To the extent it's, she's still doing her posts and her videos and her content or whatever in service of growing the company, you may want to consider actually raising at a holdco level, just because both, there's a really interesting growth dynamic between the two things. And so. You basically want to have flexible capital to deploy against like the highest ROI activity, whether that's doubling down on content, whether that's investing in R&D. But if you're like, no, I really just want to like go all in on operations and run this thing, it probably makes sense just to raise at the company level. It really comes down to just growth building, I suppose. And then also if there's other ideas you want to also pursue alongside that don't necessarily fit into the existing entity of the company you're contemplating, like It's also kind of interesting. Yeah.

So just to give context to the listener, I'm decidedly passionate about the ISA space, you know, investing in humans in general. I partnered with you guys like 4 years ago to host one of your ISA conferences. I was on Sam Lessons' The Information podcast to talk about ISAs a few years ago. And I've invested a couple of companies in the space, not as much as you guys for sure. So I say this with, or I ask this with a desire to see this happen. Which is there's this tension on the deal, which is some people, you know, ISA has always been a controversial concept. People will claim all sorts of things, but the idea of giving some percentage of everything you earn for some period of time makes some people uncomfortable. Some people don't want to accept it. At the same time, I feel like the reason why that needs to happen is for it to be a comparable investment to wherever, to other start— let's say startup investments. Like that same dollar that goes into creator financing needs to compete with going into tech startups or something else.

Totally.

And if it's compelling, then you're gonna have a lot of money flooding in. And so you could have quote unquote a fairer deal, but if it's not compelling from an investor perspective, then there's just less money to have fairer deals. So what I'm, I'm wondering is 5 years from now, 10 years, you know, right now we're early, we're kind of pre the YC safe, we're pre standardization in the space. Is it gonna be the norm that people are giving some percentage of what they earn for a decade plus?

Yeah.

How, how do you think it's gonna, how do you think about this?

I mean, it's a supply and demand issue, right? I don't see this going mainstream for the everyday worker. The math just doesn't make sense from an investor's perspective. Again, those dollars are competing with, you know, other opportunities. And so I don't think it's gonna go mainstream from that perspective. But I, to the extent there are these people-led companies and brands where it's actually a little bit unclear. Clear where the line starts and ends with respect to business building, and then also you as a person with influence and whatever. I think that's a really interesting use case for this model. But again, like, not for everyone, right? If you're not a public person, if you have a 9-to-5 job and the math just doesn't make sense, and it doesn't appear that there's a world— I don't know, there's logic for that. But on basically, if you look at someone, and even on like the entrepreneur side, if you look at someone and you're like, They're just like addicted to building. There's actually no reason why an investor wouldn't want to bet on that person. We kind of see this happening in regular venture where it's like, okay, you have an engineer coming out of Stripe, you know, XYZ venture capital firm is like giving them a term sheet sight unseen. It's really like the same concept, but I think, yeah, I don't know. There's definitely some limitations into this going mainstream and I think it was just going to take some time.

So beyond creators, have you done any kind of just human, human, or what human investments have you done that you can talk about? if any, and what types of people are, it might be a good fit for?

Yeah. We've invested in the Lieberman Brothers, which they're infamous at this point. 4 siblings, just like crazy product builder, super smart, like working on a ton of different ideas at once. So we've done that deal. I mean, I think that the hardest part again for us on entrepreneur side is, and I think we're going to do it like a little bit more opportunistically and really focus on the creator side is just one, like How do you value these folks? The creator stuff is a lot easier to value and underwrite again, because there's just like more to wrap your arms around versus the best engineer coming out of, you know, the hottest startup. It's like, how do you actually assign a value there? And then to the cost of capital question, right? Which is like many of these people have ideas and so, and they're going all in on one company. And so they should just go raise for that thing. That said, the Lieberman's launched Humanism to do this, like at scale, kind of as people investing at scale. So. We're excited for them to figure it out and want to be along for the journey. But yeah, there's just different nuances with respect to investing in like entrepreneur folks.

But it's funny, like if I'm a second time founder or, you know, hot engineer leaving a hot company, I should say, you know, maybe I'll raise for a company at like $20 million. But if I'm like raising for, you know, in perpetuity, like, totally. How do you, is it $200 million? Is it a billion? Like, you know, it's like my potential is, you know, Is it a multiple of what I've made to date? Yeah, it's fascinating.

Yeah. And I think, I mean, if you talk to Lieberman's, like they, they've come up with a model. And so they have a really strong point of view on how to think about valuation. We've kind of chatted with them on some potential deals and it's like, I'll, I'll meet these entrepreneurs and it's, I almost like can't tell like one from another. It's just harder for us, but we're excited to see it happen.

So totally. A few years ago before the pandemic, the creator economy got really hot as a concept and a lot of money flooded into startups that were focused on the creator economy. And my sense is that people perceived that wasn't money super well spent in the sense that there haven't been like huge outcomes that came from some of the companies that were excited there. Maybe the outcomes were just in the creators. How would you kind of reflect on what we've learned as an ecosystem about the creator economy?

Yeah, well, you should look, read my newsletter from yesterday.

Exactly. I'm just literally teeing it up.

You're teeing it up. I mean, look, I think like the creator economy when it like first came to be is really like a different way or people are like working and making money and creating things and whatever that is going to play out over a longer time period. And so I think a lot of the companies that were started and the money that kind of flowed into that category was just like premature. Like I don't think people like fully understood how it would actually play out. And so. I mean, I think you saw a couple of things that happened, which was one, there was only like really one slice of the value chain where people, where these companies could play simply because the existing social platforms do a really good job on all the other stuff, everything from like content creation. So I could make a TikTok on my phone in 3 seconds to top of funnel discovery, to distribution, to monetization in certain cases like YouTube. And so. Outside of those social platforms, like other monetization methods, I suppose, that's kind of where the, like, new upstarts could really play, which is only a sliver. And then I think the realization was like, okay, so if basically the business model is that like you have a take rate on some specific flow of funds in that like other monetization bucket, you're kind of leaving yourself to this like whale problem effectively, which is the top 1% of creators are driving 80% of your economic value. And then to the extent those creators are building real businesses, like a lot of the companies that were created were like a little bit like white label-y, one size fits all. And so they just need more bespoke business building stacks effectively. And so that was kind of my readout on what happened. But yeah, I mean, I think it remains to be seen. I just like, I don't think there, the bottom line is I don't think there's all that much like economic value to be captured in that slice. And I think you're going to actually start to. I think the real win or like the real prize is like the creators themselves effectively.

Yeah. So let's segue into that. So you fund the creator, you put a million dollars. I'm curious why it's a million and not 150K or 5 million. Like what I got to that number. And then what do they do with the money? And do they typically have, you know, a COO or something, you know, at that point? Or what do you talk about the org building side as well?

Yeah. So they can do whatever they want with the money, literally no strings attached. They could hire a nanny if it gives them more free time to like create content. So. We want to be really careful as to like not direct how they use the money and just have them again, like when you're raising at the holdco, you get the benefit of like crazy flexibility. And so they can do whatever they want with the capital. I mean, as part of the deal and underwriting or whatever, I think they need to have a pretty clear idea of use of funds and what is it actually going towards. There's also some like tax implications if you use it for personal stuff. But so generally it's used to launch a business or like the guy that we're doing a deal with now, he has some crazy ideas as to how he's using the money that we love because it's like, these are the types of things that you get, these crazy outcomes. They usually don't have a COO. A lot of times the money is also used to go just hire people around them to just let them scale like a regular business. We have yet to see the capital used towards hiring a big executive position. It's a reasonable use case.

Yeah. What are you— so at what point do they professionalize in that way? Or what is the kind of evolution of the org building of a creator, would you say?

Yeah. I mean, I think it depends where they are in their, in their stage, right? If they're just starting out, if they're like relatively newer, right? They could be hiring a production assistant or like an editor or, you know, all the smaller roles kind of around them. I think a lot of it, you'd be amazed how far, how, yeah, how far people can get just from existing e-commerce and infrastructure tools without hiring a big team. And so. We've seen, we basically, we've invested in a creator or the deal that we're doing, they have an existing DTC, like bottom of funnel business. He's kind of hiring editors and people around him to basically scale his content and double down on that area. I mean, I think eventually he'll probably bring in a GM or a COO. I think it depends which project actually starts to take off and in what capacity will kind of inform the next hire or like the next big hire. I mean, from a business building perspective, there's kind of an interesting sequencing of events where you can basically back a creator. I think Zohra made this point. Okay. They're just going to like totally double down on e-commerce business, or they're actually going to try a whole bunch of different things and like see what hits. And so there's two multiple paths to a similar outcome. Yeah.

How do you think about protections here? Because you back a company, you put $1 million in a company, you know, they're not going to just run away. Like, you know, they have fiduciary duties. There's some legal protections. How do you think about that here?

Yeah, I mean, there's no recourse here, right? Like that's a, that's the benefit of equity, right? If they take our money and go to the Virgin Islands and just sip daiquiris on the beach, like that's our bad, pie in our face. And so I think that's where it comes down to just spending a lot of time with them, deeply understanding their motivations. I mean, Sam and I have had conversations about like, is there some sort of, not like psychological evaluation, but just like, What's like the grit factor here, right? Like how do you basically assess for that and get comfortable with, with that? So that could also be applied to founders, right?

Yeah. But, but founder, uh, the company owns IP. Like the founders can't just like YC, for example, you know, they take 7% or, or whatever it is they take. And founders at Series D stage may think, oh, that seems like a lot. You know, do I, should I really be giving the 7%? But they can't just like walk away and start a new company cuz company owns the IP. Yeah. What does the joint venture hold? That might, you know, prevent a creator from just saying, actually, I'm just going to take the money and keep doing my thing, but just not pay them.

Yeah. I mean, so from a governance perspective, we have certain protective provisions, but there, and we won't get into the details, but like the IP basically sits at the JV level because the creator has assigned all of it to the holdco. But I mean, I think like if they basically take the money and then tomorrow said, You know, I don't wanna do this anymore. Like they could, there's nothing that we could do to stop them. And it's just, I think this is again why it's like, this is a really interesting use case for equity and not debt, right? Or like cash advance stuff.

So I, I get equity, not debt, but what about revenue-based financing? You wrote an article about this, like what Spotter is doing. Is that like, wouldn't that become the norm? Or like how do you think about that?

Yeah, I mean, it's certainly a very reasonable financing path. I think the thing to think about when you're the financier, right, is that you're basically underwriting a very specific slice of the creator's work. And so, and I've kind of always wondered this about Spotter, which is any change in the algorithm or like any pullback in like marketing spend broadly, like your algorithm changes and then all of a sudden you may be like in the red on what was an investment that you made 6 months ago, right? Because now monetization has kind of changed all of a sudden. So that's the piece to me where I'm like, lower risk, lower reward type model. And I don't, I don't know. I think it's for a very specific use case. And I think, you know, a lot of the bigger creators can obviously get huge deals, but I think for the smaller creators, you just can't get as much capital or you just have to give up like a ton in percent.

Yeah. You guys just launched a newsletter. I was, you know, before you did that, I was going to ask Why don't you become creators yourselves about the creator economy and just, or about, you know, the business of creators and just become the leading, you know, voice on how to do it, like the Paul Graham of creators, so to speak.

Yeah. I mean, we're trying to be not in like a totally concerted way, but like basically the realization was we're having all these really interesting conversations with people kind of one-off and whatnot, and there must be a way to like Give that information or, you know, share it more broadly. And it's, I mean, before this call, I feel like I was telling you this, it's actually paying off, which is, you know, it, it content works. And so maybe one day when there's like an actual, like full team, but I just think there's like so much to do now. Right? Like this is like kind of a startup in and of itself. So thinking everything from the messaging and the narrative and education and the marketing of it to like who who are the right types of creators, to how do you actually structure the deal, to underwriting, to post-investment support, to like, you know, soup to nuts. This is like a product that we're trying to build and a company, basically a company that we're trying to build. And so I just don't know that there's the bandwidth to be like a full-time creator right now. So the newsletter is what we're doing, but there may be more. I mean, who knows? We're trying to do more like, I think the humanism team and I are doing like a one-day conference. Actually, you might even, I'll keep you posted.

Yeah, it's fascinating. People will say when you get into venture, hey, you should build up your Twitter presence. That's where VCs are. John Coogan came on and he talked about how, you know, he's really invested in YouTube. Gary Tan, a couple of others have. Other people have said, you know, Patrick O'Shaughnessy says he has a podcast network and he's like, actually don't touch YouTube because my audience of, you know, kind of, you know, GPs, LPs, et cetera, it's probably not on YouTube. So what John Coogan says is, yeah. Yeah, they're not on YouTube, but the GPs and LPs of the next 5, 10 years will be on YouTube. And they will come back to my, you know, videos the way that people come back to Paul Graham's essays or something. The idea of just talking to a camera about something like what, you know, uh, it seems so foreign.

Yeah.

That said, if someone was like, hey, this will, you will accrue a lot of career capital by doing it. I would do it. I'm curious if you think that. John is right, that approach, not even John specifically, but just that approach, if more people in tech should do that because it will have a kind of long-term compounding benefit as opposed to just writing essays or something. What do you, what do you think?

There's something just writing generally. I think there's something about like force, forcing clarity of thought in kind of long-form writing. So I think like besides like the audience evaluation, I think there's just some like, you know, intellectual benefit there. I mean, I think John is right on the YouTube piece. Like I, I think what pe— where people start on YouTube is like, it's very specific. Thing or idea that they just want to like learn about or consume or whatever. But like the algorithm is so damn good that like you just end up spending like stupid amounts of time on YouTube. And I think he's right in that like our peers effectively are spending a lot of time there. And I also think for what it's worth, like Twitter has become extremely noisy, extremely. And it's like, how do you actually start to differentiate like noise from signal there. Whereas I think YouTube, similar to writing, you can't really fake it. It's harder to do the whole like virality thing. So it just feels like a little bit more substantial, but I think he's right. I think that's a really interesting insight. I met him at, I think it was VidCon or VidSummit, whatever. Really enjoyed it.

Will you invest more in a YouTube presence?

So we started, I mean, I basically with like the Josh Kaplan interviews and all that stuff, I kind of Again, with the same idea of like having interesting conversations, what if we just like hit record and like in a really unpolished way, like uploaded it? It just takes time. I mean, and so it's like the, I think it comes down to a trade-off between like, okay, do I invest time in the newsletter or do I invest time in recording interviews and whatnot? I also, for what it's worth, like love to do it in person. I just think like the conversation is so much better. Not that this isn't great, that just requires a lot of time. So I don't know. It's certainly on our, on our radar. I want to do more. But just kind of like carving out the time to do it. Also, John's like production video, like quality is amazing. And like, that is something that I will never be good enough going up against like the Johns of the world.

I'm like, it's intimidating. Yeah. What have we learned about other forms of, you know, fundraising for good, whether it's social tokens or NFTs, you know, they had their relative hype cycles. Where do you, what have we learned slash where do you expect them to net out? As a potential paths or options. Yeah.

So the social token thing is interesting. I think like, again, like intellectually it makes sense. I think it was like two jumps too far though, where like the market actually wasn't ready for it. I mean, if you think about like having like a person as a ticker where like every day you see like where you are and like how far up or how far down you are from the day before, it's like a really bizarre, unnatural concept. It's not to say we won't ever get there, but I think— and this is not me promoting our own thing— but I think having institutional investors do this as a starting point is a lot more natural of an entry point. But I don't know. Crazier things have happened, I think, than social tokens, and we may see them come around again. But I think it, the concept was just like too out there for it to get real traction. And I also think like, from a retail investor perspective, I know this is what CreatorDAO and others are pursuing. I think my biggest question is like, how do retail investors like actually do the underwriting outside of just voting on what they like or don't like, especially when it's a longer-term investment? So, yeah, I don't know.

So maybe gearing towards closing here, let's look to the future. Let's say we're doing this conversation, you know, 3 years from now or 5 years from now. I'm curious if you could either make a prediction of what you how you expect this creator financing space might play out, or just enumerate kind of the questions that you have, or what are the forks in the road, or like, you know, the biggest questions you have about how it might play out.

Yeah, I mean, I think the biggest question is going to be liquidity, right? And so like, that is even to raise more capital to go do this thing, like that is the natural wall you kind of bump up against is like, okay, this is great conceptually, but like, how do LPs or investors actually get return on their money. And so I think there needs to be a lot figured out there. I think the other thing is just simply data availability and just acceptance that this is a thing, right? I think I have different sourcing tools and pulling from APIs and whatnot that help me with that, but I think there needs to be a lot more data and performance data available on How do these investments actually perform? Right? Like how do, like how far off were you on the underwriting? And so just like some sort of feedback mechanism to like help refine the investment process. But I think like, I don't know, quite honestly, in the past year I've been surprised as to how quickly this is becoming a thing. Like I actually thought, like I joined Slo last April, I thought I'd be sitting here like, you know, still doing the education and kind of convincing people of it. But like it has become such an ecosystem where I'm like, Okay, maybe this is like going to happen sooner than I thought. So that's been a pleasant surprise.

That's a great note to wrap on. One question I have is, when are, when can I angel invest in my favorite creators, right? I don't just want to subscribe to them. I want to support them in some way where I also get a sense of the upside. And I don't know what the vehicle for that is going to be. You know, people are trying a variety of different ones, but at some point it feels like that has to be more, more normalized.

Yeah. I mean, there's a bunch of companies actually working on this, doing so in like a pretty fractional way. So I don't know like what check size you're talking about, but there are certainly companies coming to market doing this. Yeah.

Let's say $20,000, $25,000 or something like, you know, standard angel investment. But it, and I want it to be like competitive with like investing in a startup. Like I want, I want like real upside.

Um, check out Everbloom. They just launched. They're doing, I think that type of check size for strategic funders built on crypto rails. And they're pretty smart.

So cool. Megan, you've given, uh, a lot to us and you're, like I said, you're, you guys are pioneers in the space. So I really appreciate all the hard work that y'all are putting into to make this a reality. Thanks so much for coming on the podcast.

Awesome. This is very fun. Thanks for having me.