$100M YouTube Lawyer Reveals How to Protect Your Channel in 2026 | Tyler Chou | 145

We are all tenants on YouTube's land, on Meta's land, on TikTok's land, and, and they can kick us off at any time.

YouTubers are sitting on businesses worth far more than they realize. Many have built their entire enterprise on a platform they don't own.

If any of your channels goes down tomorrow, you have no way to reach your audience.

Tyler Chow has spent 20 years as an entertainment attorney at Disney, Skydance, and BuzzFeed, and she was lead counsel on 18 feature films. Now she represents some of the biggest channels on YouTube.

One thing I want to caution creators about is—

She explains what makes a business worth buying, but also why some creators don't need to sell at all. They actually just need to take a sabbatical.

The number one question I get from creators is, Tyler, is this it? Like, do I just make videos for the rest of my life? Because I'm getting really tired.

Investors and studios are buying up creator businesses, and Tyler's the person who runs those deals.

A lot of creators will say to me, well, like, what product should I launch? Like, I don't know. And this is my favorite strategy.

I love that. Tyler, welcome to the show.

I'm so honored to be here. Thank you for having me.

So you and I have some of the favorite, like, our, some of our favorite topics in common, which is building large businesses, creator-led, and doing it in a way that is sustainable and everything else.

Yes.

So you're talking to creators right now about How do you build for an exit? How do you protect your IP? All of those things. What are some of the things that you're seeing right now in the creator space? 'Cause you're talking to private equity or any of these others, you know, they're coming in, they're saying, hey, you have attention, we have money, what should happen? Like, what are you hearing from the private equity side and the creators and the match or the mismatch that's happening right now?

Well, so what's super exciting is private equity fund, studios, streamers, all understand now, right? We've, we've been talking about it for years, but they finally are here. They get it. They get it. They're like, okay, clearly, you know, Unilever last year saying we're dedicating 50% of our ad spend to creators in digital media. And I think that was a big indicator for the big Fortune 500 companies to start paying attention. So the private equity funds are coming and saying, okay, we wanna buy YouTube channels, but what does that mean? I just came back from Cannes Film Festival, my first time. I, I, I was in Hollywood for 20 years and I never got invited. But now that I represent big YouTubers, now they wanna hear me talk.

Yes.

And so it was, it was quite a, you know, kind of watershed moment. And they had their first Creator Summit there. And I think private equity funds are saying, well, what does it mean to buy a YouTube channel, right? Or what does it mean to buy a creator-led business? Because they think, well, it's a YouTube channel. I guess there's AdSense dollars, you know, I think there's brand deals, but there's so much risk around the key man.

Yeah.

Right? So what happens if this YouTuber doesn't want to make videos anymore? You know, are we buying— I guess, is it maybe the back catalog? Is it the videos? You know, can we, can we license it to streamers? And yes to all of those. But the clients that I'm selling for $100 million have 15 revenue streams in addition to their YouTube channel because they're building on their own land. They have an email list. They have a newsletter. You know, that's very important. Owning your audience is the data. You know, data is the new oil. Like, you need to own your audience. I was at a masterclass back in December with 10 of the biggest YouTubers, all over 10 million subscribers. I asked them, I said, you know, can you raise your hand and let me know how many of you have an email list of your audience? Do you know how many raised their hands?

Oh, I'm guessing 4?

1.

1? Oh no, 10%?

I know. And I said, so if any of your channels go down— goes down tomorrow, you have no— you have no way to reach your audience. 10 million plus. And I think the horror on their face— I think they're starting to figure it out. Because what we're seeing in the marketplace is a lot of creators are approaching burnout, right?

Mm-hmm.

We're 6 years from COVID where a lot of creators started their channels. And the number one question I get from creators is, Tyler, Is this it? Like, do I just make videos for the rest of my life? Because I'm getting really tired.

Right.

So a lot of them are coming to me asking me, okay, what is like, how do I get off this hamster wheel? And so that's where a lot of the interesting conversations are happening. I'm running 3 active exits in, in the creator space right now. I have about 3 to 5 YouTube channels that are sort of behind them who are saying, okay, I want to exit in a year or 2, get me buttoned up, You know, do I have clean chain of title? Which, by the way, they don't even really know that until I explain, you know, do you have clean B-roll? Do you have clean music? You know, do you have work-for-hire language for your employees or independent contractors? The answer to that is usually no.

Okay, so I want to dive in on the mistakes that people make and how to fix them early. But before we do that, let's talk about the business model.

Okay.

So when we're going to say an exit for $100 million, like what actually is being purchased in that?

Sure.

There's the channel and the audience, but also usually there's a bunch more revenue streams.

Right. So sometimes, you know, the newsletter can be very valuable, but a lot of my client Jim Louderback, you know, he sells brand sponsorships and placements in his newsletter. It's that captive audience. You know, if you have 30,000 of a specific audience in your newsletters, like brands and, and the buyers potentially want that audience. Do you have a community? Do you have a course? Do you have physical products? And my favorite right now are technical products.

Okay.

You know, apps. And I'm sure you're seeing this, like every single, every other one of my clients is like, oh my God, with Lovable and Claude, I've created 3 apps and it looks great and it's beautiful. But then we, we bring, I will bring in a proper CTO for them who are, who are actually—

Who can scale it.

Who are auditing it right now to even see if this is something that can go to market. Digital products, I think, are really important. I mean, I recently met someone who made 6 figures, you know, selling an 80 $9, you know, digital product. Um, I think there are so many different ways to make money off platform, right? I'm, I'm a big proponent of, you know, we are all tenants on YouTube's land, on Meta's land, on TikTok's land, and, and they can kick us off at any time. And YouTube is doing huge cleaning up right now, right? They're terminating channels, they're demonetizing. I'm sure you've heard of the stories, probably friends who've asked you, oh my God, I lost my Instagram page, can you help me get it back?

Mm-hmm.

And Meta just doesn't even respond to. There's no live person. So the anxiety of building on someone else's land is, I think, becoming more and more clear to creators that they need to build somewhere else.

What are the things that you've said, or how have you been able to convince them besides the fear of loss? We've covered that, but to get them to say, okay, I have 5 million subscribers to my YouTube channel, you know, I'm going to follow in the footsteps of like— I think like Veritasium is a good example. They've built a really meaningful email list.

Sure, yeah, we should talk about Veritasium and MatPat. You know, those are the two YouTube channels that have sold to private equity and they're case studies right now. You know, private equity funds look at them and say, well, was that a successful acquisition? And the attention and the views have gone down, right? Since, I mean, Veritasium has done a really good job. Like, he, Derek, didn't even really tell anybody for a year. And he's like, surprise, like, I'm actually not the owner anymore, but you guys haven't noticed.

And I haven't been for quite a while.

Right. And you haven't noticed any difference. This is, you know, so I think he's done a really good job. You know, MatPat, I, I, I'm, I don't follow it quite as well, but I, I, and I don't know, you know, I wasn't their attorney on those deals, so I don't quite know, you know, the structure. But I do think, and you, we were talking about this off camera, I sometimes will convince creators or my clients to not go towards an exit. You know, the, the $100 million one that I'm running right now, we went out to market 18 months ago.

Mm-hmm.

And we were told that his business was worth $35 million.

Okay.

And I told him, I said, you know what, let's wait 3 years. I think you'll hit $100 million in 3 years. And I was wrong because we hit it in less than a year. But that was because in that year we built out the team. We, we, we put in more revenue streams. We built an amazing technical app, a budgeting app that we'll pro— we could probably spin off for $30 or $40 million on its own. And that's what investors are looking for, right? They're, they're wanting independent streams of income that does not rely on the creator's face.

Right. So in that example, if someone comes to you and says, hey, I have this $30 million exit, as an example, and should I take it or not? And if I were to take it, can you help me shepherd it through to the finish line? And you're saying, hey, I actually think, you know, if you're asking for my opinion, I think no, you shouldn't, because you could triple this over the next few years. What are the things that you're encouraging them to do between, You know, day one when they bring it to you and a year or 3 years later when it's like, hey, this is worth 3 times as much?

So typically I will come in and do an audit for them and say, okay, what does your corporate structure look like? You'd be surprised. I've seen creator businesses making $10 million a year that goes through one single LLC, right? So they need a parent company, they need subsidiaries, you know, one that holds the YouTube channel, one that holds the technical app, one that holds the, you know, physical products because Every, you know, revenue stream has its own liabilities. Let's say you have a supplements, you know, product line.

Right.

I want to make sure that if anyone gets sick from that line, that they only— they're only suing the product line, right? That LLC, not your YouTube channel, not your technical app, not your courses, you know, not your other things, not your real estate, you know, because I also have clients who have their real estate in all of the same LLC, right? And so that's kind of step 1. Step 2 is, What do your employment and independent contractor agreements look like? Do you have work-for-hire language that actually says you own the IP that they have created for you? This is very important for technical creators, you know, for creators who have technical apps. If they have people building code for them, if they— if you don't have that agreement, like, that CTO or that senior developer can walk away with the code and say, that's mine. And I had this happen to one of my clients. Where the CTO walked away with a lot of code, and they had to start over, and it was terrible.

Because everyone assumes, I hired you, I paid you for a service to write this code, and so I own it. And that is not the default way that it works. It works that way if it's in the contracts.

Correct.

But otherwise, it's not.

So first is corporate structure. Second is employment, independent contractor, work for hire. Now, there's also another wrinkle in there, which is huge, is Do you have hidden misclassification lawsuits in there that the buyer will tear apart? Because that is something that's huge in the creator economy.

And is this misclassification of employees or—

Well, so you, you will have independent contractors who work for you, but they really are employees because they're working 8 hours a day for you, 40 hours a week. They might be abroad or, you know, they might, they might be remote. So you think, well, they're not a full-time employee. I, I know of creator businesses that have hundreds of independent contractors who are, who should be W-2 employees who are not. Once a buyer comes in and sees that, they will walk away from that deal or reduce, you know, the purchase price by 50% because those are just lawsuits waiting to happen. And this is a— I will share this kind of like very insider information. Here's what happens. Let's say you have an independent contractor who works for you for a couple years. They leave and you leave on good terms, right?

Mm-hmm.

Then they go file for unemployment. And then the Labor Commission will say, wait a minute, we've never received any W-2 from you. Why are you filing for unemployment? Then they come and audit the creator.

Hmm.

And that's when they find the hundreds and hundreds of misclassified employees. And those fines are very expensive. And so that's something that I deal with for a lot of my clients. You know, do you have disgruntled employees? I mean, you look at MrBeast and his latest lawsuit of that woman, you know, who says that she took a call in the labor room, you know, and was let go when she came back from maternity leave. Those types of gender discrimination, you know, sexual harassment, any of those things, those are heavy, expensive lawsuits that buyers are going to be looking for in due diligence.

Right.

Clean chain of title. Do you every video you've made, you actually own the music, the B-rolls. Um, is, is, I mean, reaction channels are worthless. Like, if you have a big reaction channel, no buyer will touch that because you don't own any of those videos.

Mm-hmm.

Right? You could have hundreds of millions of views per video, but no one will touch that reaction. I mean, my one advice to anyone who's watching, you know, is if you have a reaction channel, Seriously reconsider it or do it the right way. Go to the small creator that you're reacting to and ask, either ask for their permission, co-collaborate with them on YouTube.

Yeah.

Or pay them $50, you know, or whatever minimal amount to get the rights to that video. Because I'm seeing IP trolls coming out of the woodworks attacking big creators because, you know, what they do is they The IP trolls, let's say you, you're a big creator and you have a compilation video with like 50, you know, TikToks in there. What the IP trolls will do is they will go to the 50 individual ones and buy the clips. And then they go—

Oh, so they own it now.

And then they go to the big creators and say—

Because it actually probably only costs a couple hundred dollars.

Yes.

Per, per clip or something.

Or less. Right. And, or they even say, or, or they're even trickier and they're like, oh, we are a clearinghouse, a licensing house. Give us the clips and we will sell 'em out, you know, and license it to studios. So then they go back to the big creator and say, pay me 6 figures or I will take your channel down. And I've had to step into some of those deals and negotiate with them because YouTube actually says now, we don't help big creators with copyright strikes because it's a, it's a legal issue that they cannot help with.

They're not going to get in the middle of.

Because YouTube probably gets millions of copyright strikes a day. And they just can't step into it. They used to. I heard in the past, 4 or 5 years ago, you know, the big YouTubers would get help from YouTube, but now they don't do it anymore.

Okay, so that's a whole bunch of things on the negative side, right, that you go through and clean up. Anyone who's listening who's like, wait, I'm— I've got 100,000 subscribers, or, you know, I just earned $100,000 a year in revenue. Wait, I can actually start to fix this now.

Oh yeah. I mean, it's much easier to fix it sort of earlier on than to try to do it, you know, backwards to, to try to capture maybe the hundreds of, you know, independent contractors or editors or people or, or B-roll clips that you've used or music clips that you've used. And, and I think most creators are savvy enough now. They use, you know, like Epidemic Sound or, you know, different companies like that. And so I think music, at least they understand. B-roll, B-roll is tricky, right? Because people will pull movie clips right into their— and they think it's fine. And I think in general, it's fine. You know, the advice I give to creators is if your use is positive or neutral, it's probably fine. It's only when you go really derogatory or you take, or you say, this is a terrible, you know, piece of film, then maybe the studios will come after you and say, well, I didn't give you a license or permission to use this.

Right. Okay. So what should people do on the positive side? Like, let's go maybe less on the IP and legal side and more on the business side.

Sure.

Right, of if we have this channel, we have all this attention, what do we direct it towards in order to build like real enterprise value?

So I think for a lot of creators, and you know, I say YouTube a lot because that's where most of my, my, my clients are, you know, the ones making long-form content are the ones creating media and real businesses. Sorry for the ones who are watching who might have short-form content. It's just like, it's not quite there. I mean, I think short-form content, you can make good living on the brand deal side. But there's less sort of enterprise value. You know, you can't license your content to Netflix or Tubi. You know, you can't really become a production company in that way.

Right.

So I think on the YouTube side, your first 2 revenue streams are AdSense and brand deals. And you should have those. Those are your kind of your foundations. We've talked about, you know, could you do brand placements in newsletters? What about a community? What about some type of course? You know, a lot of my clients tend to be educational or professional channels, so they have some type of wisdom or knowledge to impart to their audience.

Right.

And then the actual revenue streams that can come from having a physical product. You know, I know the biggest ones that people talk about are like Feastables and Prime and Emma Chamberlain Coffee. Now, I think consumables are, have very small margins. It's not a great, you know, um, you have to just sell a lot, right? Like MrBeast does sell millions upon millions of units of Feastables and that's how he makes money. But I think you know, having digital products, I think having different types of physical products, technical products, that's where we see really high multiples. You know, those are the 10 or 20x multiples that we're seeing because buyers love recurring revenue, right?

Yeah.

It's a SaaS product. You build it once, you can sell it to 10 million people. And it's like, what's your monthly, you know, revenue? What's, you know, they look at churn, but it's the easiest, I think, product to make for creators, especially with Lovable and Claude. You know, you can go make a lot of apps on your own now.

And you have the distribution. So what's becoming the harder part, it used to be that building software was very hard.

Right.

And now building software is quite easy, relatively. Now building it in a way that scales and is secure and all of that.

You do need to bring a CTO in, okay?

Yes.

For all of the, the kind of like the vibe coders out there who are like, oh my God, I have this great product. I actually have 3 clients right now who all have told me the same thing. And I have another client who's a senior developer who is offering fractional CTO services. So she's coming in actually, auditing these apps and saying, okay, actually, do you have a viable product or do you think it's like pretty right now? Because that's different, right? When you, when you put it out into the marketplace and then you're actually getting customers to use it, you know, that's different.

Yeah. So having that checked, you know, by someone who's a professional and, and, you know, building a team behind it is really important. But I think the advantage swings even more in the favor of creators now Because they have distribution and they have brand. So before, if it was like maybe 50/50, like distribution and brand and software, now the software has become substantially easier and the distribution brand is, you know, still just as effective as ever.

And I think it's really exciting because, and so a lot of creators will say to me, well, like, what product should I launch? Like, I don't know. And I, and this is my favorite strategy. Ask your audience, you know, what products do you love? What is a pain point that you're struggling with right now that maybe we could solve together? Um, one of my clients, um, uh, is called A Life Engineered. You know, he has a small channel. It's— I mean, small, okay, 200,000, right? Like—

In the scale that you work in.

In the scale of— some of my clients have 10 or 100 million, right? But it's a great, very niche audience, right? So he— what his Channel is about is, so he was a level 7 engineer at Amazon. Do you know this channel?

Have you heard of it?

I don't. Okay. So he was, he started this channel while he was working at Amazon. Amazon knew and, you know, they were fine with it. And his product wasn't competing with anything he did in his day-to-day was he was teaching engineers soft skills on how to do well on interviews, how to do well on their, you know, 360 reviews within the company so that they could get to the next level engineer because that's $100,000 usually, you know, every time you, you elevate a level. So then he, he launched a course that taught people how to do it. And we launched this course 2 times and made over $400,000. And he was like, if I'm doing this part-time, I wonder what I could be making full-time.

Mm-hmm.

And so he quit his job last year, did it full-time. And what's really cool about that is he asked his audience, like, what is your pain point, right? And for a lot of them, they said, well, I always do terribly on my internal reviews. You know, like, I don't know how to promote myself. I don't know how to remember what I did well. And he actually has this great idea called a brag binder, right? Every time you do something well, like, print out the email and just, like, put it in this binder. Because, you know, we forget as time goes on. And then at the end of the year, show it to your supervisor and say, like, these are all the things I've done this year. You probably don't know that because you're not in my day-to-day.

Right.

And that's really smart. So, there are very tactical things that he was helping his audience solve. They had a pain point. So I think, you know, poll your audience and say like, what product would you need? You know, a lot of photographers do this really well. You know, they create certain pieces of equipment that is like, that they needed for themselves. And so—

Right.

So then, of course, other photographers need it. I think there's really a way to involve your audience because when you involve them, they feel a sense of ownership. Right? There's this creator called Mae Pham who has a hoodie. It sounds really simple, but she's really smart. You know, she does an exclusive launch every 3 to 4 months. It's that single design. When it sells out, it sells out. She never repeats it. So, like, people go crazy. Like, you know, she puts out a password that you have to enter. And I know this because I actually have bought her hoodies.

Right.

And I buy a lot of creator-led And I got to try on some of her products just to see how they are. And it was, Nathan, it's like the best hoodie I've ever owned. And it's like $140.

Yeah.

It's really soft. There's like an individual, like, you know, message in there. Things like, what you seek is within. You know, it's very zen-like. But what she's really smart in doing is she brings her audience in every step of the way. From design, you know, she shows them the design. She has them vote on it. She takes them to the factory. She shows them like when the products go wrong, you know, when the stitching is wrong. comes out, like the audience is so, you know, invested in this product. They're like, we need to have it because we helped her design it. We helped her, you know, produce this product. And I think that's really smart. And she makes millions of dollars a year, by the way, selling these hoodies.

I think one of the best things is when creators introduce artificial scarcity. And it can even be real scarcity at first, right? Because you're like, I don't know, are people going to buy 1,000 of these? 10,000? Let's, let's do 2,000 to play it safe. And the audience And the audience is like, are you kidding? We'll buy 2,000 in 12 seconds, you know? But you end up in this place where if you deliberately, say, sell 50% of the demand that you had, or you, you know, cap supply at 50%, then you stay on this train of like people always wanting more.

Yeah.

And so there was a— when one of my kids, this is years ago now, was a baby, there was a baby carrier that was made by a small company.

Okay.

And they only had so many of them.

And so they kept selling out until they finally—

Was it the one on the hip?

Yeah, it's like— Because I love that one.

You can do it as a front carrier or as a hip or all of that, yeah. And it, it was an excellent carrier. People loved it and all that. But instead of figuring out, okay, how do we scale supply 10x to be able to fulfill all the demand, they said, wait a second, this is a feature, not a bug. And so what they said is every Thursday at 11:00 AM Eastern, we will post all the inventory that we have in our Facebook group. And then whoever gets one gets one. And then the rest of the time, you know, maybe there's some used ones selling or, And they just continually got more and more demand. And people would be like, wait, how did you get one? It's like, well, I was in the Facebook group at 11:00 AM Eastern and I bought it immediately.

The exclusivity is so smart. It's just human psychology.

Right.

Because if you're, if you're told you can't have it, you're like, well, I need it.

Right.

Right. And so, you know, I'm, I'm actually launching a creator exit accelerator soon and I'm, I'm, I'm capping it at 10 spots because I, I think that's how you give, you know, people the right attention. But when people hear 10 spots, like I already have a few signed up, they're like, well, I want my place in that same 10 spots. So I'm And I'm not trying to create scarcity because I have to do actual audits with them, you know, one-on-one. So like over—

It involves your time. Yeah.

And over 8 weeks, like I can only do so many. So humans are interesting because if you tell them, well, you can't have it, they're like, oh no, I need it. Right. So there, there's definitely some strategy that we're, we're, we're sort of, you know, I think imparting to your audience that think about a pain point that you can solve and then be realistic about how many, you know, items, you know, how many units you can launch because So this is another part where, you know, a lot of my clients come to me and say, well, I want to launch a physical product. And I say, okay, well, it'll probably cost $10,000, you know, to do this first initial launch. That's not a small amount of money. You know, that's an investment. So perhaps that first launch is 500, you know, units or 1,000 units. And it's a test, you know. And so I think a lot of the times the launch is small. And so then there is a sense of scarcity.

Right.

And maybe that's what happened with May Pham is she just launched 500 at a time and just sold out so quickly. She just kept it, you know, sort of small. But that's also how you really keep a check on quality. And, you know, I think our audiences have been burned by, you know, bad creator-led products where they just slap their name on it and they're not really checking quality. So I think the audience, you know, our audiences are very hypersensitive about like, oh, are you putting a good quality product out into the market or are you just trying to make money off of us?

Yeah. Something else I've seen make a big difference in the quality of the company is if you're selling either a recurring product or a repeat purchase, right?

Okay.

And so, if you're thinking about, you know, you mentioned software, it's obviously a recurring purchase. There's plenty of subscriptions, like I think about, there's an author and creator named Sahil Bloom who launched his Wild Roman product, right? It's not true recurring, but if it's a skincare line, you're like, if you like it, it's a repeat purchase, and then actually they'll get you on a subscription, So, so that is the best model, right?

So if a buyer is looking at your business, and, and I like to say like the gold standard is Mark Rober's CrunchLabs subscription boxes, right?

We get it every month.

Right. Is it every month or every 3 months? Because I think in the beginning it was every 3 months. Is it every month now?

My 6-year-old puts together a CrunchLabs box every single month, and he could not be more excited.

Okay. Okay. You know, I have a 7-year-old I need to get that for because the— so I don't let my kids watch YouTube, but the only channel he's allowed to watch is Mark Rober because I know that that's safe, right?

Yeah, our kids, it's Mark Rober, Chef Nick, and Dude Perfect. Those are the 3 channels.

So ours is Mark Rober and Cleo Abrams a little bit.

Oh yeah.

We've just introduced Cleo to him and he really loves her. I'm actually about to go speak at Open Sauce in July and I told my son, I said, you know, the speakers have been invited to Mark Rober's Crunch Labs. And he was like, I need to go. And so I think I might be bringing him.

That's amazing.

But that's the sort of like, intense love and loyalty, right? That Mark Rober, who I know has probably 50 or 100 people in his R&D lab, right?

Right.

Who, who are, who are thinking of those ideas, who are able to get those customers to come back month after month. And that's really important for a buyer like a private equity fund. They're looking at what is revenue that will keep occurring every month for us? versus, you know, sort of a one-off.

Launch-driven. The best-case scenario is that you have a brand that can be more than that person, right?

Right.

They don't show up to make a video, that's still working. And that brand is promoting a product that will be purchased over and over again, even if the creator doesn't show up or a video isn't made. And so then probably the worst-case scenario is the one-off, launch-driven, entirely tied to the creator identity. Is that kind of the two ends of the spectrum?

I think so. And, you know, and there's also an importance of naming your products, right? You know, I, I, I think— I don't know, you, you get them every month. Is Mark Rober's name on the Crunch Box, the Crunch Labs? I, I think it's Crunch Lab is the brand.

Okay, that's the brand of the company. They have their own YouTube channels for Crunch Labs. It might say by Mark Rober.

Okay.

But I, I feel like as I watch from a distance, you're like, oh, I see what's happening here. It's not like we're trying to remove Mark or hide him from it, but you're like, oh, this is its own Yes, because we want it to be its own thing.

You know, my, my client has, has, um, you know, Caleb Hammer has a, a, um, budgeting app. It's called Dollarwise. It's a standalone name, right? Like we don't, it's, it, we specifically, when I was doing the trademark and naming it, we were like, we don't want Caleb Hammer in there.

Right.

You know? And so that's what buyers want is they want something that can be standalone that doesn't depend on this YouTuber wanting to make videos or not. And, you know, we talked about the key man risk a little bit, so let's tease it out a little bit more.

Yeah.

Is, you know, when private equity funds are looking to buy these creator-led businesses, the requirement is that the YouTubers— and I know Veritasium and MatPat both did this— they stayed on for 2 to 3 years to kind of have more of a smooth transition. They're there when they hire sort of co-hosts, you know, to kind of wean the audience and teach the audience. So here are the new hosts, you know, here are the new faces of the channel. Ideally, the business is so independent, right? It has a full team executives, right, who are running the company without the creator, right? Who could allow this creator to leave after 12 months or 24 months and the business would still run really well. I have a 5-pillar framework for what's really sustainable in a business, and one of those pillars is the team. Like, who do you— who's your team? You know, my favorite phrase I like to say right now is, I can raise capital all day long, but the hardest capital to raise for creators is human capital, right?

Yeah.

Like hiring the right people, bringing in great operators who can run with things on their own. That's really hard. Um, I mean, I think one thing MrBeast is doing really well is the churn is very high at his company. So it's like, you know, we're getting, you know, like there's a a big pool of people now that we can pull from, you know, leaving MrBeast. And so they're going to all the different companies now. I mean, Cody Sanchez's president was, was Jamie's president. And so it's like, as time goes on, like, we'll get more adults in the room, for lack of a better word.

Yeah.

Now, there are all a lot of people in corporate America or traditional Hollywood who, who also want to get into this space, who are coming in. You know, you look at Dhar Mann's, you know, president, Sean, he was at Discovery. So, you know, there, I think there are a lot of people who are interested in, in supportive of creators who are saying, I'd like to come help you build. And that, I think, is the best scenario, is if we can get really experts who've been doing this for 20 years who can come in and really help you guide that. I mean, I worked in Hollywood for 20 years at the big studios. And so I feel that I have sort of the expertise, but I have a deep love of creators. I started my own YouTube channel 3 years ago.

Right.

Because I had a midlife crisis. And I just fell in love with my fellow creators and realized so many of them get taken advantage of. You know, you, you see these brand deals or these contracts that get presented to creators that you would never see in Hollywood or in corporate America, you know, owning their name and likeness or their formats in perpetuity. But you have young creators who are like, oh my gosh, someone wants to pay me $5,000 for a video. That's insane, right? Here, I'll sign whatever you want. And that's a problem.

There's all kinds of details in there that they should never sign.

Sure.

Yeah. Going back to CrunchLabs, because I do think that's the best example of a creator business done really, really well. Like, the IP is totally unique. It has its own brand. The fit, like the creator-product fit, is perfect, you know? Like, because sometimes you see these products where a creator comes out with that, and you're like, okay, any— that's cool. I think that'll work. But anyone, any one of these like 50 people could have made that product.

Sure.

Are there other ones that are at the top of your list where you're like, okay, this was done really well, or this has the potential— maybe it's still early on but has the potential to be really big?

Um, you know, I did a video about this. So there, there's this creator called Amanda Rach Lee. She's a bullet journal creator. She's been making content on YouTube for over 10 years. She started when she was like 10, and then I think during COVID when she was like 19 or 20, Um, people asked her, you know, why don't you launch a bullet journal of your own? And I think for her it was— there was a hesitation because it's like, it's a blank journal.

Right.

Right. But she, she ended up putting her own designs in there. I think each month she did a design for each one. She sold— so it was $50. I know because I bought one. Um, and, you know, creators are very transparent. So during that first day when she had the launch, she was showing how many units were being sold. Nathan, I think she sold a million units that first day, right? That's $50 million. Yeah, that's, that's incredible. But that was a great fit, right? For 10 years she had been doing journaling, writing, like there was no better product for her to make than a bullet journal. And so now she has a whole line of like pens and stickers and everything around that ecosystem. Um, another creator, Caroline Girvan, is a fitness creator. Uh, for years. So, so her story was great. So she was a CPA in Ireland, and during COVID because everybody was locked down, she's very fit, she's like, I'm just gonna do videos at home and I'm gonna have you guys come along with me. She never did a brand deal. She never made any money. And then I think 3 years later, she disappeared for 6 months and people were like, oh my God, where did she go? Like, did she go have a baby? Did she quit YouTube?

Right.

And I was like, I bet she's building a fitness app. And sure enough, 6 months later, she, she launches fitness app. It was like $20 a month or $99 for the year. I bought one because I wanted to support her. And on the bottom, you know, it showed how many members she had. And it was something like 5,000, you know. So if you times 5,000 times $100, you know, like, what is that, half a million that she made on that first day?

Yeah.

And, and she has stopped making YouTube videos. Now that I think is amazing because she has— she used, you know, YouTube as sort of a launchpad to go and build on her own land because that app is hers, right? No one will ever take that away from her. YouTube can't kick her off. Um, she can do whatever she wants over there. And that is what I really want creators to do, is to build on their own land, have their own email list, newsletter, you know, building on different platforms. I mean, there are ones like There's Uscreen, there's TopFan, you know, there are ways for you to just be on your own land where you don't even really have to be on YouTube anymore. I mean, you should still be on YouTube because YouTube gives you AdSense. And if you're— if you have the audience there already, you should just diverse all of your revenue streams.

I want to get into the how the AdSense is valued in the back catalog and all of that in a moment. But I had a creator on, Ben Greenfield, who is big in the fitness space. And he was telling me how much he has separated his whole Ben Greenfield brand from Kion, which is his supplements brand.

Okay.

Like, early on, he used the Ben Greenfield brand and, you know, like a top 10 health podcast and all of this to launch Kion and grow to a meaningful scale. But then he's been very, very deliberate to keep it separate.

Actually, I didn't even know those were connected.

Okay.

I know them separately, but I actually didn't know they were connected.

So he's the founder. He's not a majority owner.

Not at all, yeah.

You know, he has a team and all of that, but he said he's just watched so many people see where, you know, either through an acquisition or like a deal goes south. Or actually, an example of this that I was talking to someone else about recently is Mark Sisson with Primal Kitchen.

Yeah.

Right? Like textbook, perfect exit. Incredibly well done. I think it was a $200 million exit to Kraft. In what, 2017 or something? Like, it was a while ago.

Okay.

Um, but one thing I didn't realize is that Kraft, through that, because it was so intertangled, Kraft owns all of Mark Sisson's— the whole blog, the Mark's Daily Apple blog, had to be acquired through that.

Interesting. Okay.

And they ultimately ended up shutting it. Kraft looks at it and they go, we don't know what content is in here and all that, let's just shut it down.

Oh, well, that's heartbreaking.

Because it wasn't And wasn't able to be untangled, or wasn't worth it to, you know, a many, many billion-dollar company. Then the creator is stuck in this position of like, hey, but I want my decade worth of content.

Well, did he try buying it back?

I'm not sure in that case.

Okay. So, so this is a great sort of segue that I, I want to highlight. You know, Nathan, when a lot of creators come to me and say, um, I want an exit, or I want an investor, And I will say, why? And they're like, because I want free cash, right? Because they think it's free cash. And I, and I say, okay, but realize when you bring in an investor or a buyer that, you know, you might have started this channel in your bedroom as a teenager and you've never worked in corporate America, you've never had a boss.

Right.

But that's what an investor or a buyer is, right? They're coming in and telling you how to run your channel, how to make your content, what products to do, what brand deals to take. It's very, very sobering. And it's a wake— you know, it's, it's not something I think creators think about. And then once I tell them that, and I'm like, you're making $1 million, $2 million on your own.

Right.

You could make $5 million if we, if we set this up properly. Do you need to exit? You know, do you need to sell it? Because there are these stories, right, where they sell. And then the channel or the business is destroyed, right? Or, or, or taken apart. You know, this is one of the bad, you know, nightmare scenario with private equity funds. You know, I, I think, I don't know if you, you really, if you remember this, but in Pretty Woman, like Richard Gere was a private equity fund guy.

Oh yeah.

And his job was to tear companies apart.

Right.

You know, I think that they were, he was trying to acquire this company and the son was sort of like, you're going to tear my company apart.

Right.

And I think a lot of creators and startup founders don't realize that sometimes this can happen, right? This brand or this audience you've built maybe doesn't stay the same anymore. Now, there are things you can do if you're willing to stay on and give it a better transition. This is why I think having a good lawyer on your side is very important, right? You can structure what that next Yeah, and it's important to think about what the next phase of your business looks like. If you're just getting a check and walking away, like, it could very well, like, you know, Mark, Mark's, you know, with Primal Kitchen, like, that could be the cautionary tale.

Yeah, and it might be in that case that you're totally fine with it, because you're ready to move on.

Yeah, maybe.

And then the exit was for $200 million. Or it could be like, hey, can I have this, this side thing that doesn't mean anything to you, but means a lot to me? is people buying back their companies.

Mm-hmm.

And so, Catherine Lavery sold her company Best Self, which was a journal and, like, conversation cards company. They had won one of the Shopify Build a Business challenges years ago with, like, Tim Ferriss and Tony Robbins and all of that.

Nice, nice.

And built a really meaningful company, sold it to private equity, and then 2 years later, 3 years later, bought it back for the price of the inventory that was in the warehouse. So I got this crazy deal to buy it back.

Okay. Okay, um, is it because they kind of let it die, or— Yeah, okay, okay.

You know, you got professional managers who came in and said, we know better, all of this.

Sure, sure.

And then they inflated salary costs, and, um, turns out the scrappy creator-led business was run pretty well.

Yeah.

The other one is J.D. Roth, who wrote the blog Get Rich Slowly.

Okay.

And he actually did something similar to the Veritasium folks, where he— you know, this is probably one of the earliest exit Because it's in blogging, I want to say it was sold in like 2013 maybe. He wrote the blog himself for a long time, gradually brought in other editors, sold it, but didn't tell anyone.

Okay.

And so a full year or more after the sale, he announced like, hey, I actually sold the blog. People were like, oh, it's going to be terrible now. This is straight garbage, all of this. Like, I knew it would go downhill. And he's like, I've, I sold it a year ago.

Ah, and you guys didn't know.

And you guys had no idea. But he ended up being able to buy it back a few years later because So, that's a great point, right?

So, when, when I structure an M&A deal, I make sure there's a buyback clause because for this exact reason, because sometimes you don't know who you're getting into bed with, right?

Yeah.

Who the buyers are. And because it's all like dating, right? The first few dates are always great, but then you have no idea, like, until a couple years later how it's really going to play out. So, having that buyback is really important because sometimes there are a lot of private equity funds who buy businesses thinking, right, they could, they could do certain things with it. And then for whatever reason, maybe they can't, or maybe they're more focused on these other portfolio companies. They just kind of let it languish. And so the creator might go and, you know, travel the world for a year or two and be like, wait, I really miss my company, or I miss, you know, my audience. So, you know, having that buyback where you might lose a little bit of money or, or not, you know, like your example about the inventory was a great one. maybe all that creator needed was to take some time off. Do you know what I mean? Like, maybe because so many creators—

You didn't need an exit, you needed a sabbatical.

Yes. Like, we hit burnout and we think, well, I can't make videos anymore. You know, it's just hard when you're on all the time and you're making— you have to make content every single day and you feel like you can't take any time off. I, you know, there's a creator named Vanessa Lau. Do you know who she is?

I don't.

Okay. So she kind of makes content, you know, you know, kind of for creators, like, to start their YouTube channel or their Instagram. She actually took, like, a whole year off, and, and her channel definitely took a hit.

Mm-hmm.

And, like, you know, like, she lost subscribers, but she has come back, and she's, she's chronicled that journey. But it was so important for her to take that time off because she had been basically pushing herself for, like, 5 years to just make content every single day. And, and her mental health was just, like, destroyed. And she took that year off, and now she's come back, And it's been really refreshing to see that her audience came back and picked up where she left off. So maybe something creators can take out of this conversation is maybe it's okay to take some time off. Like, maybe you don't need to sell your business. I mean, this isn't something I've said before, but it just came out organically. But maybe you just need to take some time off.

Yeah, and I think knowing that as the creator, you have options and that the exit may be incredible, If you're working towards that, great.

Yeah.

Or it might be, you know, designing a business to keep for a long time. Something that I focus on when I'm building Kit is to build a business that's set up in such a way so that it'd be really desirable to purchase. Because investors want the same, like investors want to buy really good businesses.

Yeah.

So if you look at what do they value, recurring revenue, a great team in place, a great brand, not a lot of key man risk, you know, all of these things. And so, those things, if you have all of that in place, and you're like, oh, I have a perfect business to sell, guess what? You also have the perfect business to keep and to operate. And so, you know, that's the position that I've been in, is having acquisition offers and being like, okay, that's amazing. What would you be looking for to make this business better? And they're like, oh, well, you have to fix X, Y, and Z. And I'm like, great, thanks. I'm just going to go fix those things, because that outside perspective really helps.

Oh, nice.

And then you have a business that you can keep and run forever.

Okay, so you use the due diligence, like, you know, to sort of benefit yourself. And I love that.

I've used it once for that.

Okay. Yeah, because, you know, the one thing I want to caution creators about is let's say you have a buyer come, come to the table and say, we want to buy your business. The creator's super excited, right? Because maybe it's $10, $20, $30 million. But what you don't realize is maybe this buyer, who's probably a competitor to you, just wants to look at your tech stack and like know your code and know Like your vendors, and so one of the cautionary tales I have is please, like if a buyer says, "Hey, just give us a raw file." It's like we'll just we'll just analyze it ourselves. Please don't do that. Please have an attorney. I know I'm sort of like a broken record, but especially with an exit, like please have an attorney guide you. Please have a really strong NDA in place. You know that has residuals protection. It has you know a non solicitation, non circumvent. Trade secret protection because you don't want that. Because some buyers will come to the table and say, this is a buy or build situation, meaning we're going to take a look at your product, see if we want to buy it, and if we don't, we're just going to go build it ourselves. Like, they're very honest about it. I'm actually like very surprised.

So you have to be so careful that you're not showing them your, your tech stack, you're not showing them your vendor list, you're not showing them The thing that I would be most curious about, so if I was coming in to acquire a company, because you're talking about like give me all the raw files, what I would most want is I want the cohort retention data for your customer base by segment.

Yes.

So if I have that and I know, oh, from, for this product, if someone comes from the YouTube channel, they stay on average for 12 months, or, you know, any of those things, like that is insanely valuable data.

Totally.

And so you're exactly right. People are like, well, Well, they want to pay me $10 million potentially, so here you go.

Yeah.

And you're just like, you just gave away something that's so valuable. And that person might say like, great, now we're going to AI code our own competitor for it or whatever else. But thank you for letting us know that—

I know.

This particular segment of customers is twice as valuable as that segment.

Exactly. Most creators just aren't thinking about it. They're just heads down, you know, making a product. They're not really business-minded, right? Because they're not thinking about like, well, you know, I had one client come in And they came in and say, I think we could probably exit at $4 to $8 million. And then I ran, you know, the projections and the models, and I looked at the multiples of, you know, I did the comp— the comparisons against, you know, kind of recent exits in the last 18 months. And I was like, I think we're closer to a 10 to 20x here. So we're probably in the $30 to $40 million range. And they were just blown away. They still don't believe me.

Yeah.

And this is why it's nice to bring in, you know, experts and advisors to tell you, no, you're wrong. Because they think like, well, I'm only making $1 or $2 million in revenue a year. But like, you're not realizing what the multiples are and what the market is and what similar, you know, products to you have just exited at. And that's where, you know, I— because I do this so often, I can run those comps for them.

Right. And yeah, you've seen inside a lot of businesses.

Mm-hmm.

How do you recommend that creators think about cash flow versus enterprise value? So building for maybe the lifestyle and the savings and investing now, versus like, oh, I'm just trying to grow the brand and the revenue as high as possible, who cares about profit, so that I can have this big exit?

Do you mean they reinvest everything back into the business?

Yeah, exactly. Okay.

Well, I find most creators do that, right?

They do, yeah.

They really do, they really do put everything back in there. You know, the issue I'm seeing is a lot of creators are not taking salaries for themselves, which is fine, but realize that buyers are going to calculate that in there, right? Because when they acquire your business and they have to have a substitute, you know, like a replacement CTO or CEO, they're going to have to add in another $200,000 to $400,000 for that. So like, you're inflating your numbers by not taking a salary.

Someone's going to see through it immediately.

Yeah. Like buyers are going to calculate that immediately. Right. So your margins are really not as good as you think it is. Right. Because you are investing everything back in or you're not taking a salary. So I think some creators, you know, founders get caught up in that and they're like, and it's fine. And I've said this to my clients. They're like, well, should we keep some cash, you know, on the side? Or should we be putting it back into the business? And I say, I think it's fine to put it back into the business because the buyers will understand that. But hopefully you are taking some money for yourself because you gotta, like, you know, like, not just kill yourself. Like, because there is— because that's how burnout happens, right?

Right.

When you're not taking care of yourselves. I mean, I think as founders, we really have to understand that we can only push for so long, right, before we burn out. And if you burn out, that's when you get to that kind desperate point of like, oh, I have to sell my business or I have to exit. Whereas if you maybe were a little slower with your growth— here's an example. I, I have a client who told— came to me 6 months ago saying, okay, I know we're approaching burnout. We, we hear everything you talk about, you know, on your LinkedIn or your YouTube. So we want to diversify and launch a product. So we came up with a great product. It was actually sort of like a Crunch Lab subscription box Like house hacks, you know? And, um, so they, they went away and they were like, okay, we're going to work on it. And I think 3 or 4 months later we talked again and I was like, how's the box going? And they're like, we have to put out 5 short videos a day. Like we don't have time. Right. And so they're foregoing, right, their future self for this kind of immediate, um, instant gratification. The short term. And the thing is with a lot of creators, they're addicted to this dopamine hit of, like, getting the high views, right? Getting the AdSense. So it's like, it's hard to wean them off of that hamster wheel of saying, well, but if you had a product line, right? Like a physical product or a technical product, like, that could make up for some of your AdSense, right?

Right.

Like, maybe you don't need to put out so many videos because you're actually making money over here. But that's the sort of dopamine, you know, like, reduction that I don't— I don't know how to solve it.

Right.

Because I actually, I do know how to solve it. Here's the solve. You just have to hire an operator to come launch that product for you, right? You have to hire— maybe it's a fractional CEO, which, you know, I, I have access to, or you hire a company that does it. You know, one of my clients is Whaler, and they actually have this company within their umbrella called Moby Ventures. So Moby actually launches physical products for creators. Um, Nami Matcha, which was from your mom Ashley. I don't know if you've heard. Okay, so that's from Moby, right? And, and, and Ashley just lets them, you know, launch it and, and ship it and, and take care of all the customer service for her. So all she has to do is take, you know, do the marketing, right, and do the videos for it.

Yeah, I think seeing those different examples is really helpful because then creators can say, oh, that's what I want. Do I want to be totally in it on R&D and the whole process? And I love operations. And so let me, maybe I'll bring the camera behind the scenes and even, you know, bring the audience on that journey. Or others are like, I want nothing to do with that. I want to make the videos and I want someone else to run the entire company. And it's very different ways of operating.

I think it's usually the latter. You know, I think they love making the videos. They love interacting with their audience. I don't think they want to be, packaging and shipping boxes, right? And I, I don't want to be doing that. But, you know, I, I think now, but the R&D part, maybe they want to be involved in that. And I think there are, uh, third-party, you know, vendors and, and operators out there who can do it. I, I know Fourth Wall does some sort of that, right? Yeah, they do. And so there are companies. Now creators will say, well, I don't want to give up that, that revenue. And I said, well, but you'll be making 80% of money that you wouldn't have been making in the first place. It's no different than when And then what you pay to your managers for your brand deals, right? You wouldn't have gotten the brand deals on your own. So 80% is better than nothing, right? And so they do get caught up in that a little bit too.

Yeah, for sure. One way that I was thinking about the enterprise versus enterprise value versus cash flow is really looking at the creator business and seeing, do you have something that is an acquirable asset? Because you were talking about the dopamine hits or the treadmill of the 5 reels a day or a week or whatever.

Sure.

And those all may be bringing in short-term money, but the moment that YouTube audience disappears, whatever, or the moment you stop making them, it's gone.

Or the algorithm changes, right?

The algorithm changes. Yep. And so all of that is, you have to take the day-to-day revenue or the monthly revenue that you're getting, and either you like invest it back in the business to make a product, you know, like your subscription box or whatever else that's going to have Yeah. And you need to have enterprise value, or you need to take a chunk of it out of the business and go put it in the S&P 500.

Yeah, sure.

You know, and just say, look, I don't have enterprise value that I'm building in this business, but I have great cash flow. And so 30% of the cash flow is going straight into the stock market.

Yeah. And I have some clients who say, you know, I want to take some cash off the table so I can go buy a house or I can do some investments. And so that's also a good idea is how do you bring in investors? You know, I like investors, um, who are angel investors, right? Bring in people who will give you $100,000. That's a rounding error, you know, for, for, for their cash flow. Um, maybe bring in 10. I'm actually structuring this for one of my clients right now for his app. Let's bring in 10 or 20 at $100,000 each, and they won't look over your shoulder. They won't like ask you like a private equity fund.

Right.

Like, hey, how's the business? Show me your monthly revenue. They, they just won't care, right? They just, they just hope that when you sell one day, that that will be worth something.

And, and they're probably already a fan of you and your product, and they want you to win. And before, I wanted you to win, and now I have all of those same feelings, plus I have some upside in it, which is even better.

Yes, exactly.

That's something actually that I did, you know, so Kit did not have any outside funding for a very long time.

Okay.

And in 2021, we had an acquisition offer from Spotify.

Okay.

We turned that down.

Okay.

And that then resulted in a bunch of team members being like, well, hold on, how do we get liquidity? And so we ran a small secondary transaction.

Okay.

So no primary capital into the business, all secondary. And it ended up being about $6 million that came in at a $200 million valuation.

Nice.

And all from founders, you know, people that are friends of mine that I respect, you know, like Dharmesh Shah, the CTO of HubSpot, you know, and people like that. And we've done another round since then. And in hindsight, I would have done that much sooner.

Yeah.

Because having 20 to 40 people who are in your corner and cheering for you, like, it matters.

Who are advisors to you, by the way. Yeah, and they paid for that. Yeah, you could call them, yeah, you could call up at any time and say, hey, like, what should I do here? That's so valuable.

So I think of like 2 examples. One is a gentleman named Noah who runs a software business in a totally different space. But when I have like software problems, I, I'm talking to him and he's, he's put a couple million dollars into, into the business and, you know, buying shares from former team members.

That's great.

Um, another one is James Clear who wrote Atomic Habits, right?

I'm so glad we're talking about this because I want to talk about books, right? Because books is big for creators right now. I'm doing several book deals for creators, but I'm a big fan of James. Tell me, tell me what you wanted to say.

Yeah, so with James You know, authors are huge for Kit. We, at any given time, probably half the New York Times list—

Wow.

Has a Kit newsletter. I feel like we have tons of the space, and we dominate the space compared to any of our competitors. But if you were to walk into Barnes Noble, and I've had this experience where I'm like, oh, Kit customer, Kit customer, as I'm pointing at books, and I'm like feeling, oh, this is great, we have so many of them, and I realize, wait, I can see 1,000 books from where I'm standing, and I could point to 5, 10 that are Kit customers. Like, okay, we have a tiny fraction of the market. And so having James as a shareholder, you know, he's like, great, how do we get this person on the platform? How do we make this happen? And it's different than a paid advisor, 'cause he actually put his money into the business.

Well, I love that. I love that. That's genius, right? Is having fans and customers, you know, be on your cap table, be advisors to you. Let's talk a little bit about books. I love it. You know, I actually am writing a book right now myself. It's called Creator to CEO.

Nice.

I have an offer from a major publisher. I haven't taken it. I don't know that I want to go with them because I do have this fantasy because I'm an IP attorney and I say to creators, you should own your IP, that I should, you know, hybrid publish, I should self-publish. But I also want to be a New York Times bestseller. And I know if you go self-publish, you can't, you just can't touch that, right? You have like Alex Hormozi will never be on the New York Times bestselling list, but he has sold a lot of books, right?

Yes, he has.

Um, so tell me, I mean, I know you're supposed to be interviewing me, but however, tell me how creators should be thinking about books. You know, my client Caleb Hammer is, is writing one right now for Penguin, and I also represent Derral Eves, you know, who has, uh, The YouTube Formula. I think, um, for myself at least, I think a book maybe will allow me to reach an audience that maybe might not typically see me from YouTube or LinkedIn.

Right.

How should creators be thinking about books? Like, should they all go write one?

I think the books are fantastic because it condenses so much experience that you have into something so attainable for $20.

Sure.

And then it also transfers a huge amount of credibility, right?

Right.

And so every author that I've seen, even if they're big on social media, you know, and all their content, But publishing a book, usually with a traditional publisher, puts them into a different category.

Sure.

I actually just did a podcast episode with James Clear and Madeline McIntosh. I think it dropped just a couple weeks ago, so it's on the show. So Madeline was the CEO of Penguin Random House US, and she left a couple years ago and started, along with James Clear and a few others, Authors Equity, which is like their dream publisher. And so on that episode, they break down exactly why they started it, how it's going, all that. And so I signed with them for my book, which is coming out in December.

Oh, congrats.

Thanks. And it's a hybrid model where they, as the author, you don't pay anything out of pocket.

Okay.

What happens is you make 70% of all revenue.

Wow.

Sorry, of all profits on the book.

So that's flipped.

And they make 30%. So it's flipped.

Right, because for traditional Publishers, you only make 30%.

Or less.

Yes.

Yeah. And so what they're doing is basically you split all the expenses 50/50. So Author's Equity will pay for all the costs of COVID design, everything else.

Okay.

And, and they're very cost-effective with all of it. And then after that, after those profits, or sorry, once the book is profitable, then you get the revenue split on it, that 70/30.

Okay.

A lot of people just think about the money, Mm-hmm. But they don't realize, like, all the second-order effects of that.

Mm-hmm.

So, for example, Authors' Equity has a better Audible deal than you could get on your own.

Oh, interesting.

And I actually have a few friends who have self-published audiobooks that have sold a million copies or more who have switched that to then sign through Authors' Equity.

Okay.

Because they're making more per copy.

Okay.

But then another thing is no one really can make Amazon ads profitable for books.

Okay.

Because if you think about it, if I, if I as the author am making $3 per hardcover and I'm trying to get someone to make a $20 purchase on Amazon to buy the book, like, I can't get a return on ad spend that's enough for that $3 to cover the $20. Like, that's never going to happen, so people don't do it. Author's Equity has a different model where they will put up all the money for the ad spend.

Interesting.

They So you'll take it out of the expenses for the book.

Okay.

And then, you know, because $20 came in, you had maybe $3 in actual hard costs, printing costs. So then of that $17, like, you can actually probably get to a positive return on ad spend.

Wow.

And then the profits, maybe there's only $2 in profit all the way at the end for that book. And as the author, you're making 70% of that, and it's not very much. But guess what? in the hands of readers, and you got paid to do that.

Yeah.

Whereas Penguin or Hachette or whoever, they're never going to become super sophisticated with ad spend.

Totally. So with author's equity, are they able to go into Barnes& Noble? Yes. And, and so you can get on the best-selling list.

So a good example would be Joseph Wen wrote the book Don't Believe Everything You Think, and he self-published, sold over a million copies.

Okay.

And never hit the New York Times list.

Sure.

He should have dominated the New York Times list.

Yeah.

But he's self-published, so he's never going to make it on. So he republished the book with Author's Equity and then spent like 25 weeks on the New York Times list.

Wow.

And he was able to use all of his marketing savvy. Like, he's a genius when it comes to, uh, BookTok and TikTok Shop and, you know, all of that to get the book in the right people's hands. And he actually trained the Author's Equity team on how to use all of his methods Amazing. Um, and so yeah, he was able to, you know, hit the New York Times list and do everything in that way.

Um, can I get an introduction to Authors Equity?

I will introduce you to Madeline and James.

I would love to talk to them. What is your book called? What is the topic?

Yeah, it's called The Ladders of Wealth.

Okay.

How to Master the Skill of Making Money.

Wow.

Comes out December 8th.

Amazing. And is it— does it have sort of a creator focus or no?

Um, it's like an entrepreneurship focus.

Okay, okay.

Creator is part of that. In the ladders, I talk about how every, as you move, it's basically a framework for how you earn more money and build wealth over time. And as you move between the ladders, an audience is the most valuable thing you could have in that.

Yeah.

This is, you're like trying to launch a new product, trying to go a new direction.

Mm-hmm.

Um, it's a whole other thing. So yeah, audience is a chunk of that.

What is your goal for your book? Because this might be helpful for all creators to think about. Wow. For me, you know, actually the one goal is like if I can get more speaking, like if I can speak to corporate companies or traditional Hollywood studios, I think there, you know, there is a desire for that. But I think that, that gives you a sense of, you know, credibility and expertise, right? What is your goal for your book?

Yeah, the biggest top-level goal is I'm trying to write the roadmap that I wish I had as a kid, right? Where, you know, 14-year-old me who's like, okay, how do I, how does even the whole world work? to map it out and be like, look, this isn't a— it isn't luck. You know, like, there is actual concrete steps you can take. And I want to get that message to as many people as possible. So it's kind of a crazy thing, but I want to sell a million copies of this book.

Okay.

Or I actually don't even care about selling a million copies. I care about getting in the hands of a million readers. And then if we— like, everything has to tie back into business in some way.

Okay.

So I think about the opportunities to grow and promote Kit are packaged in a way that don't, it doesn't lend itself to media or podcast tours or things like that, like getting the message out in front of more people. It's like if you were to try to go on, you know, Good Morning America, and you're like, I have a software company, and they'd be like, oh, okay, we don't care.

Yeah.

You know, but if you're like, I have a book coming out and it's about this, and they're like, okay, great. You know, it's packaged in a way to get the message out there.

Got it.

And it's a much more approachable thing for someone to come into my world. And so I want the book to do that for Kit.

Got it.

Because Kit's a big business. We have over 100,000 active creators on the platform and all of that. But we still, we just have the tiniest bit of the market right now. And so it could be way bigger.

Interesting.

And I think that the right book will, help get Kit in front of a lot of new audiences.

Yeah, that's super cool. How long did it take for you to write it?

Uh, it's somewhere between 2 years and 12 years depending on how you count.

Okay, um, I'm trying to write this thing in 6 months, so—

I think it's doable. I think what I would say on writing a book is write every single day.

Okay.

No matter what. I only finally made progress when I—

Really?

When I did that.

Like, how— what was your— like, give me some, some tangible life like an hour a day, or like what, what finally made it work for you?

I would say like any amount.

Okay.

Um, you could say 20 minutes.

Okay.

Right, because you could always find time for 20 minutes.

Okay.

And I think that just that relentless progress is really important. Finding a really good editor.

Okay.

Makes a big difference.

Do they help with that, or—

Yeah, so actually Authors Equity hired the first editor that they— the way that it works is in traditional publishing The editor who acquires the book also often helps you develop the concept and all that.

Sure.

Author's Equity has split those.

Okay.

And so they say, we love this book. And Author's Equity only publishes, I think, like 20 books a year. So they don't do a lot.

Okay.

Um, and they have to really believe in the book and the marketing behind it because they're taking a big risk, uh, on it. But then what they do is they hire like a developmental editor to work with you.

Okay.

And so having those calls every week, you know, accountability turns out helps.

Yeah, yeah, when someone's going to ask you, hey, how far did you get this week, right? How'd you get?

You said you'd finish these 2 chapters, did you? And you're like, and so often for me, it'd be like the night before or the day before, I'd be like, oh, I'm going to call with Zach tomorrow. And he's going to very nicely ask, did you do what you say, like you said you were going to do? And I'm going to be like, And I was like, no. And so then—

See, I need that. I need a deadline because, because I, you know, I have, I have my law firm, I have my Creator Arc M&A, I have, you know, all of these things. I'm also trying to make content, like the book, just, and my 2 kids. So the book always like just slips through the cracks. So if I have no one sort of like holding me accountable or keeping me on track, I think it's really hard.

It was the biggest thing for me. Like, I only made progress when I put it as the number one thing.

Okay.

Where I said, at least 20 minutes of time writing the book.

Okay.

It has to, like, that's a non-negotiable for the day.

Okay.

And it sounds terrible, but I was like, okay, that's more important than time with my kids or working on Kit or all that. The truth is, none of those things ended up like—

Suffering, right?

Suffering.

It's just the mental game.

It was just, what did you put first? And then I was like, oh, well, I can actually make sure I get this done. The 20 minutes of writing in before anyone wakes up or before whatever else. And often that would be an hour or more, but that consistent progress.

Thank you. That's helpful.

That helps a lot.

Okay, I'm going to do that.

I like it. Okay, the last question that I wanted to ask about on the acquisition side is you see the back catalog in music be really important.

Yes.

You know, with Justin Bieber and everybody else selling their masters, selling their catalogs, does that matter in YouTube? Or is it really people are looking at like, what is the channel doing today?

Well, I think there's certainly that, that can be one revenue stream, right? I think a lot of— I, I'm putting my clients, you know, catalogs on Tubi or, you know, Netflix. I actually was at Netflix last week and I met with the executive who did Mark Rober and Jordan Matters' deal. And there, for Jordan Matters, like, I, I love to share this story. So I was speaking in this group of creator experts and Jordan came and spoke. I spoke first and then Jordan spoke after me. And he was kind of sharing about, you know, his daughter Silesh's skincare line, right? That like—

They got into Target and everything else.

Yeah, like that.

We actually got to hang out with Jordan in Dubai a few months ago. So he was lovely.

So just, you know, the 40,000, you know, kids who showed up for her product launch, you know, her makeup line. So what's so great about their overall deal at Netflix is, you know, it's a moment in time, right? It's where a big streamer, a studio says, okay, YouTubers are clearly important. We need to get them on our platform. And I asked Heather, I said, well, why is it important, you know, to have YouTubers on this, on our, our, on Netflix? And she said something that was really clarifying was she said a lot of parents don't allow their kids to watch YouTube.

Right.

Right. I don't allow my, my son. Um, but they will let them watch on Netflix, right? Because it's safe, right? Because they, they do curate what, what is on there. They, they make sure it's nothing especially if it's, you know, under the parental kids channel.

Yep.

So Jordan Matters, they took 10 of their videos and put it— YouTube videos, right— on a catalog. That show became like number 3 or 4 in all of Netflix, not just in kids, but all of Netflix. And I was like, what is that about? And, and she said, it's just wholesome content, you know. It's, it's a relationship between a father and daughter. It's, you know, it's her navigating her teenage years with her dad. her friends. You know, she's very brand safe, and it introduces a whole audience, right, who has never heard of them because they're not on YouTube. To go back to your point of like YouTubers who have back catalogs who are brand safe, like, could be selling these, you know, catalogs to a Netflix, to a Tubi, Amazon, Hulu, Disney, because they all need content right now, right? Because this is free content basically that they didn't have to greenlight or, or pay, you know, a budget towards. And Tubi's doing this in a big way. Tubi's also doing original content, you know, Netflix is doing original content. What I say to my clients is, you know, think of your back catalog as just additional revenue. Another thing I like to tell my clients to think about is to have a network of channels, right?

Okay.

So not just your own channel. So, you know, let's say one of my clients is a male finance creator. Well, can you have like a female creator, you know, maybe a, a gay or lesbian creator, you know, like all finance still, right?

Yeah.

Um, who will capture different parts of the, of the demographic that you're not capturing. It diversifies, you know, the key man risk. And for a private equity fund or a studio to say, oh my God, you have 10 channels, that's amazing, right? That's a business we would want to acquire.

Well, I think that example is so important. Like, any acquirer or any founder is like, well, I see the potential. I could go and do these things. Once this is so successful, I could go and start those other channels.

Yeah.

And everyone, the acquirer is like, yeah, hypothetically. So some friends of mine built a virtual assistant staffing company called BELAY, and they sold it for, I think, mid, like $100 million, between $100 and $200 million. And something that they did is they realized because they'd be going into these conversations and saying like, oh, you can hire a great CEO to replace us. And they're like, wait a second, why make it a hypothetical?

Yeah.

And so they hired a great CEO, they trained them, they did all of that, waited 12 months, and that CEO took the company to market and ended up selling it to, you know, to private equity.

For more?

And all that. I think for an amazing acquisition. Like, everyone was very, very happy with this.

Okay.

And the owners were just in the background.

Mm-hmm.

And so it wasn't like, oh, the, you know, the private equity folks aren't thinking, could we hire operators who are just as good as the founding team? Or that sort of thing. It's like, oh no, there's a team already in place. And so it's that same thing of like, okay, can you make the leap from one channel? Can you back yourself out of, you know, can you take care of some of these issues beforehand before the acquirer brings it up?

I think so. And some creators are, you know, Jesser's one of my clients and he has several channels, you know, and I think creators, to reduce their potential path down to burnout. They are thinking of having smaller, younger creators come in, you know, who have the drive, you know, who have the sort of the fresh, you know, eyes on, on content because they'll be bringing in a new group of audience. And, and sometimes some of my clients are going to creators who have maybe 10,000 or 50,000 subscribers already. And then asking for— they acquire—

so you can show up.

So they acquire their channels and then they bring them in as an employee. And then so that channel just becomes part of the network that they have. So I'm doing this with several clients right now, which I think is really smart. And it's, it's, you know, basically you're, you're becoming your own studio or, or proper network, you know, like an NBC or like an ABC. So. Yeah.

Yeah. That makes a lot of sense. Makes sense. Well, we could talk all day about all of this.

Yes.

Um, thank you so much for coming on.

Of course.

If people want to learn more about what you're doing, follow your channel, all of that, where should they go?

Um, so my handle is The Creator's Attorney, and you can find me on YouTube or LinkedIn. I write quite often on LinkedIn. Um, you know, this moment in time, Nathan, is so cool. Like, I just came back from Cannes Film Festival where I brought my clients Creator Camp They just announced today— Deadline announced that MK2 acquired all Europe rights for their film. Do you know about this film, Two Sleepy People?

I don't know about it.

So they made a film, $100,000 over 100 days. They gave themselves that goal that they were gonna make it 100 days.

I love constraints, and that's quite the constraint.

And so the 2 creators were the American Baron and Caroline Grossman, and it's about 2 people who work together. So it's like Severance meets Eternal Sunshine of the Spotless Mind. So it's 2 coworkers who work together. Apparently, they take this, like, melatonin gummy that allows them to dream every night that they're married to each other. But then when they wake up, they totally don't remember that.

Okay.

And they wanted to go into the theaters, and they just did it. They went to independent theaters and said, hey, can we show our films in your theaters? And they were like, you're crazy. You're not a studio. But sure. Like they gave them a goal. If you can presell every theater at $10,000, we'll let you do it. So they did 2 and then they did 10. And then, so they did several hundred and they would drive in their RV and actually go show up at the showings.

I love that.

And Kickstarter picked it up. Um, we, you know, they spoke to Adweek back at South By. We took it to France. We took it to the Cannes Film Festival. And this was their first year of the Creator Summit. And so on stage was Markiplier.

Oh, yeah.

You know, he had Iron Lung. And Seb, this French creator whose film actually premiered at the Cannes Film Festival. So, you know, I've been talking about this for 3 years. I left Hollywood behind, you know, to come represent and protect these young creators. And this moment is here. You know, when I left Hollywood, so many of my former colleagues said, don't do it. Like, it's a terrible idea.

You're taking this huge risk.

There's no money in this space. You'll be babysitting kids. And now, Nathan, I have 3 offers from the biggest law firms in Hollywood asking me to bring my book of business in. And I actually said, I don't think I need to, but thank you so much. You know? And so it's, it's quite a moment in time for creators. I, I really think it's, you know, I think Colin and Samir said this, you know, this is the, the era of abundance for creators. Here it is. This is such a lovely conversation. Thank you for having me. I'm a big fan, you know, of what you're doing. So thank you.

Yeah, thank you so much. If you enjoyed this episode, go to YouTube and search The Nathan Barry Show, then hit subscribe and make sure to like the video and drop a comment. I'd love to hear what some of your favorite parts of the video were and also just who else you think we should have on the show. Thank you so much for listening.