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A $100 Million Bet on Finding the Next ‘Mr. Beast’

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When Kevin Espiritu left his job at a book subscription service in 2016, his big idea was to grow food in other people’s gardens while working on the blog Epic Gardening. At the time, the blog was making about $600 a month.

But when Mr. Espiritu started selling galvanized steel planters on the property, business took off. The company will take his $7.5 million in revenue in 2021, and this year he received a $17.5 million investment from media and technology investment firm TCG.

Espiritu’s blog is a template for what TCG hopes will become the next wave of popular media companies. The company invested his $100 million in Night Capital. Night Capital is a new company co-founded by Reed Duchscher, the manager of his YouTube megastar Jimmy Donaldson, also known as Mr. Beast. TCG has also invested an undisclosed amount in Night Media, Mr. Daksha’s management company.

The plan is to acquire companies that sell their products directly to consumers and pair them with influential creators like Espiritu.

In recent years, traditional media companies have been left in the fray over ad scrap left by technology platforms like Facebook, Google, and Amazon. At Night Capital, TCG is betting that investing in a new media business based purely on advertising is pointless unless it has the opportunity to become a big platform like Snapchat. Rather, investors should fund creators who can leverage established platforms to sell their products and market themselves.

Building a business on a social media platform has risks. For example, in the 2010s, media businesses like Mic, LittleThings, and Upworthy undermined media businesses like Mic, LittleThings, and Upworthy by changing the algorithms that determine how updates are displayed on platforms like Facebook and Instagram.

But Alexandra Moore, a former Amazon executive who joined Knight Capital last week as chief executive, said many creators are reducing the risk of algorithm changes by building audiences across multiple platforms. said there is.

“Night has been in this business for a very long time,” said Mrs. Moore. “They have ridden waves of algorithmic change and consumer spending habits, successfully partnering with the talent on the roster to make propositions and drive new business opportunities.”

Daksher said he is looking for entrepreneurial creators who can come up with new business ideas, as Donaldson did with his popular fast food brand, Beast Burger.

The company, which has offices in Austin, Texas and San Francisco, plans to hire a small team of investors from TCG and Night Media.

The Night Capital concept took shape in Austin’s Steakhouse in 2018. TCG co-founder Mike Kerns told Duchscher at dinner that he was interested in finding creators who could replicate the success of Mr. Beast. other categories. Kerns said Night Capital would consider taking a large stake in a profitable business rather than making venture investments.

Knight Capital aims to upend the traditional compensation model for influencers by giving creators stake in acquired businesses, Kearns said. While creators have traditionally received only a small percentage of the revenue generated by their posts and videos, the digital platform she uses to publish her content has captured the bulk of the revenue. But that is changing, he said.

“All platforms have incentives to help top talent become more successful,” says Kearns. “Otherwise, that talent will migrate to platforms that enable better audiences, better revenue, and better technology.”

Kerns said the Night Capital concept is based on TCG’s investments in companies that combine content and e-commerce, such as sports media company Barstool Sports. Food52 focused on cooking. MeatEater for carnivores. Halo Sunshine, a media company founded by actress Reese Witherspoon, was also a source of inspiration, Kearns said.

The Knight Capital paper stems in part from Kearns’ experience as head of Yahoo’s media business from 2013 to 2015 and watching Facebook overtake the company’s business. advertising business. With a billion monthly users and thousands of engineers, how likely are startups like Vox Media and Bustle Digital Group to be hit hard if Yahoo fails to expand its online advertising business beyond Facebook? Is not it?

“I think those are very difficult businesses to get venture-scale returns from,” Kearns said.

Mrs. Moore was most recently responsible for global strategic initiatives for Amazon’s music business. Prior to that, she was a corporate development manager at Electronic Arts, a video and gaming company, and an investment banker at Citi.

Mrs. Moore said the creators Night Capital has invested in will work hard to introduce new products as they will own part of their business. Creators who sell their products can have a large following on platforms such as Instagram, Facebook, Patreon, and YouTube, so businesses can save money on marketing as well.

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