Podcast Summary
Leveraging Data and Insights for Successful Investing: Canalyst provides detailed company-specific models for professional investors, setting it apart from competitors. TCG focuses on organic growth and identifying creators to build businesses with, offering unique insights for the creator space.
Canalyst, a leading destination for public company data and analysis, is a valuable resource for professional equity investors looking to react more quickly to the deluge of IPOs and SPACs. Founded by a former buy-side analyst, Canalyst offers detailed company-specific models on virtually every investable public equity, including pre-IPO models with all segments, KPIs, and non-GAAP figures. With clients including some of the largest money managers in North America, Canalyst's ability to provide quick access to accurate and up-to-date data sets it apart from competitors. TCG, also known as the Churning Group, is a multi-stage investment firm dedicated to building consumer businesses. Unlike traditional VC or private equity firms, TCG approaches investing organically and focuses on identifying creators they can help build businesses with. In today's media landscape, established companies should consider the role of influencers and media in their strategies. TCG's partners, Jesse Jacobs and Mike Kearns, have been invaluable resources for Patrick as he navigates the world of building new media properties. Their unique history and approach to investing sets them apart and offers valuable insights for anyone looking to succeed in the creator space.
Two entrepreneurs saw opportunity in media industry transformation and started Lightspeed Venture Partners in 2010: Entrepreneurs Jesse and Peter founded Lightspeed Venture Partners in 2010, focusing on investing in content delivery businesses, particularly influencers and subscription streaming video, using a flexible holding company structure, and achieved success with Fullscreen and Crunchyroll through personal connections and shared vision.
The media industry was on the brink of a major transformation due to technology, and two entrepreneurs, Jesse and Peter, saw this opportunity and started a venture capital firm, Lightspeed Venture Partners, in 2010. They focused on investing in businesses and brands that delivered content directly to consumers, with themes being influencers and creators on the Internet and subscription streaming video. They were able to invest flexibly with a holding company structure and grew successful businesses like Fullscreen and Crunchyroll. Their personal connections and shared vision led to the formation of the firm and its success.
Investing in unique media properties that resonate deeply with audiences and represent a significant part of people's identities: Invest in brands with proven consumer loyalty and the capacity to generate revenue organically, focusing on unique media properties that resonate deeply with audiences and are a significant part of people's identities, rather than relying on paid marketing or ad-based media companies that struggle to compete at scale.
The investors discussed their experiences and shared values in joining a firm that allows flexibility in making great investments and building businesses, with a focus on unique media properties that resonate deeply with audiences and represent a significant part of people's identities. They emphasized the importance of investing in brands that have proven consumer loyalty and the capacity to generate revenue organically, rather than relying on paid marketing or advertising. These companies, such as Crunchyroll, Barstool Sports, and MeatEater, have built strong fan bases and have shown the ability to turn passion into profit. The investors also highlighted the importance of avoiding direct-to-consumer commerce companies that rely heavily on paid marketing and face competition from larger distributors and manufacturers, as well as ad-based media companies that struggle to compete at scale with tech and data capabilities of larger platforms.
Starting a business out of passion: Passionate individuals can build successful media businesses organically, with investors later providing expertise for growth
The most successful affinity media properties are often built on a foundation of genuine passion and don't necessarily have a grand business plan in place from the start. These "accidental businesses" are started by individuals who are deeply invested in a particular topic or interest, and their companies grow organically as they build a dedicated audience around their shared passion. These entrepreneurs have already accomplished the most challenging aspect of starting a business – connecting with their audience and creating a strong brand. The role of investors comes in later, helping these companies scale by providing expertise in areas such as management, acquisitions, and expansion into new business lines. The success stories of companies like Food52, Hodinkee, MeatEater, and Exploding Kittens demonstrate that starting a business out of a deep-rooted passion can lead to thriving enterprises.
Engaging audiences and understanding conversion in commerce: Strong audience connection, high repeat rates, and sales from content channels are crucial for business success in the direct-to-consumer sector. Media companies are shifting towards bundled services, making it challenging for pure media investments.
Successful engagement with audiences and understanding conversion in commerce is crucial for businesses, especially in the direct-to-consumer sector. Companies with high spending on paid marketing and low engagement metrics may not be as promising as those with a strong connection to their audience, high repeat rates, and a significant percentage of sales coming from various content channels. Furthermore, media companies are increasingly becoming bundled services, focusing on data collection, higher e-commerce throughput, and intellectual property commerce, making it challenging for pure media companies to thrive as standalone investments.
Media as a tool for customer acquisition and retention: Brands prioritizing media relationships build customer loyalty, experimenting with new platforms is key, and authentic, values-aligned talent investment leads to credibility and success.
Media is no longer just a means of communication for businesses, but a crucial tool for customer acquisition, retention, and long-term conversion. Brands that prioritize building strong relationships with their audience through media channels can leverage that loyalty as a competitive advantage. However, the media landscape has evolved, and businesses must be willing to experiment and adapt to new platforms to remain visible. The most successful companies are those where executives and employees are creators and makers themselves, constantly trying new things. For instance, the pairing of MeatEater with First Light demonstrates how a content-to-commerce model can lead to a thriving business. By investing in authentic, values-aligned talent and building a diversified product set, brands can establish themselves as credible and respected players in their industry.
Using media and content to build a digital audience and drive commerce revenue: Acquiring companies in same category as media personality's interests lowers customer acquisition cost, media becomes effective tool for customer acquisition and retention, and creates defensible position against competition. Focus on purpose-built marketplaces for specific passions or interests instead of being all things to all people.
The investment strategy discussed involves using media and content to build a digital audience and drive commerce revenue. By acquiring companies in the same category as the media personality's interests, the cost of customer acquisition is lowered, and the media itself becomes an effective tool for customer acquisition and retention. This strategy also allows for the creation of a defensible position against competition. Another interesting term used was "phony aggregator," referring to the idea of building marketplaces that are more purpose-built around specific passions or interests, as opposed to trying to be all things to all people like larger platforms such as eBay. This was exemplified by the experience with Hodinkee, a watch collectible platform, where the emotional impact of watches on collectors led to a realization that everyone in the community was a watch collector. This strategy has been successful in the watch, anime, and classic car spaces, and will be expanded into fly fishing, deep sea fishing, and outdoor culinary in 2021.
The collectible market's surge in interest and investment: Companies like Hodinkee are disrupting traditional industries by bringing ecommerce to sectors with low penetration, fueling a renaissance in the collectible space due to emotional connections and speculation opportunities.
The intersection of content, commerce, and collectibles has led to a significant surge in interest and investment in various markets, such as watches, sports cards, and even virtual currencies. Companies like Hodinkee have disrupted traditional industries by bringing ecommerce solutions to sectors with low penetration, such as watches. The emotional connection people feel towards these investments, coupled with the ability to speculate on their perceived value, has been enabled by the Internet and digital platforms. Additionally, the explosion of sports betting and fantasy sports has further fueled this trend, as collectibles provide an alternative way for individuals to express their beliefs and engage with their favorite players or teams. Overall, the collectible space is experiencing a renaissance due to these factors, and it's important for businesses and investors to understand this shift and adapt accordingly.
Trend of collectibles and niche markets: Younger generations are turning to collectibles and niche markets as traditional investments lose value. A new platform that combines technology, media, and finance could effectively serve these markets by providing editorial content, personalities, data insights, and analytics tools.
As traditional forms of currency and investments like cash become less valuable, there is a growing interest in collectibles and niche markets with limited supply. This trend is particularly evident among younger generations who are more hands-on and interested in these areas. The intersection of technology, media, and finance presents an opportunity for a service that can effectively cover and serve these markets, providing editorial content, personalities, data insights, and analytics tools. Currently, there is a lack of platforms that successfully combine these elements across various markets such as stocks, collectibles, NFTs, and futures markets. Companies like Coinbase and Robinhood, with their large retail customer bases, are well-positioned to capture this opportunity by expanding their offerings to better cover these industries. The disintermediation trend seen in media industries, where consumers go directly to content creators instead of intermediaries, is also applicable to finance, and this new platform could potentially allow users to bypass traditional intermediaries and access information and trading opportunities in one place.
Exploring the NFT-driven sports collectibles market: The NFT-driven sports collectibles market offers investment and entertainment opportunities, driven by passionate collectors, and represents a significant technological advancement with potential applications in various industries.
The sports collectibles market, particularly in the digital realm through NFTs, offers unique opportunities for investment and entertainment value. Traditional finance news may not provide the most relevant or up-to-date information compared to online communities like Reddit and Twitter. The sports collectibles industry, especially in the context of NFTs, is driven by passionate individuals who value the trade, action, and community. These collectors span various backgrounds and demographics, making it an intriguing and diverse market. NFTs represent a significant technological advancement, enabling secure digital ownership and scarcity, which can be applied to various industries and use cases, including fantasy games and digital art. The intersection of NFTs and influencer culture further underscores its potential impact on mainstream blockchain and crypto adoption. Overall, the sports collectibles market through NFTs represents an exciting and growing space with significant investment potential and entertainment value.
NFTs shift creator-consumer dynamic, allowing creators to retain value: NFTs enable creators to retain a percentage of economic value from their work and offer fans unique benefits, potentially disrupting traditional equity investments.
NFTs (Non-Fungible Tokens) represent a significant shift in the creator-consumer dynamic, allowing artists and content creators to retain a percentage of the economic value generated from their work indefinitely. This disintermediation trend, where creators have more direct connections with consumers, presents challenges for traditional equity investments. However, creators themselves could issue tokens, offering fans unique benefits and a financial stake in their future earnings. This model combines emotional and financial rewards, potentially disrupting the traditional equity investment landscape. NFTs are already impacting art, music, and collectibles, and their reach is expected to expand into other areas like crowdsourcing and kickstarters. While it may take time before this model significantly impacts equity investments, it presents an intriguing opportunity for creators to monetize their fanbase in new ways.
Investing in Art vs. Businesses: Perspectives and Priorities: Some investors see art as a waste of money, while others value emotional connections. Prioritize financial returns or long-term growth, depending on perspective. Undervalued opportunities found through thematic research and partnerships.
The value of art, investments, and businesses is subjective and depends on the individual's perspective. In the investment world, some view physical art as a waste of money, while others see value in it for emotional connections. Similarly, some investors prioritize financial returns and quick exits, while others focus on long-term growth and partnerships. The current investment landscape varies greatly, with some companies receiving high valuations based on trends and momentum, while others are undervalued due to their stage or industry. Our unique approach involves finding undervalued, long-term growth opportunities through top-down thematic research and building partnerships with companies that align with our values and business plans. While some investors may prioritize quick returns, we focus on maximizing our impact and ensuring the long-term success of the businesses we invest in. Ultimately, the key is to stay true to your investment philosophy and approach, and to remain disciplined and focused on your goals.
Building successful relationships between influencers and companies: Empower influencers with resources and upside potential, support their creative vision, and recognize their importance in today's market.
Successful relationships between influencers and companies require a mutual understanding and respect for each other's expertise and goals. Companies should empower influencers to grow their audience and create content, while providing them with the resources and upside potential to do so. At the same time, companies should stay away from interfering with the creative process and focus on supporting the influencer's vision. This approach has led to successful collaborations, with examples including New York Times journalists becoming influencers and partnerships with content creators in various industries. By allowing influencers to have uncapped upside and control over their creative output, companies can build win-win relationships that benefit both parties. Additionally, companies should recognize that influencers are essential in today's market and have been for over a decade, with rabid fan bases and the ability to reach large audiences. Overall, the key to success is finding a balance between supporting each other's goals and allowing influencers to maintain creative control.
Exploring Trends and Areas of Investment: Our firm is prioritizing investments in NFTs, quantifiable self technology, webcomics, low-code game creation, and gamification to help entrepreneurs and stay competitive. Potential for innovation and growth in these areas is significant.
Our firm is exploring various trends and areas of investment to stay competitive and help entrepreneurs, particularly in the NFT space, quantifiable self technology, webcomics, low-code game creation, and the integration of gamification into everyday life. We believe these areas have significant potential for innovation and growth, and we aim to be involved by providing our experience, influencers, intellectual property, and new technology platforms. The NFT space is a priority as we don't want to miss out on the shift, and we see opportunities to help entrepreneurs in this area. The quantifiable self is another intriguing trend, with advancements in technology allowing for more accurate and continuous monitoring of physical and emotional data. Webcomics, a niche area, have gained significant traction and engagement, particularly in Korea, Japan, and the US, and offer a built-in monetization model. Low-code game creation platforms are enabling a new generation of creators and brands to build games and micro economies, and the integration of gamification into everyday life is becoming increasingly popular. Overall, we see potential in these areas and plan to focus our time and resources on them.
The impact of kindness and mentorship on personal and professional growth: Mentorship and acts of kindness can lead to valuable opportunities and guidance, shaping one's personal and professional journey. Openness to learning from others and networking can result in meaningful relationships and ripple effects.
The power of kindness and mentorship can significantly impact one's personal and professional growth. Both Mike and Jesse shared inspiring stories about how individuals, Ron Conway and Skip Paul, made a difference in their lives by providing valuable guidance and opportunities. Mike's encounter with Ron Conway led him to a successful career in venture capital, while Jesse's relationship with Skip Paul offered him invaluable advice and connections throughout his career. The importance of these relationships underscores the significance of being open to learning from others and the potential ripple effect of small acts of kindness. Moreover, the discussion also touched upon the unique approach of the firm and the value of connecting with like-minded individuals. Mike and Jesse's shared interests and the firm's differentiated approach provided a rich context for their conversation. In a separate conversation, Damir Hott, co-founder and CEO of Canalyst, shared the origin story of his company and the problem it aimed to solve for professional investors. Canalyst's focus on providing specialized data and tools to professional investors has made it a popular service among the audience. The insights shared by Mike, Jesse, and Damir offer valuable lessons on the importance of mentorship, networking, and innovation in personal and professional growth.
Identifying and solving pain points in capital markets: Investors spend too much time on manual data entry, leading to inefficiencies and inaccuracies. A solution providing accurate and comprehensive data can save time and allow investors to focus on valuable tasks.
There is a significant pain point in the capital markets where even the smartest investors spend an excessive amount of time on rudimentary tasks, such as manually entering data from multiple sources to create a single row of a Key Performance Indicator (KPI). This duplicative work not only wastes time but also leads to inaccuracies. The speaker identified this issue and saw an opportunity to commercialize a solution by providing investors with accurate and comprehensive data in a format that aligns with their thought process. This first 80% of the fundamental model for public equities would free up time for investors to focus on more valuable tasks, such as engaging with management and expanding their shadow coverage universe. The success of this approach was demonstrated when professional investors were willing to pay for this service, despite it starting as fairly rough Excel spreadsheets.
