For YouTube millionaires Rhett & Link, VC is the future of creators

Rhett McLaughlin and Link Neal on Friday, November 1, 2019.

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Rhett McLaughlin and Link Neal are two of the most successful content creators in the social media market, with their long-running YouTube show ‘Good Mythical Morning’ helping them earn $30 million in 2022 – the fourth most among YouTubers , according to Forbes.

As the creator economy exceeds $100 billion in value with more than 300 million people participating in it globally, according to a recent report, venture capitalists recognize individual creators as investment opportunities that harness the potential of the industry. These investors also include creators like McLaughlin and Neal.

“Good creators are good and investments,” said McLaughlin, co-CEO of Mythical Entertainment. “We are looking very closely at their business and their vision.”

McLaughlin and Neal created Mythical Entertainment, an internet-based entertainment studio that hosts “Good Mythical Morning” to include several other notable channels including Mythical Kitchen, Smosh and others. In total, the studio’s owned and operated YouTube channels have generated more than 27 billion lifetime views.

The duo chose to reinvest their earnings and the lessons of their experiences into rising creators through an accelerator fund.

“There are a lot of creators out there who want to build companies bigger than themselves and they need to build the kinds of teams and systems that we’ve created to achieve those goals,” McLaughlin said. “We can bring that with direct investment and that’s what led to the creator accelerator.”

McLaughlin and Neal formed the $5 million fund in 2021 to invest in other creators, while providing partnerships and advice on how to build a lucrative business in the creator economy.

“The partnerships we’re creating with the Mythical accelerator allow creators to take this turn,” Neal said. “We’ve invested in ourselves all our lives. So we believe in creators because we believe in ourselves.”

McLaughlin and Neal are primarily focused on YouTubers launching on the Alphabet-owned platform with long-term potential. Currently, they have invested in two creators, commentator Jarvis Johnson and musician Daniel Thrasher. Their decision to invest in these creators stems from their shared vision of expanding into bigger independent businesses.

“What you’ll see with Jarvis and Daniel is that they can do multiple things. They both have the vision to grow their business and lead their business,” McLaughlin said. “We want to invest in creators who can actually lead a team.”

Since joining Accelerator Mythical, Johnson has grown his YouTube views by nearly 60 million, and Thrasher has expanded his music career by touring to star in the upcoming Amazon Freevee show, “Dinner with the Parents. “.

“I’m really excited about the charts we’re building,” said Neal. “And we have more in the hopper.”

The accelerator fund itself may attract outside investors at some point in the future, McLaughlin said, so it “could be scaled up and super-powered,” but those talks remain in what he described as a phase. exploratory.

The holding companies of the creator economy

The Mythical team aren’t the only ones who see the investment opportunity. The venture capital firm Slow Ventures has also launched a creator fund and is keenly interested in the activities of creators.

“We’ve seen this lack of access to capital in the same way that startups have a massively developed ecosystem for capital,” said Megan Lightcap, lead creator at Slow Ventures. “These creators, who are in many ways businesses, didn’t have the same access,” she said.

The Slow Ventures fund invests between $100,000 and $5 million in creators in exchange for the rights to up to 10% of future creator earnings, but typical deals range from $500,000 to $2 million for up to 5% of future earnings.

One of the creators Slow has invested in is YouTuber Marina Mogilko, who immigrated to the United States, specifically Silicon Valley, from Russia in 2015. Mogilko has nearly nine million subscribers across all platforms , posting content focused on his experiences since arriving in the United States. . Lightcap says she invested in Mogilko because she is a designer and an entrepreneur. Mogilko founded the company LinguaTrip, a language learning platform that allows users to book courses to study the language in the country where it is spoken and enroll in foreign universities.

Providing capital to creators like Mogilko gives them the opportunity to grow quickly at a time when they can leverage their existing social media virality. Although the fund is still new, it expects to generate high returns from these investments, Lightcap said, but added that there is no track record yet to show. “The return profile remains to be seen. But they are very cash generative,” Lightcap said. “Over a long enough period of time, you kind of bet that they build a business that eventually sells.”

Lightcap says she’s particularly drawn to creators who aim to build businesses around their content, rather than those who remain solely focused on gaining social media attention or growing followers. This is key to many of these new investments in the creator economy, prioritizing typical ways creators generate revenue, such as branded deals and video views. Many creators establish separate holding companies to manage income generated from various sources. Slow invests in these holding companies and says it’s up to the creators to make the decisions on how the capital is used.

Dylan Lemay’s Equity Model

Chris Camillo, co-founder of Dumb Money, an investment show on YouTube, said the changing creator economy has allowed VCs to help solve “a pretty critical problem” for venture capitalists. -risk, namely the cost of acquiring large-scale customers. Camillo led a pre-launch round of more than $1.5 million for a venture by Dylan Lemay, a creator with more than 16 million followers on his social platforms.

Lemay, who originally became popular on TikTok after posting videos of himself working at Cold Stone Creamery, used the funding to launch a brick-and-mortar ice cream shop in Manhattan’s NoHo neighborhood in July 2022.

NEW YORK, NEW YORK – JULY 27: Dylan Lemay tosses a scoop of ice cream during the YouTube and Catch’n Ice Cream Grand Opening on July 27, 2022 in New York City.

Cindy Ord | Getty Images Entertainment | Getty Images

Camillo says working with creators to start a separate independent business in which they can buy stock is a better path to success than the holding company model used by other creator funds, one reason being that it does not conflict with a creator’s existing content business and revenue streams.

“You can’t just take a content creator and throw a lot of money at them and tell them to start a business,” Camillo said. “The business entity’s goal is to expand this content creator into a new space that it is not currently in.”

The growing attention creators are getting from investors comes at a time when investing in other startup sectors is seen as increasingly risky. And by providing substantial funding and support, these venture capitalists underscore the growing synergy between creative talent and entrepreneurial success.

“He did so many things that we never could have imagined when we started,” Lemay said. “It made me feel comfortable doing something like this and taking a big leap and dedicating years of my life to trying to start a business.”

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