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☕️ Coast to Coast to Coast
And how Emily Herrera is pioneering a new type of venture investing
Morgan Barrett
October 04, 2024
Today’s Menu ☕️
👋 Hi, Breakfast Club Members!
Thank you to Luka @ Remgu for sponsoring this edition of the newsletter. Luka helps growing companies source top European engineers
Pray for me these next two weeks - 5 Tech Breakfast Clubs over 8 days. I’m going to SF then to NYC then to LA.
Sign up for a Tech Breakfast Club in your city and if you have a minute, read my interview with Emily Herrera from Slow Ventures. It’s rare to find a VC with a truly differentiated investment thesis. People love to toss around the phrase “Category Defining” but here it’s appropriate. No one is doing what Emily is doing.
Also - I have a job posting from Tech Breakfast Club member, Mady Duboc (Lumos Capital).
Lumos Capital Group is seeking a full time Analyst or Associate to join our growing team focused on growth equity investments in the global education and human capital development sectors. The Analyst / Associate will be a core team member and involved in all aspects of the investment process, portfolio management, investor relations and firm development. Role is based in NYC.
Resources:
-Clerky offers a $100 discount for TBC Members on their formation packet. Reply to the newsletter and I’ll send you an invite
-Fixing the YC SAFE: Reply to the newsletter and I’ll send you a redline for the YC Postmoney SAFE that can save founders millions in dilution
-Fidelity Private Shares: TBC members get 20% off Fidelity’s already competitive pricing for cap table services. Reply to the newsletter.
About Morgan Barrett:
Morgan is the creator of Tech Breakfast Club. He hosts breakfast meetups in NYC, LA, SF, (and occasionally Austin, Miami, Boston) that bring together the best founders and investors.
Morgan is also a Startup Lawyer at Optimal, an elite lean boutique startup law firm repping clients funded by a16z, Sequoia, Kleiner, Accel, and countless other VCs. He works with clients from formation to exit, in collaboration with Optimal’s partners.
Tech Breakfast Club Events
SF Tech Breakfast Club (SF Tech Week) OCT 8th
Cohosting with the legendary Riley Finch from Next Gen Venture Partners
NYC ML Engineering Leaders Tech Breakfast Club OCT 9TH
Brought to you by Baseten
Baseten builds infrastructure for AI companies to serve ML models in the cloud. If you’re an AI leader, come join for a hearty breakfast with fellow founders, CTO’s, and ML engineering leaders
NYC Tech Breakfast Club OCT 10th
This very special Tech Breakfast Club has been almost two years in the making - cohosting with long time Tech Breakfast Club member (one of the earliest adopters) Emily Herrera from Slow Ventures
LA Tech Breakfast Club (LA Tech Week) OCT 14TH
Cohosting with Espree Devora for LA Tech Week. Espree is the best - she introduced me to Beehiiv and has made me a lot of money (on paper)! We’re blowing it out for LA Tech Week.
El Segundo Tech Breakfast Club (LA Tech Week) OCT 16TH
So many surprise guests for this Tech Breakfast Club - you do not want to miss this. Fly to LA for this. It’s conveniently located next to LAX. Cohosting with Jacques Sisteron from Upfront.
Tech Breakfast Club 🤝 Luka
Meet Luka, founder of Remgu, who sources top European talent for fast growing companies
#SponsoredPost
You studied CS at Waterloo – incredible CS program – then you worked at companies in Toronto, Chicago, and NYC for almost two decades... why did you move to Croatia?
I moved to Canada as a kid from Croatia but then I went back on vacation in 2017 and met my wife. So, I moved back to be with her. I started finding all of this incredible technical talent that spoke English very well – that’s what prompted me to start Remgu
Who is Remgu a good option for?
We’re ideal for startups and SMB’s seeking top-quality European talent for long term engagements. Our talent is elite – we’re very selective and do intensive vetting. So when a client comes to us, the process is very streamlined, we match them with one or two handpicked candidates. So for $50 to $80/hour you can get a vetted experienced senior engineer instead of settling for the most junior and inexperienced US based engineers.
Why is Remgu a better option than competitors?
We have near perfect retention of clients, and I think that comes from our long term perspective. We’re not here to maximize profit from every engagement. We want to grow with our clients. We have a lean and flexible model with low overhead, so clients keep coming back to us for more and more talent.
If you’re ready to build out your team, the easiest way to get in touch with Luka is connecting with him on LinkedIn
Member Spotlight
Emily Herrera Takes No Prisoners
How do we even start this? I was hoping to interview you in New York today but you’re actually in Greenville, North Carolina... What are you doing in a tiny town in eastern North Carolina?
I’m hanging out with some creator operator friends. I bumped into some at Vidsummit and figured I’d come down and see what’s going on. There’s one particular creator holding company I’ve been interested to learn more about.
Maybe the readers are starting to connect the dots here, but be explicit – who is the creator?
It’s MrBeast. Greenville, North Carolina is the home base of Mr. Beast Productions and a lot of the companies they’re building. He’s one of the biggest YouTubers, but most importantly one of the most impressive founders out there.
How did you get connected with the MrBeast team?
I used to be an investor for Night Media, which started out as MrBeast’s management company. But truthfully, I didn’t get that much exposure because of corporate hierarchies, etc. etc. Now I work at Slow, focusing on holding companies (usually creator), so I’ve been lucky enough to bump into some people that have been growing that company into what it is today.
When/where did the interest in the creator economy come from?
I’ve been obsessed with media forever. When I was a teenager, I worked in what I would call the Fangirl Economy: selling fanfictions, flipping anonymous twitter accounts. Not entirely glamorous, but it showed me the social and financial power of online fans. I also dabbled in traditional media for a second, I started off doing journalism and computer science in college with a minor in tech policy at Northeastern in Boston.
I’m a big fan of Northeastern – did you do a bunch of Co-ops?
The problem is that I loved working, so I kept taking co-ops. I went through technical, growth, journalism, and general media. NEU’s model is based on experiential learning and traditional learning. I think I went a little too hard on the experiential. I got a job and ended up dropping out.
How do you invest in creators and how did you get there – where do holding companies come into this?
When I was at Night, I heard about the MrBeast holding company deal going out to fundraise. That was intellectually distracting for me. I had been watching managers go out and fundraise per-project for each incubation, long-form media project, anything, and I never understood why you couldn’t just get some larger lump sum to have the founder (the creator) figure out later what to do with it.
Investing in creators is a holistic investment in an individual that takes all of their income, or potential income, generating assets under one company, so the investor has exposure to all that that person touches for a certain period of time.
There hasn’t been a fund to figure out how to really do holding companies for individuals – except for Slow.
I remember you having a bit of crisis around this time – you asked me if you should go back to school
[laughter]
Yeah, I was pretty obsessed with this holistic investing. I quickly and quietly left Night and moved home. I had just turned 25. I have been stuck in this mental standstill trying to translate 1) the importance of creators and 2) investing in founders holistically. I thought maybe I should just go back to college. Ask some professor to help me translate it? Do I work for a creator and build their company?
One thing was for sure. That there was too much brawn in the creator business as not enough brain to really translate what’s going on. I met Megan at Slow and felt like she got it.
She and Sam had been working on this for a while. The deal is a holding company structure, which spans a creator’s content, licensing, brand deals, joint ventures, companies, whether that's M&A other channels or other businesses, and also incubations internally within the holding company
What do you mean by incubations?
Founders can be in more than one company at the same time. I think a lot of people call this a “product studio” or a “production studio” model, but for me, it’s healthier to work with a really visionary founder to see what companies they want to build within the next 20 years that build up to their greater narrative – and work backward from there. So I try to explain that they’re self-incubating - that puts them more in the driver's seat.
How do you see this investment different than other traditional VC investments?
VCs should give “startup cash.” Meaning that the costs can go to the real operations of starting one or multiple businesses (operational costs, getting lawyers so you can negotiate a better deal, getting an in-house manager/sales rep, etc.) Not to keep the business running - there’s debt for that.
Do you think previous attempts by VC’s to invest in the creator economy were misguided?
I think there’s a misunderstanding of the structuring of the creator ecosystem. The creator economy as a term strikes me as weird, too. It’s the only vertical we refer to only as an economy and not as an ecosystem. We would never refer to the healthcare industry as the health economy because everything has so many moving parts.
I feel for the “creator economy” companies that raised so much in 2020-2021. There’s a lot of money in the ecosystem, but almost no infrastructure. Tech disrupts existing infrastructures, traditionally, so it’s like swinging an axe on an invisible house.
Why do you think that so many failed to capitalize on the opportunity?
There’s a misunderstanding on what the creator persona has done to the world. I have a thesis on my blog that tells you what happened: basically, creators are active consumers. People are actively consuming things and feel self-aware that what they put out there has the ability to make or break companies.
Also, professional creators can be named or anonymous. Nobody can settle the difference on influencer vs. creator. Lots of people have public accounts – are they creators? What are independent media companies and what are indie brands? These are big questions that have to be settled before we can throw that much money into it.
I think people were enamored by this big chuncky TAM but that was misleading.
Lots of people know Em the VC. I think people reading this would be surprised that you’re also a lobbyist and started a think tank
Earlier this year I started a think tank with Nate O’Brien – he’s an ex-Youtuber, now a big shot media guy. Also one of my best friends. He’s a great example of what can go right in the creator ecosystem: gets an online persona, builds back-end media companies, and gets to invests.
During the TikTok ban, Nate and I went down to DC and saw how creators were being presented as small businesses. That’s fine. But creators don’t fit under the same policies and laws as general small business. So now we work on policy, set up research institutes at universities, grant writing, kiss babies, etc. to shed light on some of the perks that small businesses have that creators don’t.
We think about the industry from a policy lens and academic lens. What is a think tank? You get a bunch of smart people in a room and they come up with initiatives and policies that you try to convince the government or universities or institutions to go along with those proposals.
We need policies that are similar to how startup policy was 20 years ago, that can protect them in some way.
Can you give me an example?
So an example of that is algorithmic transparency. A lot of these platforms just choose to change the algorithm out of nowhere. If I'm making an investment in a creator, I need for that person to at least have a heads up on a massive change, why that change is happening, and how they can adjust to it.
Payout transparency. Trying to manage cashflow – payment rails are not really great for creators...
And there’s so many parts of the government you have to coordinate but the industry by its very nature is super fragmented and can’t easily advocate for itself. With some tweaks we can promote a lot of entrepreneurship.
Where does the Academia part come in?
On the academic side, education doesn’t currently reflect what’s happening in the world. Even though we had a journalism department or media department, it’s not built to study and advance what’s happening with creators. Everyone is a creator. 70% of kids want to be YouTubers. Curriculum needs to adapt. We need research. And you’re starting to see Universities to take it seriously. At Harvard there’s this great initiative where they're focusing on public health and how creators affect public health. But that’s just one aspect. Creators are impacting so many different verticals.
I was shocked that you provided the initial funding for the think tank out of your own pocket. In some ways it’s bonkers that it’s falling on you to rally the industry and try to navigate the government and higher education.
It’s totally crazy and not what I thought I would be doing. Yeah, I felt so strongly about this, I moved home with my parents so I could finance it. Not my sexiest move ever!
[laughs]
I see all of these moves as “levers” for a larger narrative. I think this is important to normalize content as a product, loop that into the underwriting process of an individual and then introduce a new relationship with truly visionary founders and people who want to support them.
In traditional venture you invest in a company and the founder, if the company fails, is free to go work on something new. But how do you invest in a person?
First off, if one aspect of the company fails, it shuts down. People, alone, never fail. If they give up, that’s a totally different thing. Sometimes it takes a talented person two or three tries to become a good founder. That should be normal. Granted, there are some best practices that I have yet to figure out. (How many times can you raise on a HoldCo? What’s the right dilution? What are the negotiable terms/side letters that might pop up?)
Pre-founder is an emerging category. My belief though, is that it’s time to introduce a new financial relationship between what each person believes is “good”. Founders pick VCs as much as VCs pick founders. Why not have a relationship for the next 10-20 years if you want it? You can always have a different cap table for the individual companies in the HoldCos, etc.
I know you’re going to be rich but I pray you’re truly rewarded for laying this groundwork that so many will benefit from
Hah, I would love for someone else to do this. Maybe if there’s a call to action from this interview – if there’s anyone from this newsletter that wants to work on this, call me.