Jesse Jacobs and Mike Kerns on Building The Chernin Group

Jacob:“I’d like to start a bit more personal and learn more about how you both found your way to not only working and investing in media but more specifically at the Chernin Group.” From a purely alphabetical perspective, let’s start with you, Jesse.

Jesse: [chuckles]. Sure. Thanks for having us on, Jacob. We’re big fans of you and the platform you’ve built. Congratulations on the recent addition to Morning Brew, which is exciting. Myself, when I was in college actually, Fox Sports started. They got the NFL rights from CBS which back then was a big deal. CBS, ABC, and MBC had had football rights for decades. Fox got those rights and I ended up into– I was actually, I think, literally, I walked in in my summer interned between my freshman and sophomore year at Fox Sports and it was four other people there.

Over the course of my entire time in college and then after college, I worked in sports TV production for Fox Sports and ultimately, for CBS Sports at the Olympics in Japan in 1998. I was working sports trucks, so NFL games, baseball games, NHL games, Olympics, snowboarding, running around in sports TV production. I quickly decided post-college that it seemed like the more successful you got in that career the more you going to have to work every holiday. You’d be working Thanksgiving if you got lucky. You know what I mean, you were good at football production, you’d be working Christmas, you’d be working New Years, you’d be working all holidays and all weekends. I decided that that wasn’t for me.

It was the early days of digital media in online streaming for video and for music. I got a job running content in LA for a business called iFilm that most people will not remember. We were one of the first companies ever to stream video online. We technically sold the first video ad ever, and we coined the term Viral Video. It was basically YouTube before YouTube. The idea is that people would send us anything. Every day, we got boxes and boxes of DVDs and VHS tapes, and we’d encode them. This is a time when you had to encode them into Windows Media player, real player, and QuickTime all separately, and in different bit rates. It was the right idea, just probably 10 years too early.

Ultimately, we sold that business to Viacom. I was writing a book at the time, and a good buddy of mine was going to business school and I said, “I guess that seems like an adult thing to do.” I went to business school and from there I ended up at Goldman Sachs doing investment banking and investing all in media, sports consumer, digital, et cetera. Wanted to leave Goldman at one point to do something more entrepreneurial. Peter and I found each other when he was leaving News Corp and Fox, and he and I started The Chernin Group in 2010.

Jacob: You, Mike?

Mike: I started my career working with Ron Conway and his first fund actually in the Silicon Valley back in 1999. I say to people, I was there for a year of the good times in the year of the bad times. We effectively were Y Combinator before Y Combinator and the growth of all these professional seed funds. From there, I went and I joined one of the top sports agencies in Steinberg and Jeff Moad, and ended up working very closely with Jeff Moad who was running the baseball practice. It worked a lot on player negotiations, which was really interesting in particular arbitration, and then ended up helping Jeff leave the agent business and he acquired a majority stake in Arizona Diamondbacks.

I learned a lot about sports and media rights and the confluence of the two during that. We actually came across and dug pretty deep into Major League Baseball Advanced Media, and this is back in 2003. The book Moneyball was written, and it was really eye-opening even for us who worked in sports and knew VAs pretty well. We had no sense of how they were really using data to the extent they were.

That combined with Major League Baseball Advanced Media spurred me on to co-found a startup that was effectively based on becoming a stock market for athletes. Very similar to a lot of stuff was happening around NFTs, ironically, at least conceptually. It didn’t work for a variety of reasons but we had great investors. A gentleman named Kevin Compton who’d been a senior leader at Kleiner Perkins for a long time was our main investor. He doubled down on us with the rest of the board. I became CEO of that company. We became a large Facebook and mobile sports application network called Citizen Sports.

That did pretty well. We were back during the days of Sports [unintelligible 00:06:28] and Bleacher Report and sports startups. We ended up getting acquired by Yahoo which still powers Yahoo Sports app, and then our team rebuilt Yahoo’s Fantasy Sports app along with a bunch of folks from Yahoo. I ended up running Yahoo’s Global Media and homepage in video businesses and product groups from 2012 to 2014. I actually got introduced to Jesse and Peter probably not too long after Peter and Jesse started The Chernin Group.

Actually, it was right around 2010, 2011 when Jesse and I first met, introduced by Jeff Moad who was my old boss and was an investor in my startup. Jesse and I kind of hit it off straight away. I spent a bunch of time getting to know Peter and ended up joining them in the beginning of 2015. Now have been with TCG for about six years.

Jacob: I’m curious about the structure of TCG and The Chernin Group overall. Jesse, you and Peter founded the firm in 2010. You’ve made investments in media and technology companies. There’s also Chernin Entertainment, which is a production company, and then there’s the fund that you closed back in November 2019. Can you explain how these various entities are all related to each other?

Jesse: Well, A, we don’t have enough time to go through that, and B, it’ll be incredibly boring for your listeners, and so I’ll try to simplify it. We have two things. We have an investment business, and separately, there’s a film and television production business that Peter owns a significant majority of. Mike and I have effectively spent all of our time on the investment business. We’re just finishing our second fund and we’re about to raise our third fund. For simplicity purposes, I would assume, Chernin Entertainment makes movies and TV shows, and the Chernin Group is our investment vehicle. Beyond that, it’ll get super boring.

Jacob: Fair enough. Mike, you mentioned that you co-founded and were CEO of Citizen Sports before getting acquired by Yahoo, and then you became SVP of the product homepage and global media. Obviously, that comes with a lot of operating experience and really building these businesses up. Now, as you are operating from an investor perspective, how do you take that experience that you have and help the various portfolio companies succeed without going too far to step on their toes? It must be a fine line.

Mike: Yes, it’s a critically important fine line, Jacob. I always tell entrepreneurs, honestly, I try to do it in the first meeting because even though we like to pride ourselves on being former operators. The truth is I think it’s valuable to have operated and been an entrepreneur in the sense that we can hopefully better relate and better empathize with the journey that these operators and founders and executives are going through. We are very clear about the fact that we understand that there is a very clean, clear and distinct line between operators and investors.

Regardless of how much of the company we own, regardless of our past experiences, we’re in the business of giving advice and giving, hopefully, helpful input when called upon. The main investor in my old startup was a legendary or is still a legendary investor himself. Asked me when I called him asking for his advice about joining TCG. He said, “Are you ready to be an influencer and not a decider? Ultimately, if the answer is yes then you’re ready to take the leap and join Peter and Jesse.” I think that probably summarizes it better than any other kind of anecdote of I or we could share because we take our role very seriously as trying to be helpful.

I know it sounds corny, and there’s all kinds of VC memes about being helpful, but we really mean it. At the end of the day, there’s countless times where entrepreneurs and operators of companies that again, will be the majority shareholder often will make decisions that we don’t necessarily agree with. We will let them know, we might not agree with it, but will ultimately support the decisions that they’re making. Because at the end of the day, they’re running and driving the business day to day.

Jacob: You could argue that there is a very clear thesis that TCG has, or at least I could argue that, but perhaps the listeners don’t quite understand that yet. Can you talk about what that thesis is and how you’re looking at companies? Why don’t we start with you, Jesse? And then Mike, you can follow up?

Jesse: Yes, think that the main thing that we’ve done this now for 10 or 11 years is we have a thesis. The fascinating thing about the internet, and digital is just an unlimited amount of real estate, there’s no limit to the number of websites, no limit to the number of apps, no limit to the number of companies. It’s not like the radio or TV business historically, or the real estate business where there’s a limit. You can’t build just an unlimited number of TV networks over time, you couldn’t build an unlimited amount of real estate. Given the fact that there is that unlimited space out there, our belief is that we are looking for the brands and the companies that people really care about, that people really self-identify with.

If I ask you who you are? You say, “I am Jacob Donnelly, I’m X-years old, I live–” wherever you live. “Three things I care about our media operator, the New York Giants, and something else.” We want to be on that list of things you care about. We want to be on the list of things, we want the companies we invest in to be on that list, we want people to wear their T-shirts. We want people to adopt that brand, and we don’t care what it’s in. In the years it’s been in anime, food, watches, baseball cards, surfing, it could be in anything, but as long as we see that there’s a brand.

Often we find that that brand is sort of it’s an accidental company, it was started by– When you look at a lot of the founders of Ben Clymer at Hodinkee, and Dave Portnoy at Barstool and the two founders of Food52, and the founders of Surfline. These are labors of love and their passions, and they start these businesses. I put businesses a little bit in air quotes because this is what they love to do and this is what they think the community that they’re a part of needs. Over time, they find like five or seven years into it, “Wow, this is actually turning into a company and we haven’t spent any money.”

Often these companies have spent zero money on marketing, the people that are showing up to Barstool, to Crunchyroll, to Headspace, in the early days, to Hodinkee, to Food52, to MeatEater, to Gold Auctions, to Surfline, all of these companies, they’re doing it originally because of the content. Over time, they’re starting to demonstrate their passion for that brand by buying something. Buying a cutting board for the kitchen, buying a watch, buying a t-shirt from Barstool. That ability to tie content to commerce in that way we think is incredibly powerful.

I think without having to spend a lot frankly, if any money on marketing, and that playbook, which we’ve now rolled out many times we think is something that we’re passionate about, and is what we look for over and over again.

Jacob: Let’s dig in a little bit to some of these companies and let’s look at the past six months, because it’s actually been pretty busy for you guys. First, there was Hodinkee which was pretty cool, because I actually had been on the show back in the fall. Then there was Surfline, then Hodinkee expanded with the acquisition of Crown & Caliber, and then two investments in quick succession with Golden Auction. You guys also invested in Collector’s Universe, which grades collectibles and also increase the price of card submissions today.

Let’s first talk about Hodinkee and Crown & Caliber, both of these makes sense from that thesis of content drive into commerce, and they look similar as other investments such as MeatEater, Food52, you mentioned Barstools, but Golden and Collector’s Universe are not content driven. Can you talk about that and how these newer investments might be a deviation from the original thesis?

Jesse: Yes, we don’t have to look at him as deviation. The other thing we do at TCG is we’re extremely thesis-driven and how we invest. About 9 or 10 months ago we started paying a lot attention to cards and collectibles. We just noticed in our community online, among influencers, we just noticed increasingly, people were interested in talking about cards and collectibles, buying and selling, et cetera, and then did some quantitative work to look at if we can verify that, how much is actually growing. Look at some stats that we can get on eBay or online.

We assign a team of people internally at TCG to go extremely deep into that vertical or into that niche. We canvassed the landscape and I think you and I talked about this months ago, Jacob, I think I hit you up and asked you about it. We asked everyone we know, “Are you into it? If you are, what brands are you going to? What individual, what podcasts are you listening to? What companies are you buying from?”

This was during COVID and we had people even on our team safely flying across the country visiting the companies that we thought were most interesting. We stumbled upon Golden Auctions, which is the leading auction site online for buying and selling cards and collectibles, sports cars and collectibles, but broader Pokémon cards, et cetera. I actually think it is a content to commerce. This was started by one guy, Ken Golden, he’s been in the hobby since he was 12 years old, he knows more about cards and everybody else.

He has more relationships and he’s built up really a top-of-the-funnel on both the supply side and the demand side, just based on his knowledge, his voice, his influence, et cetera. He’s turned it into a really impressive business that was growing very fast. At the same time completely separately, Collectors Universe, owns PSA, which is the leading company that grades cards and collectibles, we also thought it was an interesting opportunity. Those were two discreet and distinct investments that we made, that were all driven off of that particular thesis around cards and collectibles.

Mike: The only a couple of things I’d add gigot about cards, although you would go to Golden, and you wouldn’t think it’s media, I think that’s fair, they don’t do a ton or all that much content. Conversely, you go on YouTube, you go on Twitter, you go on to Reddit, there are thousands of people both talking about kind of distributed a few communities and sharing, and more and more publishing, about the coverage of cards, collectible, et cetera. We’ve probably gotten a dozen plus pitches in the last six months about seed stage venture backed companies that we’re going to reimagine the kind of consumer experience and media experience around unboxing of cards.

We said, “Look, what better place to start the reimagination of the consumer experience of cards and collectibles than on a platform like Golden. Which has such strong history of supply and relationships with athletes, and deep relationships with a lot of the major collectors in the space. That we thought with Ross Hoffman joining and Ross has already made some key hires in consumer product and digital media.

I think it’s fair to assume that a core part of our hypothesis will be that we will bring world class consumer product and live media experiences to collectibles. In a way that, again, many startups are going to try to skate to that same vision but we think we’re skating from a position of strength and starting from a position of strength with the foundation that Golden provides day one.

Jacob: I want to pivot a little bit and talk about action networks, or more broadly, a curiosity I have. This, if I’m correct, was created a few years ago, by merging a few different brands that you had acquired into one major brand. Have you ever considered identifying new niches and trying to start companies from the ground up or is it always better for where you guys are to just acquire them as you find them?

Mike: I think the ideal is a bit of a hybrid, Jacob, and we’re actually going through it right now in a couple of different categories where we think there’s a really interesting opportunity. We don’t believe that that opportunity exists, or we’re confident, it’s not out there right now. We would love to potentially, acquire stakes or majority stakes in some companies to put them together.

The hardest part of the puzzle is finding the person who is going to ultimately run these businesses and it has to be someone that the other entrepreneurs are all excited about. working with/for. It has to be someone who shares the vision that we have and has enough credibility and experience managing scale to go after the opportunity together with. That’s a challenging part of the “roll-up” because unless there’s something that’s at scale as a starting point, you have to put several things together to start something. That’s what we had to do with Action Network. That’s both the opportunity but the challenge at the same time.

Jacob: It’s interesting that I’ve written about this many times. I’ve pretty negative opinion about venture and media and yet, I’ve really never been able to write anything negative about you guys because so far, it doesn’t appear as if you guys make too many of the same errors that other VCs have made in media. Why have so many VCs screwed up when it comes to investing in media?

Mike: I’ll start Jesse. I think rather than talking about what they’ve done wrong, it’s probably good to go back to what we like to focus on. Which are, generally, if you look at our investments there’s two kinds of investments. There’s minority stake, what I’ll call venture businesses, and we’re typically investing at the growth stage of those companies. Although, in the past, we had done more early-stage investing, but we stopped doing that, for the most part on the venture side of the house.

Then on the majority stake type businesses are often more of the “media” the MeatEater, Food52, the Barstool, the Actions. Those businesses we believe, tend to be most successful when you run them in a capital-efficient way, i.e. don’t burn a lot of cash. They also tend to be non-advertising based and they tend to not rely on nor in many cases spend on customer acquisition. They rely on their contents and the investment in the content to be the tool for customer acquisition.

Many of the businesses that haven’t done as well from an investment perspective in “media” burn too much cash, raise too much capital with too reliance on advertising. Ultimately spent a lot of money acquiring customers at some point in their history, and the combinations, a recipe for disaster. Even one or more of those things will generally not work out well. We often say if you look at the logos on the majority stake side of our investing, most of those companies have been around a decade plus Barstool, Food52, Surfline, Hodinkee.

These businesses, and you read about this, Jacob, it’s hard to create brands that have real organic audiences of subsequent size by a flash-in-the-pan strategy of a new distribution or new customer acquisition. They tend to be built, to use a Barstool in brick by brick. We both like those businesses because they’re enduring, and they have built-in audiences to provide a foundation from. By definition, they haven’t burned a ton of capital to get to that point. They’ve been run capital efficiently. When we invest, we try to not screw it up and try to maintain that discipline around capital efficiency.

Jesse: I think that’s well said. I think the other thing I’d add over the years we’ve had so many people come in and say, “The Food Network is big on TV so there should be a Food Network for digital or travel as big on TV or in print so there should be a travel brand,” just based on their market analysis that rarely if ever works. One of the company CEOs that we just recently invested in over the last year, we’re talking to him about how he communicates internally with his staff.

Somebody said, “Hey, you should consider using Slack.” He said, “What is Slack?” In other ones, somebody said, “Hey, did you go to [unintelligible 00:26:43] Road and meet with Sequoia, Accel, Andreessen?” He said, “I don’t know what you’re talking about. You’re speaking a different language.” Literally, they don’t know what those companies and firms are. We have one company we’re working with right now, they have no clue what an advisor or investment bank would do. These are really people who are in the true sense of entrepreneurs. I think that’s one thing that really differentiates the way we look at it.

Jacob: One of the other things that’s been interesting, and because you both invest in companies, I’m curious, your thoughts, there’s been a ton of ink spilled about the recent interest in Spaxx as a means of acquiring companies. By and large, though, in the media space, there has not actually been a lot of acquisitions made just a lot of money raised. Is this a lot of noise, in your opinion or do you think that there are good opportunities?

Jesse: Yes. I think a [unintelligible 00:27:44] is just another way of going public. Ultimately, if you ask me the question, or ask us the question, will there be media companies that should go public over the next two to three years? The answer is yes. Might this back craze result in too many of them trying to do so? Potentially. All the Spaxx is an alternative to doing an IPO or a direct listing. I think if there are companies out there that otherwise would have thought of going public, a Spaxx is an interesting alternative to regularly IPO.

Jacob: I want to ask another operating question. An old CEO of mine, when we were talking about doing some M&A work and never actually went through, said that mergers and acquisitions are one of the hardest things to get right and most of them fail. You guys have both invested in companies, but then also bought other companies to incorporate into the larger ones such as Crown & Caliber becoming part of Hodinkee. What is the strategy and the operating plan to ensure that M&A doesn’t fail?

Mike: That’s a good question. Look, I think we can answer it from a couple of dimensions. All three of us, Jacob, has spent a lot of time in our pre-TCG careers, both buying and selling businesses, from different perspectives. We could do a whole podcast just on this topic. Now interestingly, we are both, in some cases, a buyer, to your point about Caliber, with MeatEater and Firstlight, there are many other examples and we’re sellers. Obviously, we sold, big business to AT&T. Several years ago, we obviously sold Barstool right about a year ago exactly to Penn National and others.

I think that on the buy side, it probably is the same truism for the sell side, which is you want to buy a business that on its own, has both a strong foundation, and a lot of opportunities that you can identify for ongoing growth independent of “synergies” or the strategic rationale behind the acquisitions. I think in both Crown & Caliber and Firstlight, which are two instances that come to mind, both of those businesses, I remember looking at what we believed about Crown & Caliber what we believe about Firstlight, independent of how Hodinkee and MeatEater respectively, could help those businesses.

We had a lot of conviction in them as standalone opportunities and businesses. I think similarly, you’re seeing with Crunchyroll, it’s obviously public that they continue to thrive within AT&T in the now what’s been about three years since they sold to AT&T. I don’t think it’s no secret that Barstool has both had a huge impact on Penn National’s core business. The core business of Barstool, independent of the Barstool Sports Book, which is now live in just two states, has thrived through COVID and as a standalone entity. It looks like just the core Barstool business independent of a strategic benefit and rationale to Penn National will be a great investment and a great acquisition by Penn National.

As a seller, I think we are proud of the fact that our businesses, post Chernin Group involvement have continued to thrive and succeed. Hopefully, businesses that get acquired into the Chernin Group, we don’t screw up by making sure we recognize what the strengths are, independent of the integrated strategy and plan. But then have enough resources in place in an alignment between the leadership to make sure that they’re going to go after their strategic synergies to capture all the upside value that we all are banking on.

Jesse: Yes, the only thing I’d add is when we do our deals and we acquire a majority stake or a meaningful minority stake in a business, it’s always a separate cap table. Everyone in the company or those, there’s an equity plan that incense the executives in the team at these portfolio companies. We’ve often gotten the question over the years, “Why don’t you create one holding company and have common back office, and have one CEO and different brand managers?” The answer is like, “Look, if you’re running Hodinkee or you’re working at Hodinkee, or you’re working at Surfline, or you’re working at MeatEater. You want to have equity tied to the performance of those individual brands.”

Given how competitive it is out there to hire, to recruit and retain talent, it’s just incredibly important to have incentives that are aligned. I think it goes wrong when you try to create these sort of complicated structures where everyone rolls into one big entity. It’s why historically large companies have been challenged to foster innovation because they can’t give people the right incentives. That’s something that we spend a lot of time thinking about and ensuring that our management teams are appropriately incentive.

Jacob: Looking forward, what are some trends in media and/or technology that have you most excited?

Jesse: I’ll start with one which picks up on something that we were talking about before, and then I’ll let Mike take the more digital part of it. What’s going on in the collectible space is really fascinating. We think it’s for a few different reasons. One is pandemic driven a little bit, right? People have been at home and they’re going through their old shoe boxes and their old baseball cards. A second, which is quite interesting particularly for sports cards and collectibles, is tied in a little bit to the rise of sports gambling. Which is if you’ve seen the growth in sports gambling, you can go and bet on, “Do you think the Denver Nuggets or New York Knicks or whatever, who’s going to win the Super Bowl?

The Chiefs or the, the Bucks?” A gazillion other bets. You can’t bet on, or speculate, I should say, on the performance of an individual player over an extended period of time. You can do that as a fantasy GM general manager by doing your fantasy league. If you have a thesis that [unintelligible 00:34:44] Fox or [unintelligible 00:34:45], or Ronald Acuna is going to be a star. Ronald Acuna is going to be the next Ken Griffey, you can now speculate on that by purchasing his card. Because it’s the internet, and you can go down these rabbit holes of, there’s so many different types of cards and which card is graded what, that the whole community fosters that.

I think the third thing, and the third reason you’re seeing so much of this interest is tied to a little bit of the macro economy just around the government printing so much money and people looking for alternative places to invest. Some of that is Bitcoin, and a lot of that is Bitcoin and crypto. Some of that is in these collectibles where people look at this as a store of value that will increase in value over time. I think cards and collectibles you’re seeing a significant increase in antique and collectible cards. I think you’re seeing it and will continue to see and watches, in wine in, all these different areas, I think is really something that’s fascinating.

Related to that, I think we also spent a decent amount of time looking at these big verticals within eBay. If you look at sneakers and tickets and cars that historically were very big categories on eBay. Where off eBay these communities have formed, whether it’s a gold or a StubHub or a StockX. I think that whole space is quite interesting. I’ll let Mike pick up the digital part of it.

Mike: Yes, the digital part of it is the topic de jure, Jacob, is the NFTs. We’ve been spending a lot of time looking at that and some of these things won’t work, some will, but if you look at the confluence of factors behind the NFTs, I would say middle of the fairway for TCG. Many people might not, think that, but it really is this confluence of passionate, subjects. Whether it be the top shot with sports, or art communities, or other forms of intellectual property that will continue to evolve and build around these digital collectible scarcity-driven marketplaces. Combined with some of the things Jesse was talking about in terms of active this concept.

I remember, I’ll never forget graduating from school and our tax and ecom professors basically saying, “Look, all you need to do is max out your 401k and put in index funds and rest invest, and you’ll be fine when you’re 70 and live a comfortable life from 70 to death. You think about that, and now we’re, what is it, 23, 24 years later and people just don’t buy that. I think people are and whether it’s the Davy Dre Day trader phenomenon or obviously, what’s been real well chronicled with the Wall Street bets and Reddit traders, I think there is this broader movement towards more active investment/speculation, whether it’s sports betting, collectibles, crypto, what have you.

I think people want to be more actively involved in investing what they understand. The other component is like we have mutual friends who write and talk and are focused on this creator economy, passion economy. Macro trend towards everyone’s becoming a creator, et cetera. This is something that Peter and Jesse, one of their first investments ever, was in full screen where they helped incubate it out of the creator program at YouTube with George [unintelligible 00:38:51]. You look at whether it’s been investments in Barstool, or investments in anchor or investments in, Twitter and Pandora.

We as a firm have always invested in this kind of people-driven media thesis and now it’s people-driven everything. I think that the NFTs actually are at the confluence of all of these trends, which we believe in deeply and we’ve been investing in as a firm. The difference now is these things are being secured and transacted through cryptocurrency on the blockchain. That’s really the difference. We think it’s potentially, a major gateway towards consumer adoption and consumer relevancy of the blockchain in crypto. We’re certainly spending a lot of time learning and looking for active investments.

Jacob: I want to close with the same two questions that I ask every person that comes on the show. First, what is a mistake you made in your career and what did you learn from it? We’ll start with you, Mike.

Mike: It’s a funny one. I actually almost joined TCG back in 2012 and had an agreement with Jesse and Peter and went and resigned. Was countered with an offer I couldn’t refuse. Decided to stay at Yahoo for another two years, and in hindsight, obviously, I’ve had a great journey and experience with Peter and Jesse now for six years. It could have been eight years, and I think we would’ve been that much further along as a partnership and as partners. At the time, I thought I was making the right decision.

What I learned from it, I think speaks to the character and the maturity of Peter and Jesse is that when I finally did leave Yahoo two years later, I called them up and I said, “Okay, this time I’m really out and I’m already actually out like, are you still interested?” We obviously got back together and figure things out very quickly from there.

Jacob: And you, Jesse?

Jesse: In my career, that’s the question.

Jacob: Yes, in your career?

Jesse: Look, I think one of them that I’ve repeatedly made, and hopefully I make fewer of this type of mistakes now. In investing, the number of times I’ll give example, Twitch is a good example. Years ago, we looked at investing in Twitch, and the data was staring in front of us, and this was at a relatively low valuation. They actually had so much trouble raising capital that ended up having to do some like highly structured deal. We looked at the data, and we were very focused on the creator economy, we’re very focused on video and live video, we’re very focused on gaming. The data was nothing you’ve ever seen before.

These are people around the world on this platform for hours a day, there’s ultimately, we could see a natural way for a built-in tipping economy in an emerging sport, that’s global, cross genders, cross races, this was super interesting. We made the terrible, terrible mistake of asking the senior executives at the large video game companies, what they thought of it. Back then, was it were they pirating their content, and it was like these guys are going to go away, and none of the content’s licensed, we’re going to build our own platform. We made that mistake a few times, where you ask people whose incentives are not aligned with the success of the platform that you’re thinking about investing in.

They’re going to give you the answer that they want to hear, or they want to happen from their incumbent position. The reality is, and I think this goes to what Mike was talking about before with a good example, he gave around resting investing buying index funds to 70 versus what’s happening online. The internet and innovation and young people using technology and these trends, they move like three years faster than big companies, and frankly big government institutions. You hear these things, “Oh, they’re going to shut down Bitcoin and create their own government-backed Bitcoin,” it’s like bananas when you hear these things.

I think it’s just listening, looking at the data and seeing what’s happening, and paying attention to it and not listening to people’s who in common positions are not aligned with the outcome of where this innovation is headed.

Jacob: Second, what is some advice you’d give to current or prospective media operators to succeed in this business? We’ll start with you, Jesse.

Jesse: Yes, I would say and it’s something that you have done a great job espousing, Jacob, but don’t get caught up with raising too much capital and going down that venture or growth equity hamster wheel if you don’t need to. I would say, you look at these businesses that get overcapitalized, it’s like there’s been many situations where I’ve looked at a company or a founder and said, “You’re going to think this is ridiculous, and that I’m clearly talking my own book, but you should not be raising that much money at that valuation even if you can, because you’re going to get stuck. You’re going to end up hiring too many people and it’s your company.”

A lot of these companies, their great outcomes where you can maintain a meaningful ownership of a company, sell it for hundreds of millions of dollars, not billions of dollars if that’s what your goal is to have some sort of financial event without having to go and just raise an unnecessary amount of capital. I’d also say on that stuff, the small things don’t matter whether you’re raising– Is your valuation X or 5%, above X or 5% below X, if you get the right partner on board and the right investor on board and the right team on board. If you have to stretch a little bit to hire that person, but it’s the right person, the small things will make a difference in the end.

Jacob: And you, Mike?

Mike: I’d think of it in two dimensions. If you want to be huge, make sure that you’re building a platform where other people can make a living on your platform. Whether that’s YouTube’s obviously the most successful example in media, but then obviously, now many others whether it’s Instagram or Twitch or potential clubhouse or what have you. The other type of business is more like Morning Brew and Barstool and Food52 and I think it goes back to that it’s a grind, and perseverance, and daily incrementalism. Having a culture and focus on brick-by-brick is what will ultimately create the most long term value and it’s really just building success, one happy customer at a time.

I think anything in the middle is what we like to avoid at TCG, and I think where the trouble lies, be a broad, global platform, or be hyper-focused on the daily grind and the perseverance and super-serving your niche.