Jimmy Donaldson (aka MrBeast) has provided investors with what they want without giving up any future returns.
MrBeast, aka Jimmy Donaldson, create videos in which he counts to 100,000, tips his pizza delivery man a house, and then buries himself alive. The No. 1 YouTube star is also a delivery-first restaurant chain, MrBeast Burger. The YouTube No. 1 star is a delivery-first restaurant chain called MrBeast Burger. His Feastables snack line launched in January and sold more than $10,000,000 in sales. He also has a merch shop. There is a merch shop. Donaldson revealed to Andrew Schulz, a comedian, earlier this fall that he declined a billion-dollar offer for his content and related business ventures. He also told Schulz earlier this fall that he could run for president in 20 or so years, but first, he would give away the tens and billions of dollars he anticipates earning by then.
Is it any surprise that investors soon noticed Donaldson and the MrBeast brand after he gave glimpses of the possibilities before him at 24? A report in Axios claims that MrBeast wants to raise $150 million for himself and his companies, with a total value of $ 1.5 billion.
Although there has yet to be an announcement, it is curious that no one has raised questions about the costs of MrBeast taking on venture funding. What VCs see in Donaldson’s investment needs to be included. It’s common to use famous people with prominent personalities to make money selling products. Investing in digital creators isn’t new, either. What’s the deal for Donaldson? What’s the deal for VCs?
The video business is the heart of MrBeast’s empire. Donaldson’s main channel on YouTube has 117 million subscribers as of December 2022. He is close to 20 billion lifetime views. In 2021, he earned $54 million.
However, $54 million may not be as appealing as it seems. YouTube received 45% of the revenue Donaldson’s MrBeast videos earned from advertising. VCs are attracted to platforms that allow them to charge a 45% tax on the income earned from content created for them. This is different for the creators of the content. Donaldson also licensed his old videos to purchase non-English versions of his content, so his catalog is not entirely under his control. Donaldson recently admitted that he now loses money due to the MrBeast videos’ ambition and production value. His latest video featured 100 children versus 100 adults competing for $500,000 in prize money. He makes up for the difference with all other things.
Donaldson also owns Night Management Company, which takes a percentage from the client’s earnings, as most management companies do. Managers in Hollywood often take 20%.
According to Insider, Donaldson has taken out venture funding for his ancillary business, including $5 million to launch Feastables. The former president of RxBar was hired to manage the snack brand. RxBar is known for its ability to grow without additional capital beyond the initial $10,000 investment and reach a $ 600 million exit. Is he able to raise more capital without reducing his equity?
Direct VC investment in real people is still relatively new. YouTube creator Marina Mogilko received $1.7 million from a few investors, including Slow Ventures. Slow Ventures will hold a 5% share in any of Mogilko’s future ventures.
Insider was told by Sam Lessin, a partner at Slow Ventures, that these types of investments are a great business. He said that if someone had many of these creators’ numbers, they would be a company instead of a human being. “They would have great venture capital.”
Others are more skeptical and point out the legal gray areas surrounding the direct investment of venture capital in individuals. Vice reports that Lessin had to defend the investment decision last year, saying, “It is def, not indentured servanthood.”
Lessin stated, “It’s the opposite. It is indentured capital.” Indentured servitude requires you to produce something or do something for me. If I don’t do something or decide to do nothing, that was a very dumb investment decision.
To fulfill his goal of becoming the best YouTuber in the world, MrBeast already gave up a substantial portion of his earnings. He would be foolish to invest more of this money.
Fast Company spoke with a veteran VC about how these types of investments in creators are similar to the deals made by firms in talent-driven production companies such as Hello Sunshine’s Reese Witherspoon. Candle Media bought Witherspoon’s company for $900 million last year.
There is one big difference between them: the narrative. Witherspoon founded a digital-centric media firm and hired a professional CEO. They also built a team. Donaldson, on the other hand, can be presented as someone who will become a billionaire.
This is especially appealing right now. This is especially true as we’ve seen tech suffer through brutal layoffs. Investors preaching growth and hiring last summer now focus on “revenue per worker.” Investing directly in employees creates the perfect example of a highly productive company. It only gets a little better than one person producing all the revenue.
MrBeast’s rapid rise in subscribers will continue. This could lead to huge sales for his burgers and snacks. If Donaldson does decide to invest in him, it would be a boon for any VC firm. He doesn’t need the money.
The VCs have everything they need: The idea of a single billionaire provides a tool to discipline founders and the employees they hire.
