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How Creators make Returns

How Creators make Returns

How Creators make Returns

How these things POP.

This comes after Intro to MCC.

Simply put: Venture capital is supposed to find early-stage and very risky investments. As an investment role, the plan is to make money off of that investment. When it comes to Creator Investing, the same objectives apply.

For our Creator Founders not as familiar with how venture capital; startups generate money back to the people that invest in them. In this section, I want to explain how that works and how Creator investments reflect mostly that. Here’s how investing in creators makes money.

If you’re an existing investor, skip to How Creators Make Returns.

How venture capital makes money in traditional software

VCs make money in 2.5 ways:

  1. M&A: the company is sold (entirely or partially)
  2. IPO: goes public on the stock market
  3. Secondaries: [Not Great]

How Venture Capital works

In short: there are people that go to much richer people or existing funds to raise money in one solid bank account. Once they reach their fundraising goal… they can start investing (called deploying). The job is to make the people that gave them money… money in return (that’s what the word returns comes from.)

The expectation is that the investor is going to return a lot of money. Either 2x (double), 3x (triple), etc. their money. The actual standard is 10x return to investors.

Traditional software investments typically mean that the investor gives money for only one company and maybe to a team of founders. An investor can be excited to work with founders that have:

  1. An idea (pre-product)
  2. An example or prototype (an MVP)
  3. A business (makes a certain amount of money)
  4. A bigger business (sustainable growth: either $$ or # of users, etc.)
  5. Multiple businesses (a collection of ideas or businesses under a company name that lead to a larger vision)

This is totally dependent on each fund. Each fund has a job to hit certain requirements for investment. These are the variables that change per fund:

  1. Stage/Risk tolerance (that numbered list above)
  2. Pricing (will target to give you a specific valuation)
  3. Check size (how much they typically invest per investment)
  4. Vertical (finance, healthcare, creators, crypto, etc.) Note: not every fund has this. The ones that try to not have a specific focus are called generalists.

How Creators Make Returns

You really have two options:

  1. M&A: the company is sold (entirely or partially)
  2. IPO: goes public on the stock market

1. M&A

Complete Sale.

Sell the whole thing to someone or something else. Pretty straight forward.

So who buys creators as holding companies?

  • Talent Managements
  • Private Equities
  • Production Studios
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Partial Sale.

  1. Majority Sale
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    What it means: Creators sell a controlling stake (over 50%) in their business, either exiting operational control or staying involved as a brand ambassador or creative lead.

    Why It Happens: Often occurs when a creator seeks to capitalize on their brand's peak valuation or shift to new opportunities.

    Buyers: Larger media companies, consumer brands, or private equity funds that want to leverage the creator's brand and audience.

  2. Minority Sale
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    What it means: Creators sell a minority stake (less than 50%) in their holding company or subsidiaries to raise capital while retaining control.

    Why It Happens: Useful for creators seeking liquidity to scale their operations, fund new projects, or diversify their income.

    Potential Buyers: Private equity firms, talent managements, venture capitalists, or strategic partners who see potential in the creator's ecosystem.

BONUS: Sell-Offs

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What it means: Individual assets, such as a product line, app, or brand, are sold to interested parties without selling the entire holding company.

Why It Happens: Creators might retain control of their personal brand while offloading non-core ventures or monetizing a high-performing subsidiary.

  • Example: A creator sells their beauty product line to a legacy brand like L’Oréal.

2. IPO-ing

Put simply: going public on the stock market. While rare, some creators with expansive, well-structured holding companies can take their businesses public.

  • How It Works:
    • The creator transitions their holding company into a publicly traded entity, allowing institutional and retail investors to buy shares.
    • Preconditions: Requires substantial revenue streams, diversified assets, and strong financial controls to appeal to investors.
    • Why It Happens: IPOs offer significant capital infusion, create liquidity for the creator, and elevate their business profile.
    • Challenges: Creators must navigate regulatory scrutiny, consistent revenue performance, and shareholder accountability.
  • Case Study Potential:
    • If a creator like MrBeast took a holding company public, it might include his YouTube channels, branded products, Feastables, and other ventures under a unified entity.

As always, if you have any particular questions, feel feel to reach out to em@pre-founder.com.

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