“Taking Revenue” & “The First Check”
If we believe in a Creator Investment world where the investment stems from a venture capital, high-growth, startup environment, then we know that “taking revenue” is something traditional Founders, themselves, do not put up with. There was a time where private equities invested in technology companies for profit. That happened. That existed. The issue was the model of private equity (and the individuals, pensions, and larger investment funds that they reported to) didn’t want to believe in a market where the Founder would put their foot down on what they need to get to the scale they wanted to and had to get to. Founder friendliness aside, there are media funds that have existed for 20+ years. There are also operators who take revenue, specifically from Creators, that have been around almost as long. (Read MCNs)
And while, again, there is absolutely nothing wrong with taking revenue from Creators at all, it isn’t something new and to write home about. That also isn’t something that good Founders take anymore.
The purpose of venture capital, especially in the beginning of Seed investments, was to be fast and to take a bet on a high-growth Founder, and their ability to make a high-growth business. The Funds that started that model knew that 1) there was only so much ownership they could take 2) these kinds of companies (Founders) would have high burn (on the tech, hires, and growth) to fit the mutual understanding and point-of-investment that the Fund wanted from the Company (Founder).
Here are the people who take revenue from Creators:
- Talent Managements
- Platforms
- MCNs
- Licensing partners
- Private Equity or Media Funds
Here are the people who yield high upside from Creators:
- The Founder
- The Early Employees
- Angel Investors and early, small investors
There are best practices on being every single one of those individuals. But when you’re starting a fund, it’s important to get together what success looks like for your LPs and for your Founders and pray to God they align.
What we’re trying to tease out here is in a fund’s structure and to its core, the decision to participate in a rev-share vs. equity priority is something to get straight. Let’s help you figure out what you want to do using parallels of how the Seed Software VC ecosystem developed and how that development shifted out different kinds of Founders going to different types of Financing.
VC vs. PE Activity in Software
(And what it means for Creator Investing)
Characteristic | Venture Capital (VC) | Private Equity (PE) |
Stage | Early-stage, pre-scale | Growth-stage to mature |
Risk profile | High risk, high reward | Lower risk, focus on financial optimization |
Capital use | For growth, product dev, go-to-market | For buyouts, dividends, financial engineering |
Structure | Minority equity, upside on M&A/IPO | Majority control, cashflow rights |
Return goal | 10x+ multiple, large outcomes | 2-5x over 3-7 years, often via cash flows |
Involvement style | Hands-on strategy, brand, hiring, GTM | Operational efficiency, EBITDA margin focus |
Time horizon | 7-10 years | 3-5 years |
Value realization | Equity liquidity event | Dividend recap, resale, or strategic sale |
“The First Check”
There are options for everything. It just really decides on what you want to be known for and genuinely do.
There is one term that I find regardless of interest of revenue or equity: everyone wants to be the first check.
For Creators, specifically, this means the first check into the fresh new HoldCo.
Not the first check into:
- A DTC brand
- A YouTube channel
- A merch drop
…but the first check into the creator-as-entity — the foundational holding company that will incubate multiple brands, ventures, and revenue streams.
What does the “First Check” mean for Creators?
First Check into a Creator Investment (or HoldCo round, overall) means that you’re investing at the holding company level, before any operating (or new operating) businesses are carved out. The purpose is to back the Creator & vision for the company, not any specific brand, channel, or SKU.
In this process, the Creator licenses and assigns the IP, content library, NIL and ability to create new businesses under their assigned NIL for a set period of time to the holding company.
If you invest, your equity gives you access to :
- All future businesses built under that umbrella
- Participation rights in later brand spinouts
- Profit share in the instance that the holding company is profitable OR a specific cash-flow services previously specified
What does a “First Check” really mean?
The first check usually is not the most formal (or institutional) first dollars entering the company. Mostly, it means the first institutional investor to:
- Formalize the HoldCo (This is where Creator Venture Accelerator sits)
- Structure it like a venture-backable business
- Take equity across the Creator’s full commercial platform, not a one-off project
- Back the Creator as an operator, not as a single content output (this nixes the JellySmack, Spotters of the world)
As the “first check”, you’re basically being the first foundational check that “anchors” the business as something venture-backable and that takes the most appealing ratio in dollars-in:equity-take.
As always, if you have any particular questions, feel feel to reach out to em@pre-founder.com.
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