Ben Lerer on building and selling media companies: why staying niche is the only viable path

It's Miller time, which we're excited about. But yeah, so Palmer unfortunately won't be joining, but we'll get him back on. Paul on again soon.

And uh right now without further ado,

Ben Lair, the co-founder, managing partner of Lair Kaval Ventures. Let's bring him in to the TV Ultra. Ben, how are you doing?

Hey guys, what's happening?

Well, what's going on?

Not too much. Uh thanks so much for taking the time to join. Um can you uh maybe I mean I feel like most people are familiar, but can you kick us off a little bit of just the shape of your business, shape of your career? Just quick intro.

Uh sure. Sure. Yeah. Um I'm a native New Yorker. Uh everything I do is sort of New Yorky in some way. So grew up here. Uh after school came back to New York, started a company in the digital media space.

Yeah.

When New York had like the smallest tech ecosystem in the world and was one of what felt like 50 founders building in New York, you know, back 20 years ago. And as a result of sort of being a founder in a tiny market, I got the I knew everybody. Everybody knew everybody. And so I had sort of the benefit of being uh a small fish in a small pond and started angel investing and really over the last 15 years got to sort of simultaneously live the founder journey and built a company and raised a few hundred million dollars and did a lot of things right and almost ran everything off the you know off the dock a bunch of times. uh and also uh had sort of the good fortune of like picking you know investing in New York at the right time and so have ridden that wave started our first fund was an $8.5 million fund we're now investing our ninth fund which is a $200 million fund um but every fund is a little bigger than the one before

that's a good it's a good sign

it's a good run

uh was it ever

how many funds get there you know

uh did you ever think it was it was crazy to set up a a a fund in New York or was it always just like just was so obvious that you were happy that other people

just were kind of uh thought thought you were crazy?

I didn't know any better, right? I mean like I grew up in New York. I thought New York was the center of the entire universe. I still in some way think that that's the case. Uh, and you know, I just I was very lucky because when I when I got sort of the entrepreneurial bug was when the whole world got the entrepreneurial bug. It was like that same minute I moment. I graduated the same year that Mark Zuckerberg did from college. And so, right, it was just like that timing. Perfect timing.

Perfect timing. And all my friends in the past would have reflexively wanted to go and work on Wall Street.

Yep.

But, uh, suddenly something was in the water and people wanted to go work in tech. And so I just got like I just got lucky and and uh you know it seemed obvious and frankly it was obvious and if you just did the obvious thing you did okay.

Talk about uh I want to talk I want to talk about media kind of selfishly because we love talking about media. Uh we

I actually want to learn about your biz. I have questions for you guys on the business model.

Like I've been poking around trying to feel it out. So you ask me questions and I'm going to ask you questions. Well, yeah. I guess I guess just uh can you take can you can you take us like we we try not to do we this is not a not a history show not like a founder journey show but but I would love like

like what was the climate around media digital media what was happening back then uh what was the initial like

yeah because I mean so much of what is informed I feel like we tried to take a lot of the lessons from that era era of media and say like okay what what was the takeaway which was maybe like

you can I I mean the primary takeaway was don't build a media company in our case that is the whole strategy is predicated on getting to a billion dollars of revenue right or or even a billion dollar valuation right and so a lot of what informs this is that like staying niche especially for us because in our business like we're building a media company that we make by hand every single day so we have if we don't stay niche we'll start covering a bunch of topics that aren't interesting to us

and then we won't want to show up every day and do this

you'll do what I and what everybody did.

Okay. Give us the lessons. Wait. Yeah. Give us the prehistory. Give us the climate. And then I I I want as many lessons as possible.

Yeah. So, look, when when I started, there was this idea that sort of like the internet would destroy every traditional business in every space in the entire world. Now, there's a little bit of that like the AI will do that, but like, you know, I'm I'm old. So, this was like the the web will destroy all. And we looked at print magazines and newspapers and the idea was all of them would go away entirely and would be replaced by digital and the entire size of that market and all that ad revenue was going to move online. And so, you know, we were one of the early movers in sort of going and trying to capture that market and we looked at the big men's magazines or the local city guides or whatever it was and tried to go build that online. and at first did it the way that you guys were doing it. It was like very much this labor of love and we didn't have that much access to capital because it wasn't hot hot hot hot yet. And so our first few years we were profitable and stayed small and it was like

it was amazing and we had a a a small community of people that were dieh hard and advertisers who really felt the needle move. And it was it was wonderful. And what happened was the space got attention from big VCs and people wanted to go and sort of like you know get in on the gold rush and a bunch of people raised a bunch of money and I was one of them. And you know the idea was you have to grow into or live into those valuations like you just like you just sort of alluded to. And you know we we went from 1 to to 3 to 7 to 15 like it was growing like you know maybe not like a software company today but it was growing like a software company did back then and we kept raising into it and a few of the like mistakes and by the way they were they were not fatal mistakes but they were they were ultimately the thing that sort of they they they took a lot of the joy out of the business I would say was when we got obsessed with figuring out how do you keep how do you keep growing and how do you keep doubling year out year-over-year and we part of it was we need to grow the advertising base and so we need to find more and more and more users that got away from our core and got away from sort of what we thought we were really great at doing and so the product started to get a little watered down and then on the other side it was commerce how do we start to sell stuff to these guys how do we start to monetize directly today subscriptions are something that I think is an actual viable model again in not not at scale.

Yeah.

Like everyone points to the New York Times and says, "Oh, this can work." Like the New York Times is N of one. That's I don't think you're going to build venture scale businesses doing that, but but there is more willingness to pay for consumers than there was 10 years ago. And so our our thought was they're not going to pay for our content. They're going to pay for products. We bought a sort of, you know, ancillary commerce business and scaled that. And I went out to raise what was our series B, thinking that we could go and get sort of 1 plus 1 equals three. They're going to love our media business, which is like profitable and attracts this audience. They're going to like our commerce business, which has a bigger ceiling and is growing fast. And in fact, I just got like full punch in the face. And it was like 1 plus 1 equals 1 and a half. And these businesses don't necessarily belong together. and media folks understood the media business and commerce folks understood the commerce business and so I had to go through this sort of painful process of taking them apart from one another and then I got the sort of bug for the rollup and well if I'm not going to grow uh vertically maybe I can grow horizontally and what are other like-minded brands and can we sell them together and can we build a tech platform together and bought a bunch of companies and raised a bunch of money and that worked Um but the reality was we were always swimming against the current which was social media and you know media in general fell under the eye of big tech

and you know Meta grew and and obviously you know what Google represented for the ad ecosystem and then as you know Amazon and Apple and Netflix grew and it just was clear that like I wasn't even at the kids table.

I was in like the other room entirely and now look at what's happened with like the top of the market. Look at like Discovery and the like amazing run they had and the fact that like they need to be consolidated. It's just

it's an impossible business and the way to do it right is to do what you love and stay relatively small and build like a real community based thing like you guys are doing. I have like so much respect for this show and like my hope is that you like find other ways to leverage the influence that you have here and don't put a like target on your back where you have to turn this show into a billion dollar company cuz

totally

it just John John's position was always that uh value in in media today is flowing to personalities individuals right even on the subscription side when you're signing up for a subscription Today, the subscriptions that I'm excited to sign up for are when I know the dollars are like flowing to an individual who's going to just obsess over like a Ben Thompson is a classic example, right? Or like an Emily Sunberg in in uh New York, right? Uh the dollars are going to an individual who has like a certain point of view and they're just going to obsess over whatever topics and then the value is going to flow to the platforms, the Spotify, the YouTubes, the metas and like you kind of want to be in either one. The only other category that's emerged as durable to me is the like, you know, truth monopoly, which is like a legacy media brand. There's only maybe 10 of them in the world, the New York Times, Wall Street Journal, things like that where they kind of like part of the value is like you, it's like you own an asset that basically has a license to distribute what is becomes the truth, right? And that takes de 50 years to kind of create.

And even across all those assets, you're talking about tens of billions of dollars, which is a drop in the bucket compared to the independent creator earnings. I think YouTube paid out like $50 billion to creators. And then YouTube itself also makes another $50 billion. And so like all of that is way more money flowing around than like the few publications that stuck around and made the business model work and are doing quite well. But creating these new things in the middle, we call it like Yeah. We want to stay out of that messy middle.

Yeah. And I I you know, I do think the uh

look venture in general like is

I so many companies raise money that should not be raising money. Most companies that raise money should not raising money. Um, venture is a very specific flavor of com of sort of trajectory and u the fact that you know it went from being a sort of cottage industry 15 20 years ago to being just like this mainstream asset class that everybody obsesses over. You know when I graduated from college I did not know what venture capital was. If I graduated from pen today it would be the first second and third thing on my list to do would be to go get into VC or to go get into a startup. like the world has changed and I think it in certain situations enables unbelievable things to be built and in most situations it like destroys companies and

yeah so part of part of it is VCs are trained to hunt the things that are getting attention right and so part of the issue is like you see a media company pop up and it's like this thing is cool I like it it's getting a lot of attention

the sexiest shitty business in the whole world

yeah 100% Yeah, we were even thinking about, you know, thinking about like the right way to be trained on is like Claudebot. Like if you could find a way to put some money into Claudebot, you know, this week that's pretty

because there should be very high leverage in a business that builds around that. Exactly.

Uh the Yeah. The the interesting thing is uh you know I I go back to what is the purpose of of venture capital? You go back to like why do we call it Silicon Valley? Well, because they were setting up fabs. They were setting up it was a high capex high R&D environment. Then with the cloud platforms and AWS comes out, it becomes cheaper to start a company, but you're still you're still putting up money for a bunch of engineers who are going to build a piece of software that then eventually starts growing and the LTV comes in year five or six and you get paid back. Um, but we have started to flirt with well like maybe let's put venture dollars into this thing that really doesn't have any capex or any R&D spend, but a lot of go to market spend that seems to pay back relatively quickly. And that seems to be a pattern that repeats and something you need to watch out for in any category is where are the what is the purpose of venture capital in this thing even if it's growing like other things. Is that how you see it? What what industries are you are you seeing? Okay, this is still a good industry for venture capital.

Yeah. Well, and one of the sort of weird perversions of the industry right now is there is more money than there's ever been in venture and there's obviously a relatively small number of incredibly sort of deep pocketed funds that need to deploy huge amounts of money.

Yeah.

And into a generation of companies that theoretically need less than ever before.

Yeah. And so you have this, you know, somewhat unhealthy dynamic. I do I think that's what's sort of creating this idea of like sort of uh picking a winner before a winner has actually emerged, just like plow in on the thing and even if it's a million of AR, but it's raised 300 million bucks. It's like stay out of the category like this is the like like these are the guys. Um and and I you know the big firms can do that. I can't play that game. I don't really want to play that game. it's not like how we're set up. Um, you know, the one thing even as our funds have grown like we are purists. We are only early stage. We're preede and seed only. And I think like when you and and we're a team of generalists and I think when that's the case like we have to be really careful that we don't get sucked into being heat seeeking and just like always going for the shiny object in a market like this where prices are crazy and where you like get pulled into competing with mega funds that have like very different incentives. Um, I also think you don't want to find yourself as like a value seeeking fund at a time in the market like this for for obvious reasons and like the history of value seeeking adventure is not great.

Well, the other thing the other thing that that strangely I mean one of the dynamics right now is you have

you know mega platform VCs that don't care about pricing as much and they just want to get enough dollars in. But then you also have some like emerging managers that are just are in the heat chasing business and so they don't really care about pricing as much either because they're like we'll we'll get in at 60. We know this is going to get marked up

and we just need to prove to our LPs that we can get in the good names. Yeah. And we'll

a shorter term like sort of fundraising mentality.

Yeah. It's like we're just we're optimizing to raise like fund too versus

versus like actual you know returns.

Yeah. How do you

Well, the hard thing is like having been in this business for a long time and like living through cycles, math matters. Like if you come into stuff way overpriced, like it's really hard to build a business from day one and have it exit for a billion dollars of cash.

Yeah.

Like actually seeing that arc is incredibly difficult. And in today's market, there's people who are raising a billion dollars who are still like figuring out what the name of the company's going to be. And you know, it's hard to see that math working. At the same time, the argument is if you look out on the horizon 10 years from now, outcomes are going to be that much bigger. We're at a moment of change from a technology perspective where there's going to be more generationally important companies. And the idea, you know, a decade ago was, can you find a billion-dollar company or a10 billion company? And now this is can I find a trillion dollar company. Um,

yeah. How have you pro? Yeah. Like when I when I look back at previous hype cycles that I've been like during my career, you have maybe uh the DTOC era, that's where I where where I got my start. When you look at that hype cycle, there was not there was it was almost like an ar it was almost like an ads arbitrage. It was like Meta was an amazing ads platform and if you had a great product that was positioned well against incumbents, you could just scale so quickly. And so the opportunity was really like, hey, we're making better products here, but really this is like a advertising arbitrage. And there were some great businesses that were created from that. And then fintech,

there's also branding firm arbitrage against VCs. You go to a branding firm, give them 100K, and then go raise out $5 million a year a lot. But but

I've been the victim of that of that. Thank you.

The the people that work at those branding firms do amazing work. So I don't want to call them out.

Shout out to my boy EMTT Sean.

That was one of But um no but going going forward like you look at kind of fintech

fintech was there there was some uh uh it was it was Dodd DoddFrank right there was like the the change some some regulatory component but a lot of it was like just better infrastructure that just made it easier

but that just meant way more competition so it wasn't like this fundamental technology shift that uh that just changed everything in the way that we're experiencing right now. And so I feel like you kind of have to unlearn some of the lessons from that because we now do have a real technology shift. So you are going to just get you know far greater value creation a lot faster than maybe this like you know temporary ads arbitrage or just like kind of the infrastructure.

Yeah. And by the way one of the interesting trends on the back of that is this move to sort of VCs hunting younger and younger founders. I think you're seeing, you know, there was a movement over time where you were getting this big premium for second and third time founders and people who had sort of unfair advantage in a category. And now I think there is this idea that you have to unlearn so much if you have not grown up natively with AI that maybe you're better off not knowing anything about an industry

but moving 10,000 times faster and you and and sort of just like living natively in all the new tools and thinking that the way that somebody like me works is totally like like I'm just like a dinosaur.

Yeah. I've actually so so I've found I found myself giving a a a buddy of mine is is kind of like going through the idea maze and a couple of the ideas that he mentioned. I was like this seems like a great idea but you have to understand like think about this idea in the context of having four YC companies going after this opportunity and do you and and it's like dude you're gonna have a family soon like like you're not like 20 anymore. Do you want to compete against like four teams of 20 year olds that are not going to sleep? Like this is and and yeah, they they have less experience and maybe they haven't raised money before, but it's going to be you're not I don't feel confident that you're going to be able to outwork them even though you're really hard worker just because you have more stuff.

We see this in like company updates. So we, you know, we're we're like actively doing deals in new companies and you get that like, you know, update 3 weeks after you invest, like the monthly update cadence. And we can see the teams with these younger founders and just like the amount of product that they ship and the learnings that they have and the speed that they're hiring, like it's palpable. And sometimes we invest in a team, great experience, they've got all the sort of credibility and we get the first update and we're like like they think it's 2002. Like they just don't get it. You need to move faster. Like the market is crazy right now.

Yeah.

Yeah.

Uh what what are you how big is the team that you work with? How are you thinking about mentoring building new great investors and uh counseling investors about best practices or like strategies for like not not breaking the rules that you just discussed?

Yeah, it's a this is like you know all all I think about now. Admittedly, I think this is a young person's business uh and and an increasingly young person's business. And I think that the investor track follows the operator track to some degree, which is you want investors who sort of understand this this new gear. And so, um, you know, I'm 44. Um, I'm going to be, you know, soon enough I'm gonna be the oldest person on this team. uh and which which is funny uh you know

to just like think about and we are actively you know continuing to hire and and sort of mentor and bring up young talent. Um I think that you can be extraordinary in this business without having 25 years of experience. I think it's nice to have some voices around the table who have been through cycles and have some of that wisdom on just like not getting too caught up in in the in the craziness. Um but uh realistically we are still continuing to like obsess about bringing in interesting young diverse perspectives, people that natively like are growing up with a technology that feels novel to people like me. And um I think that that's going to be the continued goal here. And then it's like up or out really. This is not a place this is not a business to sort of hang out in. And I I don't have the patience and I don't think people in this business should have the patience to wait 10 years to see what performance looks like. I think you have to sort of decide early if you feel like people have the right instincts, if they're able to identify talent, um with their gut, um if they're able to sort of win people over and like I think you have to I think you have to like make bets the same way you do in like professional sports. How do you think about that uh that patience versus, you know, moving quickly and and not waiting to measure results? I'm I'm thinking specifically about uh the the pressure that can occur a bunch of you know new VCs who are at a fund and they all want to get points on the board and that maybe leads to more aggressive deal making that becomes sort of like a rat race between them and they wind up making bad decisions versus saying look you will be judged on a short term but we're going to give you the space to not swing at every pitch. Um, how do you think about that that balancing act?

Well, I think first of all, it's like this comes down to some of the actual like mechanisms for how you manage people and just stylistically like how much communication you have, how much uh like, you know, of a lone walt culture versus a team-based culture. You know, here we're very collaborative. We have a bunch of people working on everything that we're doing. Obviously, at the end of the day, like a deal gets done because somebody brings that over the line with with like very personal conviction, but uh I think our culture is set up to be able to assess people in in sort of softer areas versus just those quick marks. Also, you know, you have to know what you're underwriting. So, sometimes we do a deal and explicitly we go, "This one's going to get out of the gates really fast. This is going to get quick marks. We understand it."

Mhm. But by the way, that doesn't necessarily mean that it's going to have great outcomes. We've seen a bunch of our quick marks over the years end up as just big black eyes. And so, um, there's other deals where we go, we know this is going to be slow. It's okay that it's going to be slow. There's a real moat here if this works or there's a real technological sort of challenge that they're going to need to overcome, but if it happens, this is going to be a really valuable business. um you know know what you're getting into and and be explicit about it so that if something is slow but you signed up for slow you're not like dinging somebody.

Um and then look I think at the end of the day like a VC fund is as good as the their sort of reputation and so feeling out how our founders feel about like working with folks seeing people's win rates and seeing the way that people sort of you know carry themselves. A lot of this is art and frankly like early stage investing is a lot of art too. So this is feel and you know maybe I'm making bad calls on on talent but um we're we're doing it I think very deliberately.

Cool.

Well, put your talent on TBPN.

I have one more

and we'll uh No,

I got I got people.

No, no. I I had a question too. I wanted to uh I wanted to get your take on uh AI focused rollups given that you rolled up. I

was going to ask something very similar.

What was your question? I was going to ask if you had to uh if you had to pick a different asset class to invest. You mentioned art. There's some art behind you uh between like public markets, hedge fund, private equity, take privates, turnarounds, rollups, growth, growth equity, bigger scale stuff. Like is there anything else where you're like ah like that looks fun, but I'm not going to do it. Like what else what else intrigues you about different potential markets? We've seen a lot of VCs like

Okay, two wildly different questions. Sure. So, so let's I want to first take on the AI roll-ups and then other asset classes.

Well, I can actually I'll connect the two because I actually do think sort of rollups

scratch an itch for me as a former operator and I've done it like I I do like the sort of

like that that that mental exercise of like putting things together and figuring out the personalities and the products.

Um I think that it is right. I I can understand all the logical reasons for why it works and why like this is all going to be this is going to end well. I can't help but think a little of the gold rush right now is a place to park aum.

Yeah. Um, and I I don't like, you know, I'm not trying to like throw stones, but uh it it's, you know, it's a real easy place to just go raise money if you're a fund that has access to a bunch of money

and I'm sure and somewhat somewhat like limited Yeah. limited some fees.

Yeah. Well, yeah, but but uh

sometimes not not always, but yeah, I mean the allure of getting venture fees on, you know, just an asset that already has cash flow is pretty safe. like not to mention that but the the entrepreneurs if they're like I'm basically running a PE fund but I only had to take 30% dilution I own you know depends on depends on the individual uh depends on the individual company how given that you've bought you've bought a number of businesses like how limited do you think is the downside on some of these rollups like is there a way for people to buy companies and just botch the integration and the actual like AI enablement so bad that the company goes from being worth $25 million doing some niche thing in

1 plus one is.5.

Yeah. Yeah. Yeah. Or to to just like

one plus one could equal zero plenty of times. And frankly, it can equal less than zero because I mean, you know, look, it depends what you're buying and it depends what the space is. The more reliant you are on a personality in these rollups, I think the greater the risk. If this is like a single proprietor who maintains all these really tight relationships and the whole thing rests with them and if you don't keep them happy, you risk like the whole thing, you know, burning down. That scares me. I do think there's probably places where you can go and and throw stuff together. The reality is there's a lot of money in PE that knows how to roll stuff up.

I'm saying, yeah, that venture is going to do this better than the folks that have done this.

Yeah. The one thing you can imagine venture doing better, venture doing better is the technology, but there's also the financial engineering and actually buying

just companies and and you know, we we have a friend who who raised a PE fund, you know, and and is yet to he's getting close to doing his first deal, but the number of amazing opportunities that look amazing that he's ultimately turned down to finally get to the point where he's doing the first deal and you realize like somebody who's never bought acquired a company before coming in and just like looking at everything and everything looks great. If you just have like a a capital hammer and you just want to hit it with with a bunch of uh hit the asset with a bunch of AI, I do I do worry that some of these

and how long are these advantages going to be around for? I mean, I think there's a version of, you know, 15 years ago it's like we understand the internet and nobody else does and then it was, you know, like we're going to go to the cloud first or we're going to do mobile. Like yes, AI is different, but like I can tell you the traditional PE funds are not going to like totally fall asleep and like decide not to like embrace any new technology and in 15 years they're still going to be sitting on the wrong side of history. Like there might be a window, but it's not going to be a big window.

Yeah. Somebody should ask Orlando Bravo if he's heard of AI.

Have you ever heard?

He's like, never heard of that.

Um,

no. People are aware.

Will be intense. This is great. Thank you so much for taking the time.

Great to hang out. I wish we had more time. Thank you. Thank you for hiring. Thank you for hiring and training up Dylan.

Oh, yeah.

Our president back in the day.

Big fan of yours and uh we're lucky to have him. So, come come back on again soon.

Yeah,

absolutely.

We'll be in New York. We'll be in at the New York Stock Exchange.

Come down to the New York Stock Exchange. Hang out with us. That'd be fun.

Join us there

anytime. And I'm I'm going to be out your way later in the month. So, I'll be

amazing. Amazing.

Great to have Well, have a great rest of your day. We'll talk to you soon.

Goodbye.