Tucker Brown launches Compound Creative Holdings to acquire and scale top creator businesses with permanent capital

Speaker 1: Wow. We don't idea what that means, but I love SK Hynix. Yeah. We don't know how to make I think that ad has, like, 80,000,000 views. Wow.

Speaker 2: For good reason. It's a good ad. Makes me want HBM. Well, our next guest is live in the TVP at Ultradome with us. We have Tucker Brown from Compound Creative Holdings. He's the managing partner, friend of Packy McCormick, and we're very excited to have him here on the show. We're back. We're back. This is quite a set. Yes. Welcome. How was the rest of your trip to France?

Speaker 7: France was hot. Okay. It was Typical. It was productive though. I think, you know, you guys probably saw the energy that there was Yeah. In in Were you doing deals? I was trying to do deals. Okay. But when you do the deal, are you a back of the envelope guy or a napkin math guy? Which one are you pulling out? You gotta kinda combine, I guess, both. Both.

Speaker 2: Oh, I've gotta Is that just because, like, you're doing a DCF and it gets so big, you might have spread in comps on different tabs? It'd be I mean, yes, I'm sure you understand, you know, the the category that we're in. Yeah.

Speaker 7: You gotta be creative with the deals. Yeah. So Makes sense. Okay. So take us back. What was your first can? What was my first can? Yeah. When when did you go for the first It was this year. Okay. So I've been to film festival for a waited until it was, like, actually gonna be productive for you. Yeah. Exactly. I'm gonna make it worth the, you know, the money you gotta spend to get there. But but yeah. Take us back early in your career. How'd you get here? So I've been at CAA for fifteen years. You know, the talent agency that represents biggest entertainers in the world, athletes, and all that. I was at Evolution Mhmm. Which is our investment bank Mhmm. Working on large scale m and a, capital raising transactions across, you know, different categories. So that for a long time. I like the applause on that. For capital raising. Yes. For yes. Worked with pro sports teams, worked with entertainment companies, TV, you know, TV studios Yeah. Production

Speaker 1: companies. When does that then get get tapped in for a transaction? Like So like Yeah. Like I can imagine if a if a sports team is gonna transact or or an emerging league or

Speaker 7: an athlete has a business that they wanna sell, like, am I am I in the right area? Yeah. It sort of it depends. Right? I mean, we're we don't work on tiny deals. We like to focus on larger scale transactions. So in sports, it's probably gonna be something 50,000,000 plus. Mhmm. So if you're putting a a check into a team and you got some money to spend and wanna buy a piece of a sports team, we'll facilitate that transaction. Okay. We'll work on, you know, team sales too. So entire teams that trade. One of the earliest deals that we did was the sale of the Sacramento Kings Civic Runway in 2011. How much That team's traded, by way, for $500,000,000. Yeah. So Good. Good much does that organization look like a standard investment bank? A lot like an like, I mean, it that's the service that we provide. I think the difference is we sit within CAA. So we have the strategic connectivity, the knowledge that might be a little different than other investment banks have.

Speaker 2: And and probably less

Speaker 7: public markets coverage? No Yeah. We don't have capital markets Okay. Yeah. Capabilities. We don't do public markets. We're focused on M and A. Yeah. Generally. Got it. Okay. So probably a little smaller. Our team's only about 20 people. Mhmm. So kind of 50 to 500,000,000 is our sweet spot. Sports is gonna be a lot larger than that. But I'd say for other, you know, deals, it's really in that kind of range. Okay. So, you know, I was there for a long time and it came to, you know, how I've gotten to compound and what we just launched. Yeah. I started working around creator deals a couple of years ago. Kind of just by chance, you stumble across deals and companies that are interesting, that make sense, you want to lean in and figure something out. And that that was the case with Dude Perfect Yeah. You know, a creator business that been scaling really nicely for a long time built on YouTube. Probably twenty years in the past. Yeah. Sixteen years of the time. Sixteen years of the time. Yes. Wow. So they were ancient in YouTube Yeah. You know, lands. But but consistent in their performance the whole time. Like I think they were growing at a 50% CAGR for that entire time. And and no matter when you dip a lot of people dip in and out of Dude Perfect content. Of course, you go through some binge watching, you watch a bunch of the archive, then you come back years later and you see that, okay, everything's evolved and all the great pieces are still the same, but they've added on a bunch more capability. Yeah. And their audience, to me, they they they cook sort of eight to 16 year old boys, I'd say, the core of their audience, but they also grew up with them. So these guys are they're 38 now. They have a big audience that, you know Oh, wow. Yeah. People in their thirties that do like watching the content. That's great. I didn't know much about it other than what I'd seen on YouTube. Yeah. They built a big live entertainment business. They go on tour. They sell at NBA style, you know, size arenas. Yeah.

Speaker 2: So what's unique about that deal? Because they're they they have multiple revenue streams at this point. They're doing advertisements, partnerships. They only have a partnership with NERF and, like, a bunch of other deals in the works, tours. And then they were also talking about building, like, a Disneyland,

Speaker 7: basically. Do Perfect World. Yes. Do Perfect World. Incredible. There was a big mock up of that when I first went to visit their office in Texas. Yeah. In Kansas You

Speaker 1: know, amusement park. To make a pilgrimage. So

Speaker 7: yeah. Listen. They wanted to build and we've heard this a lot from creators, but, you know, kind of a next generation Disney type business Yeah. For a specific audience around, you know, sports, kids, comedy, family. Mhmm. Very family friendly business. And yeah. So I I I sort of got to know the guys Mhmm. Saw their business, diversified across a bunch of different categories. Yeah. It wasn't just a YouTube business. It was a real media company. Yeah. So we took that to market and executed a pretty large scale private equity transaction. It it wasn't easy. I was naive in the sense that I thought it would be because the financial profile was so attractive. Why was it legible to It it just it's it's a new category, I think, generally for transacting. That's opportunity that I see at this point in time. You don't have decades of, like, case studies and Harvard Business. There are no there isn't a single comp or press, and I looked at media company comps for it, I guess. And you're dealing with talent, you're dealing with key man risk in a way that's sort of unnerving to some private equity investors. Platform risk. Risk. I mean, with them, it was a little bit less contingent on the platform itself, which was an advantage. Mhmm. You know, their YouTube revenue was a small percentage of the overall business at that point in time. But, sure, you know, investors get spooked by algorithms, what can happen if it goes up or down or changes Yep. And how that impacts the business. So it took, you know, to go and by the way, have find the right partner too. For, you know, for Talend and for their business, they built it over sixteen years. Mhmm. They owned it outright. They cared about what, you know, what the future looked like with their partners. So finding the right, not just the right deal, but the right people behind the deal to transact with, I'd say in this category and the creator world is more important than in others.

Speaker 1: And so you came out of that feeling like you had a greater sort of understanding of these businesses as well as like an appreciation for their potential and their quirks,

Speaker 7: and so you decided to become the buyer. Is that the right way to think about I I There were many times during that process, and there were a couple of those I did after where I was yeah, I just wish I was the buyer in that situation. I feel like I was doing the work to structure the deals that made sense. I understood, you know, the talent behind the deals in a way that maybe others buyers couldn't, and I came from the world of the agency at CAA where we had a whole suite of services and things we could provide for these creators in a way that, you know, a typical buyer wouldn't be able to do. Mhmm. So we pretty quickly started to think about what we could put together to basically be that unique buyer that we didn't see in the marketplace. Or we didn't see many of, didn't see really at scale, didn't see sophistication from, and started to iterate, you know, what that would look like and how it would come together, and do we do it through the agency proper, do we set up something independently, which is what we did, because I think it's important to be independent in the way that it's structured. And raised, you know, a good amount of money, and looking to do a lot of deals in the category and really become the the first of its kind, you know, kind of preeminent buyer in in this category. So, yeah, excited. For

Speaker 2: creators or media businesses that wind up with the Disney style business, the flywheel of multiple properties, multiple revenue streams, do you find that those businesses are sort of organically grown by garden, like a garden, or built brick by brick? Like, how often do creators have the idea Yeah. Of where they wanna go, and they execute one step at a time. Because I always think of that Disney flywheel, and, it's a beautiful napkin sketch. Yeah. And it's so cool, and you understand how the business works. But when he drew that, it was like two years before he died. Like, was very much a reflection on a life's work. Yeah.

Speaker 7: Listen. The best creators really are creative geniuses, but there's not always cohesion with how they think about the future and what they're doing. So oftentimes, I may see the whiteboard over there in the studio. You walk into their offices the same way, you know, I walked into Dude Perfect's office in Texas, and you see a whiteboard scattered with ideas. And it's all brilliant. It's not necessarily put together and structured in a way that provides, again, a lot of cohesion, but there's a lot of opportunity that they see. And I think first and foremost, what they've all done successfully is they focus on building a pretty rapid audience and building engagement with that audience. And then once you have that, and you have that captive audience, it really expands and opens up the world of opportunity beyond whatever that core product or offering might be. So for them, it was trick shots on YouTube, and then, you know, you build an audience there, kids, family comedy, and you can extend that into live events, into products, into things they probably, you know, certainly in 2009 when they started, didn't think they'd have a line of products in Walmart Yeah. Necessarily. Right? But then you start to dream bigger once you realize that what you're doing is actually working and resonating with the audience. Yeah.

Speaker 2: So the fund that you've built, how permanent is the capital? Are you thinking about a certain fund life cycle? Is there a world where maybe not today, but in ten years, we are talking about capital markets, public markets, creators going public. There's been rumors about MrBeast. Yes. And I could see that happening, but that might be, like, a exception that proves the rule. But is there a world where in a decade we're looking at, like, yeah, like, the top 20 YouTubers and podcasts are public? Yeah.

Speaker 7: Certainly possible. I mean, it's the, you know, it's the fastest growing segment of entertainment. People want exposure to that. Yeah. It's going to start with private capital. I think it will probably move into the public markets. Mhmm. So, yeah, I think we're moving in that direction. For us, I think permanent capital is an important part of our strategy. We want to we don't want to be forced into an unnatural life cycle where we're forced to sell quickly. Creators don't

Speaker 1: and, you know, feedback is Yeah, they're like, hey, you're doing your life's work, but also we're going to try to just change up who you're partnered with in a decade. Whereas, like, a CPG business or a software company, like, the management team might be fully turned over over the fun life cycle. We try to again, in structuring this, we try to solve for what we heard

Speaker 7: was important to creators in the transactions I've been around. Yeah. And some permanence of the partnership or permanent capital is part of it. You know, letting creativity sit and remain with the creators even in a controlled transaction, so there's no interference in the creativity of That's what they've really important even if you're selling equity control. Yeah.

Speaker 1: Yeah, to me, I look at it and I can see over time this just being a more and more and more important part of CAA strategy because the challenge right now is you have creators. Historically, there was maybe I don't I don't you know, you you you'll know much more about the history, but my feeling is that historically, there was like maybe 500 stars that matter. Yeah. And then now in media, there's like 50,000 stars that matter across every single vertical. It's you you it was it was maybe easier to run a business when you had, you know, you could just focus on like a smaller number of like really really big stars who were running their own, you know, basically, they they had their own individual businesses. But when you have 50,000 creators and all these sub niches, you can't like, it seems like there's probably a limit. Like, you can't scale the CAA team ten, twenty x and expect to be running the same You agents. Need to Yeah, exactly. Cover it all. And so as a as a sort of new strategy saying like, hey, we're gonna try to service as much of that market as we can, but we're also gonna try to find the best talent and businesses across all these different categories, and then be a long term partner to those Mhmm. And actually participate in their overall business.

Speaker 7: Yeah. You go deep with the ones you believe matter most and are positioned to scale the most. Yeah. Right? So we're not, you know, trying to transact with hundreds or thousands of creators. It really is to pick the businesses we believe in and categories that we think are exciting and scalable and go deep with them across the board. On the capital side of things, then, you know, we're working with the agents. How do you think about stages in a creator's

Speaker 1: life cycle? There's people that are gonna be incredibly talented from a just pure talent standpoint. Right? There's people out there that are like, not even good at making videos, but have incredibly engaging content because they're so good. And then usually they graduate into having, you know, better and better teams and eventually maybe they get into products. But like, how do you look at the different stages? What's what's too early? Yeah. When are you seeing a an individual who's, like, showing all the potential but is too early for maybe a transaction?

Speaker 7: Yeah. We don't like to be hyper prescriptive with with how we look at it. I mean, are certain things we do look for to assess whether it's the right stage for us to get involved. If it's an individual without a business, it's tough for us. Mean, there's a lot of work Sure. To do probably to pull it together and make it transactable. So we look for it to be an actual business that's been built and scaled to some capacity.

Speaker 1: Right now Is that like multiple

Speaker 7: revenue lines, not dependent entirely on platform revenue? Yeah. Like those kind of Maybe an operator and a To verify to some extent. Maybe an operator, not essential. Mean, I was no operator do perfect when we did that deal. Wow. Wait. They do everything themselves? I mean, there was, I think, 20 employees. The oldest outside of them was 24. Yeah. But they didn't have, like, a business guy who would be, like, the aggled business guy. I love that. That's awesome. Yeah. It's a it's a different business. Yeah. It's Yeah. 80 employees now. Yeah. Yeah. Of course. So you look for some sense of a business, achieve diversification in some it doesn't need to be massive, but yeah Yeah. Some off platform monetization is, you know, is attractive. And then, yeah, scale of revenue, profitability. We really only like businesses that are profitable and that's it's not I don't want say it's not hard to do, but in in this category it is. You're used to seeing margins that are not common in traditional media. Yeah. Right? 50% plus margins Sure. For a creator business is actually relatively, it's relatively standard. So Sure. Yeah, look for for profitability growth and again, the categories that we think are positioned scale Yeah. And where we can be valuable and add additional value. So Yeah. You know, bring service. When you're when you're underwriting a deal, are

Speaker 1: like, how do you think about it? Like, how do you how do you think about a business where you know there's a ceiling? Like and and I imagine there's certain situations where you're totally because, like, there's certain creators, I would say that, we've always said that if you if you asked us to make content for a 100,000,000 people, we would just wouldn't enjoy doing it because we'd be covering topics that are not interesting, right, to to us at least. Sure. And there's, I think, a lot of creator businesses where there's sort of like some TAM on from a from an audience standpoint in the category. Million dollar business today. I think that you can get to 40 and and that's gonna be enough for it to be a home run for you and us. Like, is that a conversation that you have or is it always like Yeah. I need to see the path to

Speaker 7: super stardom and, you know, 9 figures of revenue? I think, listen, there's a difference between how we might underwrite the deal and think about where there's a ceiling and then how you communicate that to a creator. If you're trying to justify, you know, value, maybe that's part of the conversation, but really they you know, the best creators won't really cap their potential. Yeah. So, you know, even if it's a $10,000,000 business today, they probably think this is a billion dollar business if we do it right. Yeah. If we sort of serve the audience in the way that we can. Yeah. And so honestly, any of the businesses we look to transact with now probably we ourselves believe could be billion dollar plus businesses. And if we don't believe that, we're probably not betting in the right categories with the right creators. It's early to maybe make that kind of call, you know, in this space, but to the earlier comment about public markets, you know, potential, I think we'll see many of these businesses scale to that billion plus dollar mark potentially go public. And, yeah, it's it's just there's a lot I think that's left to Would it end up is is a more likely

Speaker 1: or or one of the more likely paths where you end up with effectively an index of a bunch of top creators? Because to me, like, creator business is like, I don't know that many creators even like look at the most sophisticated operations like a MrBeast. Right? You have these like 9 figure Amazon deals. You have these consumer packaged goods businesses. You have, you know, royalty streams effectively. But him running him running his business being like, I gotta make sure that next quarter's good, otherwise, we're gonna nuke. Like, that feels challenging, whereas if you took a basket of of, you know, 200 top creators that that were were were trading,

Speaker 2: you could see that being, like, stable and growing, you know, just You're looking for sort of, like, a manosphere ETF for you. So you can have exposure to world Vabicular

Speaker 1: entertain in one ticker.

Speaker 7: I do listen. That's that's partially what we're trying to do. Right? I saw the difficulty from institutional capital partners to transact with single creator business or single assets. Yeah. They're all eager to get into the category. They want money to work. They talk about it all the time. You bring them a deal that's attractive and they're like, ah, we can't we can't do this. There's too much risk.

Speaker 2: If you bring a basket though, right, I think it's a lot more attractive. And in some ways, dude, perfect is a little bit of a basket. There's a number of on camera talent. It's not single person, single name, and same thing with

Speaker 7: with Midas Touch. They have a number of of products in their portfolio and number of hosts and whatnot. Yeah. The more the more layers to diversification you can achieve Of course. More traffic probably easier. Right? So the business itself Yeah. The talent maybe that's involved Yep. Even for us, the portfolio that we build. Yep.

Speaker 1: How are you how are you building out your pipeline of opportunities? Are you going I'm at, you know, you're in Cannes, you're meeting a bunch of creators, but I imagine you're like probably I'd like the beauty of creator businesses is they're out in the open. Yeah. Like an invisible creator business is not one. Like some of the best deals and, you know, traditional private equity are like, you would have to like live in the town and know that you know, a certain business was was printing.

Speaker 7: Yeah. They're out in the open, but some of the flashiest ones don't always have the numbers you might expect that they would. Some that you don't think about as much, a little quieter, building actually really significant businesses in a different way. So you don't always know everything even if it is quite visible. You know, I've had the benefit of living in the category for a little while, so I've seen a lot and have a good sense of what, you know, the immediate attracted targets might be. You know, we again have the relationship with the agency at CA. We've got a Yeah. I think three zero eight creator clients. Not all of those would make sense for us, but a lot of them are growing and are looking to potentially think about capital partners. So there's a built in pipeline there. And, you know, we're open for business. I've gotten a lot of great inbound opportunities that have come our way since we announced. That's great. So, yeah, it's there's a lot a lot of activity and a lot I think for us to do. How much time are you going to be spending in New York versus LA? LA. Yeah. So I'm I've been back and forth, over the last decade plus quite a bit. I spend the winter out here usually Mhmm. Smart to do. If you go to New York, it's not always the the most fun. So I'm usually here about twice a month. We'll have a headquarters probably in both, you know, both locations. Yeah. And then, you know, creators are kind of everywhere too. So New York and LA have been the hubs of entertainment. London a bit internationally. But we see that much more dispersed with creators that are all over the place. So Yeah.

Speaker 1: How how has the influencer creator industry evolved in China? Is it similar, diff how does it how is it similar versus how does it differ from The US? Yeah. Because, like, they were big and early in like live shopping, for example.

Speaker 7: Yeah. I mean, it's you have a sort of massive, you know, massive population. All the numbers you see with businesses over there are pretty crazy from an audience perspective. It's listen, transacting

Speaker 1: with China Yeah. Don't I I can't imagine you could do deals there, but I'm saying, like, is is is when you when you look at that market, is there anything that you see that allows you to feel like you're seeing into the future?

Speaker 7: It's tricky. Right? Because if you do take that as a learning and you try to apply it to a different territory, it probably won't necessarily translate in the same way. Yeah.

Speaker 1: Yeah. Like, live shopping has taken off in The US, but it's a lot of, like, a functionally gambling, not like buying oranges. Yeah. Oh. Like a lot of these, like, live shopping platforms are, like, people live breaking open packs of cards. Yeah. Unboxings and stuff. Not like they're, like, shopping for apparel in the same way that in China, like, lot of these live shopping platforms, they would start with like, you could literally go and buy a new kiwis and you can see the kiwis and then you're just hitting like Apparently, China doesn't have a Joe Rogan. Like, they don't have a really dominant

Speaker 2: just public commentator who just gives his random opinions about everything. Well, I think somebody like Joe Rogan that's commenting on that many things, like It's a little risky politically, actually. So How that Yeah. What about Hollywood? What's even your update on the creator economy's, interaction with Hollywood post the trifecta of creator led movies? So Obsession, Backrooms, Iron Lung Yeah. Three born on YouTube crossed over. This was predicted like a decade ago. It's finally here. Is it it feels like very high status, but maybe not actually moving the needle for some businesses. Not something reliable like something low status like ads and merch, which might actually drive a business forward.

Speaker 7: Tough to yeah. Again, tough to tough to rely on that and bet on that as a business model in and of itself. I think it's a component that's pretty interesting. For creator businesses, I mean, it was a big kind of narrative early podcasting, using podcasts as a cheap sort of IP development mechanism for Yeah. Long form You know, same thing with YouTube. Right? A cheaper way to test and see if you've got an audience Yeah. And then use that to sort of monetize in long form. So it's a it's a great trend. Think that we're seeing more and more of that will continue. Yeah. We were talking to Alex Ramosie about this yesterday, and it was it was interesting thinking about, like, he was saying that he just doesn't reach

Speaker 2: the same audience as a Ramsey. As a Dave Ramsey who who just has syndication on so many radio shows. And if he were able to crack into that, it's not that that deal would make him that much money. It's that it would expose his overall portfolio, his overall business to a new tranche of clients and potential, like, customers, but also audience members. And so there's an interesting world where you could underwrite the, you know, high risk. Maybe this person does the next obsession. Or you could say, this person's on a track where they are going to crack distribution on radio or TV at some point, and they're gonna be on that channel, and that's gonna be a halo for the overall business. But, obviously, to predict.

Speaker 7: Yeah. And so that that's why it's hard to Yeah. Underwrite against that. Right? I mean, it's a that moonshot outcome could drive upside Yeah. But probably not gonna be a a base case underwriting situation. That makes sense. What about Substack

Speaker 1: and potential new platforms?

Speaker 7: Substack, you know, you've seen some really nice businesses built and monetized on that platform. Mhmm. So in the same way that YouTube can be a core that you build off of in other areas, you could YouTube build into Sub The same thing I think we're seeing migration from Sub Sack into video and other, you know, other platforms. So it's one of the the kind of top platforms that we're actually looking at to evaluate if there are things for us to to invest in there, and again, migrate that audience into other mediums. So, yeah, there's a there's a lot, you know, to do in that category. Yeah. I was thinking, like, why is there no

Speaker 1: substack for video? You know, like like a platform that was less algorithmic. And, of course, the substack for video will almost certainly be substack. Yeah. Yeah. Probably. They just gotta get the right people on there or something. It's hard because, like, as soon as you make a video, you're like, well, this wants to be replicated everywhere on the Internet. So let me throw it up on every channel. Timeline to first deal announcement. Any prediction? Are you gonna hold me to it? Don't that's it's always hard to Are we gonna I mean, but but but we know we we have, you know, friends with funds that have a unique strategy, and sometimes they don't do a deal for eighteen months after closing a fund. So, like

Speaker 7: I think we we benefit from a bit of a running start because we've been in conversation with creators. We've had this, you know, in the works for a little while. Sure. We have relationships that are that are warm. So, you know, we're we're looking to move fast, but also want to be thoughtful. We know those those first couple deals are gonna be really important for setting us up for longer term success. Yeah. Love to think we get something done by the end of this calendar year. Oh, cool. These deals, at least the ones I've been around historically, they do take time. Yeah. There's a relationship element to it that involves a real time commitment. You want to make sure it's, again, obviously structured the right way. Yeah. So we're ready to go. Just want to be thoughtful about making sure that we're picking the right partners and setting up the right deal for ourselves. Makes sense. Amazing. Let's hit the gong

Speaker 1: for the fund itself. That's it. No. I want Tucker to hit it. Look at this guy. He's He's a a gong. He's a gong. Can have at it as hard as you want. It's warmed up. Warmed up.

Speaker 2: Hit it. Break it. Break it. There we go. That's it. Thank you for coming on the show. Thanks for coming on down. We can wrap the show there. Can't wait to do this with your first deal. Yeah. We're excited for that. Leave us five stars on Apple Podcasts and Spotify. Sign up for our newsletter, tbpn.com,

Speaker 1: and we'll see you Following Flashback. Tomorrow. Goodbye. Cheers. Love you.