Slow Upload
HoldOn, A HoldCo?
Last fall, Axios reported that Mr. Beast was seeking to raise ~$150 million at a ~$1.5 billion valuation. The investment encompassed his overall portfolio, which includes several businesses across consumer products, restaurants, and merchandise in addition to his YouTube channels. This was one of the first public examples of a creator holding company, or “HoldCo.”
Put simply, a holding company is an entity that owns a controlling interest in other companies. While it may oversee certain management decisions, the holding company generally leaves day-to-day operations to its subsidiaries. HoldCos can be used across companies of all sizes - from large enterprises with multiple business units, like Alphabet, to solo-entrepreneurs.
For creators like Mr. Beast, a holding company presents an elegant alternative to owning one business with several, different divisions. While all of his subsidiaries benefit from the Beast brand and distribution, they have separate P&Ls and may have different teams, shareholders, or even long-term visions or risk tolerances. For multihyphenates, holding companies may look like venture studios or incubators; they have ownership interests in multiple projects or are exposed to various income generating efforts (e.g., consulting, writing, investing).
So, in the context of fundraising, what’s the benefit of capital at a holding company level? For those that are most generative, like creators and multihyphenates, it comes down to flexibility, risk, and investment terms.
Because dollars are not earmarked for a specific project, the entrepreneur has the flexibility to allocate resources optimally across their portfolio; they can be deployed toward something specific, like product development, or more broadly toward community building. Raising for a specific project may force the creator to do slightly unnatural things with their time and effort, such as focusing their attention on relatively inconsequential problems with little expected return vs. investing in system-wide growth. This distinction is especially important for creator businesses, where value creation can be nonlinear. Content is often the growth engine that enables many different yet adjacent businesses to flourish – but the relationship between content and growth is correlation, not causation.
Ironically, the holding company model allows for both risk containment and enablement. While there may be one source of capital, loss and liability are contained to each sub-company. Moonshot projects, which often have the highest ROI, can access funds and be housed separately from core, or more profitable, operations.
Finally, because the holding company reflects the entirety of an individual’s business interests, they generally have access to more favorable investment terms. The equity value of the holding company is greater than the equity value of just one startup or company within their portfolio. As a result, they can raise more capital for less dilution by selling equity in their holding company as a whole vs. in any single project.
So, if holding companies are gaining popularity as favorable structures for extremely productive creators and entrepreneurs, why haven’t we seen greater adoption? The most simple answer is likely time. There are a number of outstanding questions, such as valuation, governance/oversight, and scope, that will be better understood and addressed as HoldCos are deployed in the real world. And, as with any other innovation, user confidence will increase alongside proven longevity and perceived acceptance. With this in mind, we believe Mr. Beast’s portfolio raise was the harbinger of the creator HoldCo era.
About Slow Upload
An exploration into individual- and creator-first companies: how they are built, underwritten, and financed. From the Slow Ventures Team, Sam Lessin, Megan Lightcap, and Caroline Cline.