Mr Beast looks to raise $150 million from VC, but this might not be the right move. Here’s a better option.
Mr Beast has been taking over the internet in recent years. He is easily the fastest-growing YouTuber in the world and quickly becoming a household name from his genius marketing tactics and over-the-top YouTube videos. However, all of this takes an absurd amount of money, and Mr. Beast often notes he loses tons of money in all of his videos, but he has several income streams to help make up for this. He has several channels, from Mr Beast shorts, Beast Philanthropy, Beast Reacts, and several other spin-off channels primarily to help generate revenue for the brand or donate to charity. Mr Beast has also recently launched his Feastables brand of chocolate bars and Beast Burgers as a way to expand beyond content creation. Both of those brands have seemingly been incredibly successful, with Mr Beast launching a physical retail store recently as well.
Despite this the massive amount of money he is generating from all of this, he has now built a massive business around his brand, and giving away money is expensive. As such, he is reportedly looking to raise $150 million at a $1.5 billion valuation to help continue to grow the brand and his various side ventures. While his business model might not make sense to most people, Mr Beast says that each of these videos aren’t just giving away money but “re-investing” it into his brand. It’s hard to argue he is wrong, too, as he closes in on PewDiePie’s nearly decade-long reign as the top individual YouTuber. Further, if you think of it all as marketing spending, he spends less than your average SuperBowl ad but tends to easily beat their viewership numbers by several multiples. As each new video continues to beat the last, the sponsorship payout increases, and thus the $100k he gave away in the last video is meaningless to the $2 million he makes in videos a year later.
Is Venture Capital the best option for Mr Beast?
While I am sure there are people looking to invest, and he even noted receiving a buyout offer of $1 billion, it’s interesting to see his brand going the venture capital route. Venture Capitalists want a return and typically have a roughly 5-year timeline to make it happen. When denying the offer he said he doesn’t want to “work for his own YouTube channel.” While this wouldn’t necessarily be the case taking on VC funds, it does mean there are other people he has to at least listen to, and can’t simply ignore everything. If his company is structured as a corporation, it also gives them rights to sue on behalf of the corporation in a derivatives suit, and they might actually have an actual case. Insiders generally have various fiduciary duties and are required to act in the best interest of the corporation. It’s a fair argument of the shareholders that giving away millions of dollars in cash is not in the best interest of the corporation and this is a violation of the duty of care. While I don’t think they would ultimately win, based on the logic above that these are “investments” it would be enough to be a fair enough argument to be annoying as a means of getting their way if needed.
I say this to say Mr Beast is incredibly vocal about simply loving to make content, make the world a better place, and just doing things he likes. While he still has to consider the various business aspects of this, there are thousands of stories out there of companies taking on VC money, getting bought out, or ramping up for an IPO, and a company gets ruined because it becomes a focus on profits over what the original goal was that got them to that point.
Mr Beast and Equity Crowdfunding
One potentially better option might be equity crowdfunding. Equity crowdfunding allows anyone to invest in startups, and companies to raise from their fans and customers. This could be a good option for Mr Beast because, generally, retail investors want a return but aren’t pressured for any specific timeline. This means he gets to raise money from everyday people, and they share in the success of his business. As well, while he already has a pretty dedicated following, he could potentially gain tens of thousands of investors that are now even more dedicated to the brand. He already has the demand and marketing needed to likely raise the maximum $75 million, so I don’t think it would even be that difficult.
His goal is to raise $150 million, so if he maxed out a $75 million raise, that would be significantly less money straight from VCs and relieve a lot of pressure for things like a direct exit.