MrBeast’s billion-dollar business and the real reason VCs want to invest

 

By Megan Morrone

MrBeast (née Jimmy Donaldson), creates videos of himself counting to 100,000, tipping his pizza delivery guy a house, and burying himself alive. The No. 1 YouTube star also runs a delivery-first restaurant chain, MrBeast Burger; his Feastables line of snacks launched in January and has already amassed more than $10 million in sales; and he has a merch store. (Of course, there’s a merch store.) Donaldson told comedian Andrew Schulz earlier this fall that he turned down a billion-dollar offer for his content and related businesses. He also told Schulz that he might run for president in 20 years or so, but he’d first give away the tens of billions he expects to earn by then.

In the wake of those peeks into the opportunities in front of the 24-year-old creator, is it any wonder that reports surfaced soon thereafter that investors had taken notice of Donaldson and the MrBeast brand? According to a report in Axios, MrBeast hopes to raise $150 million—in himself (and his companies)—at a value of $1.5 billion.

There has been no announcement as yet, but curiously, no one has questioned the cost for MrBeast in taking venture backing. Also missing: what VCs really see in investing in Donaldson. After all, using famous people with big personalities to make money by selling products is hardly new. Investing in digital creators isn’t new, either. So what’s in it for Donaldson? And more curiously, what’s in it for VCs?


The core of the MrBeast empire is the video business. YouTube is where Donaldson has amassed 117 million followers on his main channel as of early December 2022, and he’s closing in on 20 billion lifetime views. He made a reported $54 million in 2021.

But that $54 million is not as attractive as it appears. Whatever revenue Donaldson’s MrBeast videos generated from advertising, 45% went to YouTube. Historically VCs have been attracted to the platforms that can command a 45% tax for the money made from the content you created for it, not the creators of the content. Donaldson also licensed his old videos to pay for nonEnglish language versions of his content to expand internationally so his catalog is not fully under his control. As the MrBeast videos have grown in ambition and production value—his most recent video pit 100 kids versus 100 adults competing to win $500,000—Donaldson recently admitted that he actually now loses money on them. He makes up the deficit with everything else.

Donaldson also has a management company, Night, which, if it’s like most management companies, takes a percentage of its client’s earnings. In Hollywood, managers often take 20%.

Donaldson has already taken venture funding for his ancillary businesses, including $5 million to start Feastables, according to Insider. He brought in the former president of RxBar to run the snack brand, and RxBar famously grew without more than its initial $10,000 investment to a $600 million exit. Does he really need more capital that would dilute his own equity?


Direct VC investment in actual people is relatively new. Last year, YouTube creator Marina Mogilko accepted $1.7 million in funding from a handful of investors including Slow Ventures, which will take a 5% stake in anything Mogilko does for the next 30 years.

Slow Ventures partner Sam Lessin told Insider that these kinds of investments are just good business. “If someone had a lot of these creators’ numbers but instead of being a person they were a company,” he said, “they would have great venture capital.”

Others disagree and point to the potential legal gray areas around investing venture capital directly in people. According to Vice, last year Lessin had to defend his investment decision saying, “It’s def not indentured servitude.” Later, talking to the Latitud podcast, Lessin compared his investment in creators to Universal Basic Income, as a private-market way of “just giving people money.” Lessin really wants you to know that investing money in people and taking a return on what those people bring in for just being their own popular selves is not indentured servitude.

“It’s the opposite, it’s indentured capital,” Lessin explained. “In indentured servitude, you have to do something for me or produce that. Literally, if you don’t do anything, if you decide to do nothing, that was a pretty dumb investment decision on my part.”

MrBeast has already given up a significant percentage of what he earns to fulfill his goals to be the world’s best YouTuber. It’d be a pretty dumb investment decision on his part to lose even more of it.


A veteran VC who Fast Company spoke to likened these kinds of investments in creators to similar deals that firms make in talent-driven production companies like Reese Witherspoon’s Hello Sunshine. Last year, Witherspoon sold her company at a value of $900 million to Candle Media.

MrBeast’s billion-dollar business and the real reason VCs want to invest

But there’s one major difference between the two: the narrative. Witherspoon created a digital-centric media company and hired a professional CEO and they built a team. By contrast, Donaldson can be packaged for public consumption as a person who is going to become a billionaire by himself.

This is particularly appealing right now. We’ve watched tech go through brutal layoffs this year, and investors, who had been preaching growth and hiring last year, are now once again obsessed with “revenue per employee.” Investing in individuals creates the ultimate example of a hyper productive company. After all, it doesn’t get any better than one person generating all the revenue.

Maybe MrBeast’s meteoric rise in subscribers continues. That could translate directly into huge sales of his burgers, snacks, and whatever comes next. It’d be a boon to whatever VC firms Donaldson decides to let invest in him—if he does. But he doesn’t need the money.

And the VCs already have what they need: The very idea of the solo billionaire creates a stick with which to discipline founders and the employees they hire. This guy built a billion-dollar business by himself. Are you that hardcore?

Fast Company

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