Pod Insights The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch 20 VC 007: The Evolution of Content and the Venture Capital Industry with Peter Csathy About this episode I am hugely excited to welcome Peter Csathy for Session 7 of The Twenty Minute VC. Peter has had an astonishing career in the media industry with an unbroken track record of success in startups and emerging growth companies. Peter is currently CEO of Manatt Digital Media, which not only offers Venture Capital but is unique in also providing legal services and business consulting. Prior to Manatt, Peter was CEO of Sorensen Media, which serves 70 of the Fortune 100 and CEO of SightSpeed, Inc in which Peter oversaw their acquisition by Logitech. Items Mentioned in Todays Show: Endurance: Shackleton's Incredible Voyage to the Antarctic In this episode you will learn: Why Peter decided to enter into the Venture Capital Industry? What are the unique service that Manatt offer that other VCs do not provide? Why are these service necessary for startups to have access to? What is the most important thing for a startup to have in order for you to invest? Does an entrepreneur's track record of failure reduce the chance of you investing? Where do you see the disruption of content in 2015? What book would you give to an aspiring entrepreneur looking to attain funding? In the final few minutes, we delve into a quick fire round where we hear Peter's thoughts on: The importance of location for a startup, future of online video and the company Peter is most excited about. As always we absolutely love to hear from you. If you would like to get in contact email [email protected] or visit www.thetwentyminutevc.com
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Harry Stebbings? Welcome, you are listening to the seventh episode of the 20 Minute VC with Harry Stebbings. Now, on today's show, we have Peter Chadi. Peter is CEO of Manatt Digital Media Ventures and their previous investments include companies such as Pinterest and Etsy. Before that, Peter was CEO of Sorontin Media. And Peter also has experience in the startup industry with SiteSpeed, which was acquired by Logitech. I know he's got some amazing content today and I can't wait to share it with you. But first, let's talk about the competition. Would you like the chance to win all the books mentioned in the first 10 episodes of the 20 Minute VC? And a chance to pitch to one of the VCs interviewed?
0:45 Harry Stebbings? Well, all you have to do is head on over to iTunes and leave a review and then email Harry at the20minutevc with the name that you left the review under on iTunes and you will be entered into competition to win all the goodies. Thank you so much and I hope you enjoy the episode with Peter.
1:06 Speaker 01 You have now arrived at your destination.
1:10 Harry Stebbings? Peter, it's a great pleasure to have you on the 20 Minute VC. Let's dive straight into it.
1:15 Speaker 02 Sounds good, really happy to be here.
1:17 Harry Stebbings? Can you now tell us a little about your background and the driving force for you entering the venture capital industry?
1:24 Speaker 02 Absolutely, I've been in the media tech world for 25 years, so a long time. I spent half my career in the traditional media companies, so studios such as Universal, New Line Cinema and Savoy. So kind of the small, medium and large studio system. And then in 2000, I struck out to go into the more entrepreneurial side. And it was the first of many, first of four different digital media tech companies. And several of which had, I'm very pleased to say, with the teams, we were able to build very successful companies, scale them and have nice exits to them. So I've been fortunate to see that. So I've been on, when I was on the entrepreneurial side...
2:10 Speaker 02 Side of the table, building companies. We frequently dealt with studios and and other partners. And so I've been on that side of the table. I've kind of seen a lot of things that way. I've raised capital, sold companies. Um, and so it's been an interesting journey, a lot of these twenty five years. And for me, it was a really compelling time to take all these different stories, take all these different contexts and bring them into a different kind of um uh world for me. And that was on the venture side and advisory side. And I had this great opportunity at Manatt Digital Media, and so I took it.
2:47 Harry Stebbings? And what was your kind of aha moment that made you switch to the venture capital side?
2:53 Speaker 02 Well, so a couple of things. Venture is a significant, it's an important part of what we do, but we're also very much. Manatt Digital Media is very much about connecting and accelerating businesses and really helping businesses, um startups, entrepreneurs, but other companies as well, big and small. But on the more entrepreneurial side, to really get them the rocket fuel they need to build. So for me, the aha moment was really, okay, I've built a number of companies now. I've been at the very large enterprises, the studio system. What's interesting to me and where can I add value? My aha moment is that I've just collected over the years these wonderful contacts, relationships
3:37 Speaker 02 and experiences, good and bad. And I felt like I was in a position where I could add real value to others who are going through that process at an earlier stage. And it was exciting to me uh from at this point in my professional career.
3:53 Harry Stebbings? Fantastic. And as you slightly hinted at, Manatt have a few differentiating features to traditional funds. Could you tell our listeners a little more about those uh assets that you bring to the table? And why it's necessary for startups to have these services and expertise at hand?
4:11 Speaker 02 Sure. So digital media is an interesting, on the venture side, a very unique place. And we, by the way, just as an aside, that shows you a little bit more uniqueness. We just recently launched our own incubator in conjunction with software development house originate, as well as with major talent agency ICM, and that's called originate labs. So O Labs. So it's a unique place that has the business advisory, it has the legal, but it has the venture side and has the incubator. What makes us unique on the incubator, or excuse me, on the VC side is that we have a depth of expertise and context when it comes to media and entertainment and advertising
4:55 Speaker 02 is specific areas related to our conversation. But it also, let's take the area of digital media. Digital media is fraught with legal issues. There's IP right, there's rights licensing issues, name issues, privacy issues in the ad tech space, all of these legal issues that permeate the business world. So where business ends and legal begins, it's part and parcel of the same thing. We are the only place that I know of that really can bring that kind of expertise together and really understand the framework and add value as a VC in that way too, where we can flag issues before they become problems and we can be problem solvers.
5:37 Speaker 02 And that makes us a pretty unique place from a just, not only, so more than just money, it's really smart money for the right kind of business.
5:48 Harry Stebbings? Why do you think startups don't have this, or funds don't have this legal branch already incorporated in them? Because as you say, it is a fundamental part of a startup's growth, you know, you will encounter legal problems. Why do you think you are the sole ones and other people haven't adopted it?
6:07 Speaker 02 I think part of it is just overall time that the times that we sit in where businesses were very much focused on one area before and being less full service on the professional services side. Minat's always been a unique place because we've had business consulting in a very McKinsey-like way for a long time as well as the legal and we've had a venture fund for over 10 years, by the way. But more, I think that increasingly clients will demand and entrepreneurs will demand to not have to go to this place, this place and this place and so you'll see more of an evolution of businesses doing what we do and VCs doing what we do.
6:45 Harry Stebbings? Absolutely.
6:46 Speaker 02 We're just, we're just early. You know, we're, we're innovators, truly, we're innovators in the venture game.
6:53 Harry Stebbings? Fantastic. And, and when investing in a startup yourself, what's the most important aspect you look for?
7:00 Speaker 02 Yeah, for me, I see a lot of different things. I get excited, quite frankly, by a lot of different things. It's, it's just a fun time.
7:09 Harry Stebbings? That's great.
7:10 Speaker 02 Of innovation and, but what really gets me excited is when I see a unique vision. So it certainly has to be in an area that I feel sufficiently knowledgeable to have real intelligence brought to the determination and exercising judgment. So it has to be a general area and I, I'm very broadly based in, in a broad definition of digital media. But then it's the vision, the vision of the people who bring this, the concept, the company to my attention and the attention of the VCs. It's the passion behind it, certainly. If the person has a track record, that's definitely a plus.
7:52 Speaker 02 I don't think that past results guarantee future success.
7:56 Harry Stebbings? Does a track record of failure put you off at all?
8:00 Speaker 02 It depends, if it's a lengthy track record of failure, candidly, of course, that will be a red flag. It doesn't mean that it can't be overcome, but it will certainly be a red flag.
8:15 Speaker 02 Timing is, look, I believe that there's a lot of fortuity to a lot of things, no question. But certainly, yes, to answer directly, I think yes. But I think that the, you know, the network of people who you've surrounded yourself, the vision of what it is, the thinking through, having done your homework. I'm a very strong believer in tenacity and hard work and getting it done and analyzing everything. So the competitive landscape, so you can really directly point of why you're differentiated. So you have to be a good storyteller, because you have a limited amount of time. You have to be a good storyteller and build the credibility as best you can, but it, you know, with a vision that is truly unique.
8:53 Harry Stebbings? So you show your unique vision through being the excellent storyteller?
8:58 Speaker 02 Well, storytelling is important. In terms of, not necessarily being the charismatic person, because not everybody can be a Steve Jobs. But being able to logically and convincingly lay out why this is the right investment opportunity, why it's different than others, why it can monetize effectively and why it changes the world. Certainly, that needs to be done.
9:24 Harry Stebbings? Absolutely. And Manatt in particular specializes in content. And where do you see the disruption of content happening in 2015? We've seen, obviously, the likes of Spotify really shake things up. What would you say is the next stage then in content disruption?
9:42 Speaker 02 It's what we really started to see accelerating in 2014, and I've done a lot of writing about it, which is, we have this, the new platform, it's not entirely new, but it's now it's really mass appeal, which is the smartphone, right? And so you have a whole generation of millennials, and even people like me, who are not, who's not a millennial, although I'd like to think I am, who gravitate now and who consume most. Mostly primarily their primary consumption device for media is their smartphone. So that changes the game in fundamental ways because it's not simply that you can take traditional media and and repackage it for a different platform. You have to think about the consumer experience in an entirely different way.
10:27 Speaker 02 That's comes from that platform. So you have the smartphone that extends out the overall platform of distribution that was available to you before. It doesn't supplant it, but it extends it out. And what that means is you have a different types of content development. You have different types of content creator opportunities and democratization in terms of video capture. You have different ways to monetize and you have an ongoing way to engage with consumers that you never had before. And that means engaging in a real conversation. That is fundamentally different and that has led to this, among other things, the proliferation of the multi-channel networks and we saw accelerating massive M and A in two thousand and fourteen.
11:10 Speaker 02 And I absolutely believe that's going to continue in two thousand and fifteen because the major media companies and others, by the way, such as significant brands are going to want to play on on that platform that they haven't played effectively in yet. So that's why you saw Disney buy Maker Studios for up to a billion dollars. There's gonna be more of that because of this understanding that a full generation is engaging primarily on a very different platform than ever before.
11:41 Harry Stebbings? Absolutely, and and you have a lot of experience yourself in ad tech. So I'm glad you brought up the monetization route. Do you believe that advertising with then the introduction of mobile and a new generation? Do you think advertising can ever be truly native and integrated into a platform so it's succinct and relevant? Or do you think it will continue to be kind of buffering YouTube adverts and, you know, Facebook adverts on the side?
12:10 Speaker 02 Well, look, you know, there's gonna be continuous experimentation to to get it more right than than has been done. So I'll start it with it this way. If a marketer can have a conversation with you. And it and that conversation is more relevant to you than just a pure broad rifle shot, which has been historically the case. That alone will make it more effective because I will be more interested if it's something that speaks to me in in my wants, my needs. So that's one thing and absolutely the targeting, the understanding, the audience is gonna matter. The analytics, all of that's gonna matter to make the messaging more intelligent and it's not one size for it all.
12:54 Speaker 02 Then, secondly, if that if the brand or the marketer can tell a story itself in a different kind of way where it's not a hammer anymore, just buy, buy, buy. But it's more, I can help you solve problems. I can bring people who mean something to you to your attention. I can help you engage with them. I can give you special access. I can give you special deals that you otherwise wouldn't find. I can give you special experiences. I can things like, you know, Red Bull's soundstage. They have their concert events, you know, things like that where you're building it in that way. Absolutely.
13:32 Speaker 02 If I can, if I can help you promote the lifestyle that you believe in already, then it's a very different conversation. So I believe that that can be done in multiple ways, including native advertising, branded content and the experiential. And then one other thing that I just wanna touch upon and which is brands, significant brands are beginning to think about themselves in a very different way because of what I just said. So think about Red Bull. Red Bull is, if you go to the Red Bull website, it's no longer, it's not, you won't, you will not see an energy drink anywhere on that website. What you'll see is you'll see a lifestyle.
14:10 Speaker 02 And what Red Bull has done, it has transformed itself into a lifestyle of adrenaline, which manifests itself in one way through its energy drinks. But now Red Bull has built its own media company, which it absolutely is developing content to engage with audiences in a different way. But to not just in a marketing fashion, but to monetize directly through that content. So it sees itself as being a studio. And we've now seen that GoPro is going that same direction.
14:38 Harry Stebbings? Absolutely.
14:39 Speaker 02 You're seeing Marriott Hotels of all things. It has just significantly financed its own studios to do exactly the same thing and Pepsi is making those noises. And so that is a trend that I absolutely see accelerating in two thousand fifteen as well.
14:56 Harry Stebbings? And do you think crowdfunding is increasingly made content creation more available? And have you seen that specifically?
15:06 Speaker 02 Yeah, absolutely. I think crowdfunding is really interesting because let's take Patreon as an example.
15:13 Harry Stebbings? Okay.
15:13 Speaker 02 Patreon is a Bay Area based company that was created by a musician for for artists, not just musicians. And it's a different kind of crowdfunding model where it's a a a subscription, ongoing support of your artist that means something to you. So let's say you there's an artist who's who's you're passionate about, you like their work, they're not mass appeal. But you want to help support their lifestyle so they can continue to do the work that you want. Now it's not just a one time or one, you know, one time crowdfunding project, but you can give in monthly, annual, ongoing sort of commitment through Patreon. That's how it's differentiated. I think that's really, really interesting. And there's an example.
15:55 Speaker 02 Certainly you're seeing a a another example where I've dealt with a number of independent filmmakers and the pain points they're having because they're squeezed out of theatrical. And if you go to the theaters now, it's just really the mega movies.
16:07 Harry Stebbings? Absolutely.
16:08 Speaker 02 The indie movie houses are going away. So what happens to the whole indie film business? Well, fortunately, you do have Kickstarter campaigns and a good friend of mine from one of my um former schools, who's this talented playwright who's had great success, just created an indie film, just had a Kickstarter campaign, just raised a significant amount of money on the Kickstarter campaign and will be able to do her movie now, where it otherwise, that vision, that story would not be told.
16:36 Harry Stebbings? That's amazing.
16:37 Speaker 02 That's happening today.
16:39 Harry Stebbings? That's fantastic. And and like your friend and an aspiring entrepreneur, what book would you give to someone looking to go into entrepreneurship?
16:50 Speaker 02 You know, this is, I, I bet my answers could be very different than just about anybody else's.
16:56 Harry Stebbings? Okay, let's try this.
16:57 Speaker 02 I, I, I don't, of course, I, I believe in business books and I read, I read some of them and all that. But I'm a very, I'm a big believer in old fashioned tenacity, never say die, teamwork, um, just making it happen as a fundamental part of success for entrepreneurs and startups. So the books that really speak to me are those that inspire me in that way. And one that comes to mind is if you've ever heard of Ernest Shackleton.
17:26 Harry Stebbings? Absolutely.
17:28 Speaker 02 That is the most incredible explorer story I've ever heard and I've, I've read a lot of those because those speak to me. You know, so here's this guy who's, has a full team, their ship, they're frozen in ice, um, South Pole for a year and a half, almost two years.
17:43 Harry Stebbings? Mm hmm.
17:43 Speaker 02 And not only did they not kill themselves, not only did they not lose their minds, they just had this unbelievable story, uh, uh, again, probably the odds were point five percent that they'd be able to succeed in it, but they did. They believed and it was all led by Shackleton. He believed, he stayed calm, he was undaunted, he believed in teamwork and he was an inspiration to his people. And it's the, that's so much of what I believe is, is very important in the success of a startup. So I think that Shackleton's biography and the endurance, which is a great name for, the endurance was the name of the ship and just think about that, the, um, the irony there, so.
18:27 Harry Stebbings? Absolutely. Well, thank you so much, Shane. I was like, I think you are the only one who's given that answer, but that's great. No, that's great. Diversity is the way forward. Now, if, we're coming into the last section of the interview now and if it's okay with you, we're going to enter into a quickfire round.
18:43 Speaker 02 Sure.
18:43 Harry Stebbings? Where I say a word or short statement and you give your thoughts.
18:46 Speaker 02 Okay.
18:47 Harry Stebbings? Okay. Online video in two thousand and fifteen.
18:50 Speaker 02 Exciting.
18:53 Harry Stebbings? Company you're most excited about and why?
18:57 Speaker 02 Hmm, that's a tough one, but I'll say GoPro. Um, and the reason why is because GoPro has, is already a lifestyle. But it's a hardware company to date, although we're all creating great video on it. But GoPro hasn't been able to harness it itself. GoPro will become a media company.
19:16 Harry Stebbings? Fantastic. And location for startups, does it matter? Does it not matter?
19:21 Speaker 02 I think it does matter, um, which makes it challenging for entrepreneurs and I get that. But I'll focus on the area that I'm best familiar with, which is the digital media side of things. And that's a very broad swath, ad tech and content driven, all of that. But LA is a hot time right now. There's, it's no accident that virtually all of the leading multi-channel networks are based in Los Angeles, kind of the hub of that kind of creativity. If you're interested, if, if an entrepreneur is interested in anything around that kind of space. I think that the, a very smart place to be would be to Los Angeles and pick up your, your bags and, and go there because the energy is hot. On the ad tech side, um, I've, you know, LA is a great place to be, not exclusively.
20:05 Speaker 02 New York's certainly a great place to be too, because you're, you're right there with all the, you know, the, the, with Madison Avenue. Uh, so I do think location does matter. Uh, can I, do you have time for one quick example?
20:17 Harry Stebbings? Yeah, absolutely.
20:18 Speaker 02 Okay, so I speak to global companies too and startups who are outside of our borders. One company is a, um, there's a very prominent mass distribution, MCN like company called zoomin.tv that's based in the U, in the UK. So it's based overseas, outside of US. It's very successful. But it's very frustrating at times for, for that company and for others who are not in the US. Because very little mind share comes to them just by the, you know, the media outlets here who really lead the charge because they're outside the US borders.
20:58 Speaker 02 And so that physical location matters and there's no wonder that that company will certainly be opening up an office in the United States. Because they need to be there, they feel. And, and that is, I hear that a lot from companies that are outside the US.
21:13 Harry Stebbings? So you'd recommend to founders, pack up your bags and move to LA if you're in content?
21:18 Speaker 02 I think if you're a passionate person and you really want to optimize the chances for success, you do what you need to do. And yes, and I also think it's an exciting thing to do anyhow. If you're, if you're a passionate person, you have a great company idea, then, and it's in the video space whatsoever, I'll focus on that as an example, LA is absolutely where you have to be.
21:39 Harry Stebbings? Well, Peter, thank you so much for coming on the show.
21:42 Speaker 02 It's great to, it's great to have the opportunity. So I really appreciate it.
21:46 Harry Stebbings? Now, for all the resources mentioned in today's show, please head on over to www. dot the twenty minute vc dot com, where you can find all of the items mentioned in today's show on the homepage. And similarly, please do like our Instagram page at the twenty minute VC and our Twitter page at twenty minute VC. Thank you so much, and I can't wait to see you all in the next episode.
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