When Smash Ventures appeared as an investor in a $ 1.25 billion round for Epic Games in 2018 – reputedly the largest investment ever made in a video game company – it was the first time many heard of the investment outfit .
When the brand reappeared in an even bigger round for Epic last summer – last August, the gaming giant announced new funding of $ 1.78 billion with a post-money stock valuation of $ 17.3 billion – A restaurant near Epic’s headquarters in Cary, North Carolina that sells “Smash Waffles” received calls from reporters, says Eric Garland, who started venture and growth deals for The Walt Disney Company directed.
“Some reporters really turned stones,” he says.
Garland knows this, he says, because he co-founded Smash Venture with Evan Richter, a former member of Disney’s corporate strategy and business development team (and previously an investor in Insight Partners).
The two say they didn’t try to hijack the press after going into business for themselves a few years ago. They were mostly just trying to get their company going, which they seem to have done and a few more. First, there’s the newly closed $ 75 million debut fund from strategic partners and big-name investors like Kevin Mayer, former TikTok CEO and former Disney executive. Co-founder of Pixar Animation, Ed Catmull; and journalist Willow Bay, who is now the dean of USC Annenberg School for Communication and Journalism. Still, it’s just a small noteworthy piece of what they have put together.
At a time when money is more a commodity than ever and is easily accessible for many founders, Smash has a few tricks up its sleeve, Richter and Garland suggest.
One thing to know, for example, is that the two of them seem to have low-turning auxiliary vehicles when they get into an interesting deal. While they learned about Epic Games through Disney (it was an investment in the company in 2017 when Epic was part of its accelerator program), they persuaded founder Tim Sweeney in 2018 to receive a larger check from Smash Ventures Packing “Several Hundred Millions Dollars ”from their LPs to get involved in the deal.
The company, with the help of its limited partners, has also “bent over” to provide separate $ 200 million to other of its handful of portfolio companies. That includes DraftKings before it went public last year through a blank check firm; the shoe, clothing and accessories brand Nobull; the male grooming company Manscaped; and India’s largest e-learning startup, Byju’s.
Disney – one of the strongest brands in the world – is a common thread. In addition to inviting Epic to its accelerator program, Disney began working on an educational app with Byju back in 2018 and owned 6% of DraftKings when it went public last year.
Mayer, the former Disney executive who recently started introducing special-purpose acquisition vehicles, credits Richter and Garland for finding “a lot of really cool companies like Epic” at Disney and says he has them “Supported since then because I think they are great. “
Underscoring the strength of this former Disney network – another obvious asset – Mayer says that he’s not just a limited partner, but sometimes “tries to talk to their CEOs, give strategic advice, and talk to some of them about exits and M & A to speak of portfolio company. “(Catmull, who was president of Walt Disney Animation Studios after Disney acquired Pixar in 2006, was also called in to seal the epic deal, says Garland.)
Whether Smash’s deals irritated current Disney executives – it’s not hard to imagine the entertainment giant would have wanted a bigger stake in Epic – Garland says no, adding that “Disney is generally not in the venture business.”
Meanwhile, Smash also says it closes deals by helping companies tell stories to their respective trapped audiences. Says Richter, “The leading consumer software and internet companies are building massive and engaged users and media, whether it’s a Travis Scott experience in Epic Games or an IP collaboration between Marvel or Disney [and Byju’s], or if it does something to the UFC [which last year partnered with Manscaped]can be an incredible way to maintain and grow a user base. “
The company certainly seems to spend a lot of time with its portfolio companies on this effort. While Smash wrote its first check in 2018, the company only has five portfolio companies to date and plans to invest in only 10 to 12 companies in total with that $ 75 million capital pool and checks valued at $ 5 million to $ 10 million issue the ability to write much larger checks when the opportunity arises and the LP network says yes.
When asked why the company is suddenly going public with these efforts, Richter suggests it is time to cast a broader net. Still, Garland says: “We like to stay focused. We make a lot of noise about our portfolio companies, “he adds,” but we are very depressed ourselves. “