Wednesday, May 18, 2022

Dave Nemetz - Selling His Business For $175M

From building a $200M media business out of college, to selling a second media business using the same playbook, to building Reverb Ventures and investing in New Media at the intersection of Web3 and digital media - this is Dave Nemetz

Dave Nemetz

Founder at Bleacher Report & Investor at Reverb Ventures

Explore This Expert Session

  • Meet Dave Nemetz 👋 : From building a $200M media business out of college, to selling a second media business using the same playbook, to building Reverb Ventures and investing in New Media at the intersection of Web3 and digital media - this is Dave Nemetz
  • Investor Toolkit 🧰 : Founder-Market Fit
  • Personal Investing 💰 : Risk-on with Startups and Crypto
  • New Markets Research 🔬: Building The Creator Economy
  • Operator Playbooks ​​📒 : How to Scale a Media Company
  • Business Idea of the week💡: Superhuman for Crypto Wallets

History & Timeline: 

Early Life - A sports fan dreams big ⚾: Growing up in the San Francisco Bay area, Dave Nemetz was an avid reader of the local newspaper’s sports section, but there was a gap. The paper was jam-packed with headlines and box scores, but where is the sports culture?

2005 - Founded Bleacher Report 🏟: Freshly out of USC, Dave and some friends from high school create Bleacher Report, a website dedicated to sports culture versus high-level scores and analysis. Dave reflected later that their first dominating topic was the NFL draft where there was year-round interest.

Bleacher Report - 2005

2008 - Bleacher Report gets recognized…and paid 💰: Bleacher Report receives series A from Hillseven Capital, Transcoast Capital, and Vimeo founder Jakob Lodwick. In the same year, BR secured $3.5mm in series B funding from Hillseven, Gordon Crawford, and SoftTech VC. The site’s culture, following, and background is catching like fire.

2012 to 2013 - Dave leaves Bleacher Report following acquisition 🚪: Time Warner’s TBS acquires Bleacher Report for just under $200 million. The sale is a culmination of years of hard work by Dave and his team. Later, Dave recalled Bleacher Report was taking up almost all of his time. When he wasn’t working on it, he was thinking about it. The acquisition is a great success for the whole staff. While many looked at the sale as a challenge for Dave, he admitted it felt like a weight lifted off his shoulders. At only 28 years old, Dave is ready to turn to the next page of his life.

2014/15 - Investing and Advising 👍: Feeling burnt out after the Bleacher Report sale and following work, Dave takes some time to get his mind right. He uses this opportunity to invest in Elite Daily and friend and Bleacher Report co-founder, Bryan Goldberg’s new media company, Bustle.

2015 - Dave finds a new opportunity 🆕: The same way Dave scouted a gap in reporting on sports culture, he saw a lack of content geared toward millennials covering technology, “geek-culture”, and science. Dave founds Inverse in San Francisco with a team comprised of his former Bleacher Report crew. Inverse is an immediate success among millennial men and unique usership grows monthly. In less than one year, Inverse tops 7 million unique monthly visitors, and in September of 2016, Dave and his team raise a series A round of $6MM from Crosslink Capital, Social Starts, Bialla Venture Partners, and Vast Ventures.

2019 - Inverse Acquired by Bustle Digital Group 💰: Trying to expand beyond their primarily female audience, Bustle Digital Group (formerly advised by Dave Nemetz) acquires Inverse. Dave stays on as executive Vice President with Inverse to manage the business side, but now in his mid-30s, he’s founded and exited two companies. Dave would stay with BDG for close to two years before striking out on his own.

2021 - Reverb Ventures starts Investing 💵: Dave teams up with some experienced founders to create his investment syndicate focusing on Web3 and the creator community and investing check sizes from $150k-$250k. Operating on his thesis “Every company is a media company,” his goal is to use his experience in building media companies to provide a roadmap of how to create a successful one. As an investor, Dave specifically helps with things like growing the first 1k users or customers, working directly with creators and media companies, making the transition from Web2 to Web3, building a media flywheel, and rasing/closing funding rounds. With high-powered allies like Bryan Goldberg and Sean Griffey, Dave seems to be poised to do exactly that.

Investor Toolkit 🧰 : Founder Market Fit

Dave invests at the early stage, often before product-market fit. At this stage, there is often very little traction and the team is usually quite small. Because the company is early in its development, identifying the right team is critical - so dave looks for Founder-Market Fit.

What is founder market fit? Tom Wilson at Seedcamp describes it eloquently below. 

3 ways that founder-market fit can manifest:

  1. Domain expertise: Startups are incredibly hard. To build a successful startup there needs to be as many factors working in its favour as possible and one that can provide that edge is domain expertise. Sometimes domain expertise can be confused with domain interest. For example, just because someone might enjoy travelling (domain interest) does not necessarily mean that they have the founder-market fit necessary to build a billion-dollar travel startup. On the other hand, if the founding team have worked at booking, Skyscanner, Mr and Mrs Smith, Secret Escapes etc. and know the intricacies of how this market operates and the stakeholders involved then this would likely tick the box. Think this element of founder-market fit is likely most relevant in the B2B space where it's even harder to really understand the specifics of a market without having been on the front-line immersed in the sector.
  2. Mission-driven mindset: Founders who have this, will often push harder and not take no for an answer and therefore put themselves in an even stronger position to succeed. How it manifests itself might be a personal connection from the founding team to the problem that the startup is solving. This mission-driven mindset can be incredibly powerful in creating a connection to the problem and a compelling narrative around why they are the perfect person and/or team to be building a product in such a space. 
  3. Technical skills: When considering technical skills generally we are thinking about across a founding team rather than specific to any one individual. The impact this can have on the degree of founder-market fit is dependant on the nature of the startup being built. Naturally, for a deeply technical company (i.e. artificial intelligence or biotech etc.) having the requisite skill set in the founding team is of the utmost importance. Equally, for less deeply technical products less emphasis can be placed on this element. However, for less technical products or applications, as technical skills may be less of a factor in assessing founder-market fit there likely needs to be excellence present across the other areas considered above.

Personal Investing💰:

We often hear that you should never invest more than 1% to 3% of your overall investable capital into high-risk assets. 

While that is a good practical rule, when an investor knows an asset class well, they can begin to capitalize on it.

Dave is an expert when it comes to crypto and startups, as such, he’s signifnactly more exposed risk-on) to those markets than someone off the street. 

The general rule of thumb here is - when you know a market really well and drive higher returns because of it, you can begin to attribute more capital to that asset class. 

New Markets Research 🔬: The Creator Economy

The creator economy is expected to 2x growth from 2020 to 2021 and reach $104B by the end of 2022.

Simply put, the creator economy is a class of businesses built by independent content creators, curators, and community builders (including social media influencers, bloggers, and videographers) plus the software and finance tools designed to help them with growth and monetization.

As of now, there are 2M+ global creators making 6+ figures defining a new type of a career dream. 

Why Does it Matter:

Over the past decade platforms like YouTube, Vine and Instagram served as tools assisting the users build personal brands and huge followings. With time the big names change but the content consumption surge continues growing. 

By the end of 2022, YouTube is expected to generate $30 billion in revenue. At the same time, Insider has revealed that a YouTuber with ~1M following can earn up to $50,000 a month

While the creator economy benefited hugely from the post-lockdown headwinds in 2021, in the coming years we’ll see creators take back control from the platforms:

  • Creators becoming founders, building out teams and assembling tools to help them start businesses while focuses on their art.
  • Creators moving their top fans off of social networks and on to their own websites, apps, and monetization tools. 

Interesting Applications: 

Spore: Tools + Infrastructure

Over the past 12-18 months the market is seeing an increasing number of creators move into independence, diversifying their mediums, creating their own websites and focusing on building their own brands instead of relying on platform names. 

Following this trend, Austin Hallock founded Spore in 2021. The company raised a $1M pre-seed round in less than a year. 

Spore offers a white-label Shopify-like basket of tools that creators can use to connect, manage and analyze their audience. Creators can also use the tool to convert free subscribers to paying ones, managing the payments while also building premium content flow for their paying fans.

Spore User Dashboard, Source: Spore

Encore: Payments

Encore is a financial platform for digital storytellers to build, run, and scale their micro-enterprise. 

Encore ‘s Dispatch, Source: Medium

The cash-flow platform allows creators to track performance, create financial projections and automate invoicing. 

Encore has created a unified dashboard called Dispatch acting as a investor update between the creators and their teams. The automated analysis dashboard allows the users to maintain control of everything happening in the business, share updates and manage the team.

 

Pallet: Community

The rise of the creator economy, work-from-home flexibility and micro-entrepreneurship has resulted in a demand for a more robust and yet simple hiring practice for companies. 

Founded in 2019 by Alessandro Russo, Jainil Sutaria, Jake Barry and Kai Han, Pallet is a subscription-based infrastructure enabling communities, creators and anyone else to build their own native recruiting products. 

Community hiring has 4 main advantages: 

  • Pre-market talent 
  • Engaged talent 
  • Talent with higher response rate 
  • Qualified and hand-picked talent 

Companies get access to communities of creators that monetize via posting jobs to their audience, or recommending candidates from their audience directly to businesses.

Pallet introduced a new concept of Talent Collectives, a collection of professionals curated by a specific person, group, or entity. Each Talent Collective comprises a select group of professionals along a spectrum of current job status either looking for a new job, network expansion, or career advisory. 

By listing their availability for a new opportunity (somewhat similar to freelance platforms) the community members signal the hiring businesses the green light to contact them with an offer saving the recruiters the effort otherwise wasted on cold emails. 

On the other hand, the Talent Collectives can generate unique Drops - a shortlist of qualified candidates open to work - and sell its access to businesses. This allows the businesses to streamline what would otherwise be a laborious, unreliable process. An average intro results in  ~80% response and ~50% acceptance rate. 

Pallet Tallent Collective Drop Logic, Source: Pallet

Those who curate the job posts can earn up to $50,000 in under 3 months

Creator Economy + Web 3:

Dave invests at the intersection of two hyper-growth markets - the creator economy and web3.

Here’s a few companies that Dave has invested in: 

1. Fancurve: Community + NFT

Fancurve, the blockchain-enabled digital fashion brand, is making NFTs wearable in the metaverse instead of just being static images on screens, brining an extra added value to sports lovers. 

Fancurve First NFT Jersey, Source: Fancurve

The company founded by Chris Chaney and Andrew Nestor. The platform connects fans with biggest athletes, clubs, designers, and culture-defining brands creating a new blockchain society. 

Fancurve also serves as a Web3 launchpad for fashion and lifestyle brands and products to enter the metaverse.

2. Thirdweb: Infrastructure

Think of the good-old WordPress. 

Now think of WerdPress for Web 3.0. 

That’s exactly what thirdweb offers to its users. A user can create and ship an NFT collection in 30 minutes without writing a single line of code. 

Thirdweb was founded by Furqan Rydhan, Steven Bartlett in 2021 and has already raised a $5M seed round. As of now, the platform is free to use. Starting 2023, it is planed to generate revenue by charging 5% of the royalties that users earn from their contracts.

Thirdweb Dashboard, Source: thirdweb

Among other investors, thirdweb is funded by Gary Vaynerchuk and Mark Cuban

3) Zestworld: Newsletters + Community

The global comic book market is booming and it’s expected to exceed $4.5B value by 2026. But despite the growth, the market has a fundamental issue - from the early days of comics, characters were typically owned by and benefited the publishers, not the creative team who dreamed them up.

Zestworld is planning on democratizing the industry. It makes the artists company stockholders allowing them to present new work and monetize their creations if they are made into collectibles or adapted for TV, movies or other media. 

Designed as a centralized multiservice platform, Zestworld plans to offer artists a variety of support services, including business management, online community, digital publishing, virtual events, and rights management as well as guidance in releasing NFTs.

Zestworl Announding Its Platform, Source: Twitter

The subscription based platform was founded by Chris Giliberti and John Liu in 2021. It has already raised a $9.3M Series A round lead by General Catalyst along with Redditt founder Alexis Ohanian’s Seven Seven Six VC, former TaskRabbit CEO Stacy Brown Philpot; Shari Redstone’s Advancit Capital; and Twitch founder Kevin Lin.

Operator Playbooks ​​📒 : How to scale a media company

Dave sold Bleacher Report for $175M. He then took that playbook and launched Inverse.com, which was acquired by by Bustle Digital Group on Jul 23, 2019. 

Needless to say, he know how to build a media business. Here’s Daves playbook on how to create a media flywheel:

Business Idea of the week💡:

Dave is an avid crypto investor. As with many folks in cryptoland, they will occasionally run into an issue with their crypto wallet (more on that below). Dave thinks theres room in the industry to create an intuitive, well designed, crypto wallet.

The context: Crypto wallets keep your private keys – the passwords that give you access to your cryptocurrencies – safe and accessible, allowing you to send and receive cryptocurrencies like Bitcoin and Ethereum. 

They come in many forms, from hardware wallets like Ledger (which looks like a USB stick) to mobile apps like Metamask and Coinbase.

The problem: Crypto wallets are not intuitive to use, there is a strong learning curve, making it challenging for new entrants to the space to feel comfortable engaging with the ecosystem. 

The idea: An intuitive wallet, optimized for usability, with a  well designed interface. Similar to what Superhuman has done for email. 

Superhuman was founded in 2014 and raised over $100M. At its most fundamental level, Superhuman is an email client that lets you view and edit your emails. So why does it exist if Google, Microsoft, and several other large companies offer free email clients?

Primarily for 3 reasons:

  • Speed: Get to inbox 0 as fast as possible. 
  • Usability: Make it so intuitive that everyone can benefit
  • Automation: Focus on removing repetitive tasks and unnecessary workflows. 

By applying a similar logic to crypto wallets - the right builder to design a wallet that is intuitive to use, flexible, and fast!