23 September 2022 |

Virtual Influencers?

By joesweeny

Good morning! Today we’re wondering why VCs keep bankrolling virtual entertainers.

Plus, OpenStore raises another $32M from Lux and do you know the highest-grossing IP franchise of all time?


Virtual Influencers?

  • Digital influencers — virtual avatars made by startups — have racked up tens on millions of followers on social media, signed record deals, and landed ad campagins with the likes of Calvin Klein
  • The financial incentives of ‘virtual influencers’ are massive and Sequioa, Founders Fund, and Andreeseen Horowitz have all invested in the trend.
  • Hume a new record label for ‘metastars’ just raised $11M from TCG
Virtual influencer Lil Miquela

Hume

Raise: $11.7M from Jarrod Dicker at The Chernin Group

Including: Gemini and Winklevoss Capital, FlamingoDAO, Coopahtroopa

One Liner: A record label for digital artists

TCG: When The Chernin Group funds a new kind of media company I pay attention. TCG is a VC firm specialized in media. They created anime streaming service Crunchyroll way back in ‘07 and made investments into Twitter, Cameo, Pandora, Headspace, Tumblr, and Soundcloud. They made Rise of the Planet of the Apes in 2011 and bought a majority stake in Barstool back in 2016. They know media. 

And they invested in the his rabbit named AngelBaby.

He’s apparently the first digiatal artist to perform at Art Basel and SXSW and was created by the team at Hume.

Good for Business

It’s ridiculous. But digital entertainers make a ton of financial sense.

For one, you don’t have to pay a digital avatar. They can be multiple places at once and they don’t have any of those pesky human issues like exhaustion or aging or emotion.

You could even take a living artist’s likeness and use it to perform concerts. Like when Tupac played Cochella or when 12M players watched Travis Scott perform in Fortnite.

Promo for Travis Scott’s Fortnite performance. Worth noting they made a Black Mirror episode about this. Miley Cyrus played the tortured pop star.

To Hume’s credit, I’ve been listening to their first single on a loop for the past 20 minutes — it autoplays on their landing page — and I still don’t hate it.

Probably because it was writen by Hume Founder Jay Stolar who’s writen songs for Selena Gomez, G-Eazy, Demo Lovato, and Aloe Blacc.

Millions of Fans

AngelBaby is not the first virtual influencer. His predecessors have found millions of fans but had mixed commercial success.

Last month, Capitol Records signed virtual rapper FN Meka to a deal — then dropped him two days later after a firestorm of outrage online.

People were furious about the quote “gross stereotypes of black artists”. FN was voiced by a black artist but there appear to be zero black people on core team at Factory New, the startup who created him, so the backlash feels pretty appropriate. Also, it looks absurd. 

Fans may not agree though. Capitol signed the avatar in the first place because he racked up 10.3M fans on TikTok.

Other virtual avatars have done better. This computer generated woman, Lil Miquela, has 3M followers on Instagram. The startup that created her, Brud, raised $6M from Sequioa and Founders Fund but was ultimately acquired by Dapper Labs last year.

From @lilmiquela’s Instagram

The business is obvious. The only question is… Will we like them?

TLDR: Personally, I don’t see the appeal of digital avatar artists/influencers but the finanical incentive is strong.

If someone can make this work they could create a Disney-esque IP empire with ageless characters that cost nothing to maintain.

With everyone from Sequioa to The Chernin Group betting on it there’s a fair shot the next hit media company will be the creator of virtual influencers.


OpenStore

Raise: $32M Lux Capital

Valuation: $970M

One Liner: Ecommerce Rollup for Shopify Businesses

The secret to Shopify roll-ups is that you can buy these businesses for 1x or 2x annual revenue. That makes them a massive opportunity for roll-ups which buy business cheap and then invest in sophisticated operations and marketing teams to scale revenue.

At it’s best, it’s a win-win. The small business owner gets an instant acquisition — the price decided by an algorithm and based on trailing 12 month revenue minus costs. OpenStore gets a great little business they can scale.

It’s the exact same model as the other company Keith Rabois founded, Opendoor, which runs an automated system to buy homes.

It is worth mentioning that Rabois is coming under fire after reports that Opendoor is losing money on a large portion of the homes it has bought in the past 12 months. Evidently the algorithm can’t predict market downturns.

Opendoor stock since SPACing in 2020

Immortal Game

Raise: $11.8M from The Chernin Group

Including: Kevin Durant, Cassius, and Spice Capital

One Liner: Web3 platform for chess.

Chess is on fire right now. Over the last few years the digital chess community has blown up with influencers, Twitch streamers, and recently, a wild cheating scandal.

There are more chess players today than ever before in history — some estiamtes say 800M+ —and top tournaments are watched by more people than ever before.

It’s weird, I know. Like video games or NFTs or K-Pop or makeup Youtube it’s one of those deep internet niches you’d never know exists unless you go down the rabbit hole.

Immortal Game hopes to tap into that new fandom and add NFTs and challenges to the ecosystem. As a fan, I’m not sure the NFTs alone will sell it but there isn’t a platform out there with the high-end modern design Immortal Game brings to the table. That alone could make it a winner.

If you want to go deeper down the Chess rabbit hole you can follow @GothamChess or superstar Hikaru Nakamura on Twitch. If you find anything iteresting let me know!


One Fun Thing

The all time number one IP franchise by revenue? Pokemon with a wild $119B in lifetime revenue. Second is…