How Instagram Helped This VC Find Billion-Dollar Startups - With Marshall Sandman from Animal Capital

0:00Ian Shepherd:Animal Capital VC Marshall Sandman has posted content for more than 130 days consecutively. This week on The Business of Creators, he explains why content is becoming a competitive advantage in venture capital. We've already written our first check from someone that reached out cold to us. And social media, he argues, gives smaller firms a way to compete outside of Silicon Valley. The idea that you're going to beat Andreessen Horowitz and Founders Fund and Union Square Ventures, that you're going to beat them to a deal, like you're just not. Like you're not. They're going to take your money before they take your money.

0:30But can I beat someone to Western Kentucky and get someone from a$3 million valuation to a$30 million valuation and have a 10x for myself before a big series? Yeah, I definitely can.

0:40Ian Shepherd:Marshall also explains why VCs are becoming creators, how content creates trust with founders, why geography matters less than ever, and how Instagram is reshaping venture capital deal flow. I think you're going to find this really interesting. Let's get into it.

1:02Ian Shepherd:Can you give me the elevator pitch for Animal Capital? And how did you get the other creators involved? I'll answer those as one thing. 10 seconds. I'm from Raleigh. I went to Cornell. I worked at Goldman Sachs. I worked at a little chop shop investment bank called Jaggy in Midtown, selling teeny, teeny, tiny media marketing businesses. I went from doing deals that were like$5 billion enterprise value. I worked on a huge deal with a business called Momentive, which is a$3 billion performance chemicals company for tire, like tire chemical, like the rubber on tires to like my best deal that I did was I sold a business called Connecting Point Marketing Group, which is a trade show business to a Blackstone portfolio company for$48 million.

1:43So like order of magnitude different, but really that's like the nature of venture capital. It was a perfect fit for what I wanted to do. I went to Tim Warner as it was becoming Warner Media. I ended up running their private investment practice by the time I left. When I got there, it was still Tim Warner. Shortly after it was Warner Media, they went from 30 ,000 employees to 13 ,000 employees. And we got to get involved into a handful of great businesses. But ultimately, the red tape, the funding allowed us to write checks that were great. And the red tape kept us from being really helpful partners.

2:19And so I wanted to build a business that was entirely based on being a helpful partner. Money is a commodity. Venture capital is a commodity. Hit up enough people, eventually you can beat doors down and find someone that's interested in your idea. But you may not find someone that is going to genuinely help move the needle, especially in the more like B2B tech oriented space. I think I said this before we came on, but I think we're in like creator venture capital, like 3.0. I think at the time it was like creators should invest in all sorts of different things, but mostly what it ended up being was consumer stuff.

2:52And then the market went to shit. As far as I'm aware, we have the top performing seed stage venture fund for our vintage in 2021. We invested in Colossal in their seed stage. We invested in WAP in their pre-seeds. We invested in Underdog in their Series A and whatnot in their Series A. Those are all multi-billion dollar businesses. Two of those are worth north of$10 billion. We did a really good job with it. But in all four of those cases, we brought my level of expertise and helping tell a story and a fundraising story and a B2B story. But we also brought celebrities to businesses that didn't traditionally, like they weren't in that creator 1.0 story.

3:29And so that's been the goal and to answer the second part of your question. Noah back in Griffin really helped start the business. Noah and Griffin still to this day, like we'll take calls with founders and we'll help and show up to things in both cases. I mean, Noah has one of our very, very few consumer businesses is an apparel business called Sown Again that we started with Noah. in 2021, it's knock on wood, hugely successful. But apart from that, like Noah goes to breakaway music festival shows kind of all the time. That's one of our bigger portfolio companies. Griffin has taken calls, I mean, literally as recently as last week during Kentucky Derby Week, which is his most busy week of the year with like true SaaS founders and helping them with some of their B2B partnership stuff, because what we've always seen from the very beginning, And so, again, sorry to answer your question more directly.

4:21I call them like founding advisors of the business. We're not, I mean, they're business partners to me in the way that any of our celebrities are business partners to us and that they're investors in the business. They just are a little more vocal and a little louder. And I think that it improves their reputation in what they do every day. I mean, Noah's become a really successful actor and is in the Baywatch reboot. He has the only movie on Tubi that is getting a threequel, which is like totally crazy and exciting. first two were great so griffin's like the youngest executive to have you know two horses in the kentucky derby over the last couple years like they both are amazing at what they do and i don't think i'm amazing what i do but i work very hard at it but we also have a bunch of other celebrities that are super involved we have paris hilton and christina aguilera and james corden and mark walberg and nick braun um who also starred in a movie this weekend called sheep detective which was like really fun amazing movie and similarly all those people over the last six years have all invested on top of their fund investment, have gotten involved with something that's like not consumer facing.

5:24They've gotten involved with colossal biosciences. They've gotten involved with a business out of Chicago called Kinetic, which is like a super, super, super deep metadata oriented business. They've gotten involved in written checks into space, photography and satellite modular businesses that have been great portfolio companies. us. And they create a level of validation and credibility and representation for those founders who I think are really good at what they do. They are great technical engineers, great technical designers. They're good at filling out, you know, potential RFPs for government contracts.

5:59But maybe I'd say in most cases, they're not as good at telling their story. They're not as good as they're not, you know, sometimes in some cases, they're great fundraisers. In other cases, they're terrible fundraisers, but ultimately they need, these are huge capital burn and capital expenditure businesses that you hope are going to have this big New York rise and having celebrities willing to help you like genuinely help sit on the phone, listen to the story, ask really sometimes dumb questions, but I ask the dumbest questions, like dumb questions in a way that they're like, I'm going to, I'm going to get this to simple enough that I can explain it, which is what I do all day.

6:32Like that is what they're doing with me is what I do all day, which is taking super sophisticated ideas and dumbing them down so that I can explain them to my investors and get them excited about the portfolio that we built. When Paris Hilton gets on the phone and she's talking to, you know, we're invested in a great pet pharmacy called MixLab and she has the conversation with them and she works through to this point of like, well, why does it matter to me and my seven dogs? And she gets to a clear answer, which is I want to make sure that the antibiotic or the ibuprofen prescription for my dog is filled the right way and it shows up on time and I know that my dog is getting the right thing because it's not like my dog can tell me that it doesn't feel right.

7:08Her being able to go communicate that to our audience or just provide a quote and a great fundraising article, it actually makes a huge difference in technical businesses. And we just couldn't be really more thankful. And I think in this, you know, venture 1.0 is, you know, creators do a bunch of consumer stuff. I'd say venture 2.0 is creators say, I'd rather not have equity. I just want the cash again. And like, I'm never going back. And I think that 3.0 is where we've been since day one, which is celebrities should use their firepower in places where the opportunity cost isn't too high, where it's not like I don't go to Griffin and say, hey, I want you to give up your deal with Celsius energy, the energy drink, to go out and do another energy drink.

7:51We're like, okay, so you're going to give up. I don't know how much, I have no idea how much money he's making from Celsius. I'm going to guess like 100 ,000 bucks. I want you to give that$100 ,000 up to get$50 ,000 of equity. Plus, I want you to write a$25 ,000 checks and now you're kind of$75 ,000 out of the door. You can't do Celsius anymore. And maybe in six years, you're going to get a big fat check. Like that's a bad bet. I talk about that on my Instagram all the time. Celebrity beverage is a bad idea, but why not go to the modular space photography business called Array with amazing, thoughtful founders that are in the middle of their series B?

8:24Like that's somewhere where you aren't going to do a deal and you can make a big

8:30Ian Shepherd:difference amazing that is such a fantastic overview thank you for that i've got so many questions i mean um can you just say the scene like how hard was it to raise the first fund did investors take you seriously initially think that no they didn't i think that the there was a right place right time i think that we all look back at covid and of course there's a bunch of terrible things but there are a lot a lot of you know really positive parts of like i spent a bunch of time with my parents as an adult that like i wouldn't have otherwise spent i really enjoyed that. And I picked up tennis again, and I enjoyed that.

9:03But also people were like cash was free. You know, interest rates were in the toilet. It was like people were going and buying, you know, buying houses before the market popped back and real estate became crazy expensive in those first eight to 10 months of COVID. Like it ends up being a great time to go present people with like just a totally interesting concept that I had not proven out. And so it wasn't that hard, Fund 2 was actually much harder because cash was so expensive at the time. Not only was it so expensive, I only had paper markups to show people. It wasn't like, you know, at the time, I think Colossal had just done their billion, like$1.1 billion valuation raise.

9:43It was like their Series B. And that was cool. But I was still basically telling people, like, give me more money because the Woolly Mammoth business says they're bringing back a Woolly Mammoth. And like, they haven't yet. And I think that we both know that they're definitely going to. And now we have real liquidity for our investors. And it's been a much easier story to tell in Fund3. But like, it was hard. It was one by one. I'd also never raised money before. Like, in every single conceivable way, like, I am a venture-backed founder. Like, I had a crazy idea with a different business, a slight, I mean, from a financial perspective, the same, but from an execution perspective, a different business model.

10:22I needed to raise a lot more money than other people do at their pre-seed and seed, right? I wasn't raising 500 grand or$2 million to operate a business. I ended up raising over$13 million. And today, the market value of that is, I think it's north of$70 million, which is awesome. We're doing a great job, but it was silly. And it was one by one. I still remember my very first investor who's an investment banker in New York. He's my age, and he had just made money for the first time. And he's like, F it, I'm going to put 500 ,000 bucks in. And the feeling was electric. And now six years later, like I've proven something a little bit, at least enough to go do another round of it.

11:05But I always ask myself this, like if I knew everything I knew now and had to go do it again and start from zero, like could I do it? I think the answer might be no.

11:12Ian Shepherd:That's a big statement. You've mentioned a couple of the investments there. Can you just share maybe a few more in terms of the firms that you invested in? Sure. I mean, the ones that are certainly well covered, WAP here in New York and Brooklyn, Colossal Biosciences in Dallas. WAP is a digital products marketplace. A lot of creators create products on WAP. They did$315 million of GMV last month. I invested in September of 2021. In September of 2021, they did$300 of GMV that month. So crazy. Underdog Sports, we did their Series A. I've known Jeremy for a long time. He's in Miami now, but it's a New York based business.

11:56And then we're missing Whatnot. And Whatnot is now worth over$12 billion. And we did that at a$50 million valuation. Fund 2, there's some awesome winners there. I actually think that Fund 2 could beat Fund 1. We've taken a much more balanced approach. I was by myself. Now my business partner, Dylan, she's been my best friend for 17 years. There's not that many people that get as lucky as I have to have someone with that level of accountability that really holds me to task and I can hold her to task. But we invested in a business called Somos, which is laying fiber optic cable down in Latin America to provide high speed Internet and ultra urban environments where Starlink's not going to work.

12:39So we did that like a$50 million valuation. They just raised it like a$350 million valuation. I think that'll be our first unicorn in Fund 2. we invested in unrivaled which is really really really off brand for what we do like it is not what we do as animal capital but it's kind of like i know where all the bodies are buried in those media licensing deals and so it makes it really hard but before the first season ever launched of unrivaled which is a three-on-three women's basketball tournament it takes place over the course of eight weeks in one location all the teams stay in one area so it takes a lot of the cost out of it.

13:12They play in one stadium. They already had their lead sponsor signed. They already had a multi-year TV deal signed. So they were profitable before they started, before the first person dribbled the first basketball. And to me, that was a reasonable reason to take the bet. We did that at a$30 million valuation. It's already 10X. It's well north of a$300 million valuation. And they haven't even gotten the season, the third season of the actual women playing basketball. What else did we do that's super, super interesting? We did MixLab, which is an amazing pet pharmacy. We did that when they were doing$3 million of revenue.

13:41They just crossed 50. We did Sundays for dogs. Again, not super on brand for us to do a dog food. But similarly to everything else we do do, very interesting approach. When we looked at the business, and I'm very fortunate that my cousin owns a couple of pet supply stores, so I made him do some diligence. But their plan six years ago was we know that dogs are having allergies the same way that humans are. We used to not have peanut allergies. We used to not have gluten technologies. We now have all of these things. And it's because of the cross contamination that occurs in factories between, you know, you might be eating a chickpea tortilla.

14:17My brother is deathly, deathly allergic to chickpeas. And it is right beside the flour tortilla line. And just because you ate a flour tortilla, you may still get the chickpea, whatever. And I've literally seen my brother using EpiPen because of it. And so Sundays for Dogs did the same thing. Like, we're going to spend$5 million after our Series A to go build our own space in our own facility, which was unheard of. Crazy capital expenditure that early in a business. So we invested when they were doing about$3.5 million of revenue before it was like a seed extension. They just raised it, I think, a$280 million valuation, just crossed$100 million of revenue in 2025.

14:53And again, different approach to a legacy business. And I think it does speak to what we do do, even though dog food is not something that we would do, you know, typically. So I think in an AI world, we've kind of undervalued, we've really undervalued like services oriented businesses, the pet pharmacies of the world, the Buy Wander is another great business. We did, we convinced them to take venture capital money at an$8 million pre-money valuation. They just closed around, which I won't give away the number because I know they want to do their own press, but a really big number with two amazing, amazing firms.

15:25These are all the thing that all these shares share is they are service oriented businesses where a human connection has built a very significant wide, wide moat. And that relationship is extremely, extremely sticky. And while AI has made their business much more efficient and their revenue per employee, like as a metric is way, way better. What they do in the service they provide is not going anywhere. I think as you look at all these crazy valuations that are out there in the world, these multibillion dollar and I'm I'm ignoring Anthropic, I'm ignoring OpenAI. But I mean, the 5 million to 25, 5 billion to$25 billion valuations of Harvey and Kurser and a handful of these businesses, I think they'd be, the founder would not be the first to tell you.

16:09But I think that, you know, there are investors that are still super illiquid and are nervous about a very funky IPO market. it, they'd say, yeah, I'm nervous. Like if it's really that big of a, of a opportunity, why wouldn't an Anthropic that's raising money at a$900 billion valuation move down cycle into what I do? They'll eat my lunch and they will. And for a lot of these businesses, they will eat their lunch. And that's, you know, part of that is venture capital, right? Like you, you take one bet and you got to have one, you know, out of like eight work. But for us, like we've, we've avoided, we didn't do the creator economy.

16:40We did not write any creator economy checks. We didn't doing any dot AI checks. But of course, there are lessons to learn from each of those big trends. And I think that you go talk to Andreessen Horowitz. I think they'd tell you if they could do it again, they wouldn't have started, you know, a crypto fund or a creator economy fund, but they did do those things.

16:58Ian Shepherd:Got it. Well, it sounds like lots of winners there. Now, one thing I'm really keen to talk to you about is your own social media account. So I know you've been posting for more than 100 days now. Can you just tell us about that? Sure. It was a brainchild of the folks that work for me. So Dylan, I mean, again, Dylan Sands has been my best friend for 17 years and she's a very seasoned investor from General Atlantic and has written some really thoughtful checks. And then I have a girl, a woman named Sam who came from a computer science major at Stanford and she's been with us from literally day one.

17:30Like she interned for me when she was still in college and she's been there through everything. And I take over a hundred flights a year. I have since I started. I've flown, call it 550 flights over five and a half years, over 800 ,000 miles. I'm about to hit my millionth mile just for animal capital flights, which is crazy. And the ask as we were doing goal setting for 2026 was, what can we do to get you from like 103 flights a year to like 80? So just like a little less than once a week would be like the goal. I'm not going to hit this year. I'm going to go, it'll be over 100 again. but we're working on it.

18:09And now I just carry my tripod around with me and the microphones. But the goal was to see like what might come in the door. And honestly, like it's worked. Like of course there's the totally ego piece of it. Like I was walking down the street and with my girlfriend and someone yelled like the VC guy at me as we were walking. And like, sure, that feels great. My girlfriend was like, don't get a big head about this. It was like, no, no, no, my head's already gigantic. Like I'm not gonna be able to fit in the room. But we've already written our first check from someone that reached out cold to us.

18:38And it was like, honestly, in December when we were like planning it out a little bit, I would have told you it will never happen. Like this will be like fun. Maybe I'll like, I'll grow some followers or maybe like I'll get invited to like speak at something I might not otherwise get to have spoken at. And like that hasn't happened. Like I don't want to ask me to speak. I'm sure someone one day will ask me to speak at something. But like I had a young man named Abood reach out to me and Abood is from Gaza. like was literally born in Gaza. His parents are still there. And he was like, his parents are like, well, we're not leaving.

19:12And he was like, and they were like, also, you're not leaving. And he was like, I'm going to leave. And he got enough money together and got into college and paid for a one-way flight to California. And he's not going back and he started this business. And when he reached out, he kind of said, hey, I've got this idea around space compute, you know, space compute, which is I think a fairly sexy space. And we invested in it. It's now been a couple of months. It was a little bit before Elon Musk started talking about it so drastically. So hopefully the timing ended up being good. But the core concept is basically that heat, water, and electric bills are going to continue to rise at a disproportionate rate to the compute power of these data centers coming online.

19:51So while everyone thinks that the supply is going to rise to meet demand and then prices are going to fall, and then it's going to be a margin compression business, the heat, water, and electric bills are actually going to lead the prices to continuing to go up. and in space you don't have heat water and electric bills and so you might not be able to expand the amount of compute you can offer but you can but you can offer it consistently and you can continue to offer the same amount you know and offer 10-year contracts whatever and he explains this to me basically in an instagram dm and i'm like okay this is cool like i'm willing you know i want to learn more take a phone call and it turned out that he came through an accelerator program called Z Fellows, which is where WAP came from for us.

20:31He took money from Village Global, which is like a great venture fund that, you know, I was aware of and knew of. And he'd hired these ex, I'm going to get this wrong, but like ex-marine to come help him build this thing. And he's already reserved space on a Starling satellite in September. Like he's a real guy. Like he, like interesting story, has money. And the reason that he showed up at my doorstep was for one reason only, which is he kind of sucks at telling his story. And he does. He's going to get better, and we're going to work on it. That's what we do at Animal Capital is help you communicate as best you can.

21:05And if you told me that's what came out of the entire 300 days, that would have been a success. And I'm going down to Western Kentucky tomorrow morning to go visit someone. He's an egg farmer in Western Kentucky. and I'm gonna go look and he came from my Instagram. And so it's not that I like want to heavily encourage people to keep pitching me on Instagram because I probably get it a hundred times a day, but like do it. Like it's clearly working for people. It's working for me because we're pretty for a New York, you know, I'm from Raleigh and I still split my time between Raleigh and New York, but our office is in Raleigh and I'm back and forth a bunch.

21:46But like for a Raleigh slash New York based venture capital firm, we're pretty US agnostic. Like, our best deals are in Dallas and in Spokane and in Ohio. And, you know, they're all over the place. This is a great way for us to be distributed in that way. Because I think that, like, everyone keeps saying this. Like, I think this happens in every venture cycle. The best businesses to invest in are the unsexy ones. It's 100 % true. Like, it is 100 % true. The idea that you're going to beat Andreessen Horowitz and Founders Fund and Union Square Ventures into a sand dune, sand dune hill, whatever that road is called in the Bay Area.

22:22like that you're going to beat them to a deal. Like you're just not like, you're not, they're going to take your money before they take your money. But can I beat someone to Western Kentucky and get someone from a$3 million valuation to a$30 million valuation and have a 10 X for myself before a big series? Yeah, I definitely can. And we've candidly, we've proven that like, but we have our last, you know, five of our last eight deals are, are all proprietary. And while we don't lead deals and we don't take board seats, we are, we have been the first check or tied for the first check five out of the last eight times.