Jun 8, 2021 - Economy

Scoop: The Chernin Group raising $1 billion for new investments

Data: The Chernin Group; Chart: Andrew Witherspoon/Axios

The Chernin Group (TCG), an investment firm that specializes in consumer brands in media and tech, is raising $1 billion to drive its third round of investments, sources tell Axios. It's adding three new partners as it looks to invest in more brands and new technologies, like blockchain.

Why it matters: A string of successful investments over the past few years has helped the firm expand to more investments in companies at a later stage.

Be smart: "We are totally focused today on growth stage right now," says internet entrepreneur and partner Mike Kerns, referencing investments in companies like Ro, Cameo, and Oura.

  • "If we did do more early stage, we would have a separate vehicle focused on that, but you won't see us doing more early stage (investments) from our growth funds."

Driving the news: TCG's three new partners bring a new area of expertise to the company's leadership team and a new geographic footprint to the firm, which currently has offices in San Francisco and Los Angeles.

  • Maureen Sullivan, based in New York, most recently served as the president and COO the skincare business Heyday and before that was COO of Rent the Runway. She'll help the firm explore more women-focused consumer businesses and subscription businesses.
  • Luke Beatty, based in Denver, most recently served as CEO of the digital asset management company Brandfolder. Previously, he was president of Mediabrands at Verizon/AOL. Beatty brings expertise in scaling businesses operationally, and will help TCG manage brands in the outdoor space.
  • Jarrod Dicker, based in New York, was formerly the Washington Post's VP of commercial technology and development and before that was CEO of the blockchain startup Po.et. He will help drive TCG's investments in blockchain, cryptocurrency and other technologies that connect fans with creators.

What they're saying: "Between MeatEater (based in Montana) and now The Pro’s Closet in Colorado, there's a whole entrepreneurial spirit going through Montana, Utah, Colorado, and having a sense of trends going on in different parts of country allows us to respond to them that much quicker," said media veteran Peter Chernin, formerly the President and COO of News Corp and Chairman and CEO of the Fox Group.

Catch up quick: TCG was launched in 2010 by Chernin and Goldman Sachs veteran and media executive Jesse Jacobs. Kerns joined as a managing partner and co-founder in 2015.

  • From 2013 to 2018, TCG deployed around $285 million in capital — most of which was majority stakes in businesses like Crunchyroll, Barstool Sports, Fullscreen, Hello Sunshine and others. It also invested in a significant number of seed portfolio in consumer tech and digital media companies, like The Athletic, Substack and Dave.
  • In 2018, TCG last raised more than $700 million, and launched TCG Capital Management, an investment firm focused on majority and minority investments in consumer businesses, like Surfline and Exploding Kittens.
  • Last year, TCG formed TCG Growth Opportunities, a special purpose acquisition company (SPAC) to raise up to $250 million in an IPO.
  • TCG’s current assets under management exceed $1 billion, per company executives. The team of about 40 added 14 new hires in the last 12 months.

What distinguishes TCG from other investment firms is its willingness and ability to invest in companies operationally and strategically, said Patrick Keane, CEO of Action Network, a sports betting content, data and affiliate company, which recently sold for a $240 million to a sports betting media group.

  • As former media executives themselves, "They really have this unique perspective because they have done it before."
  • TCG has been known to get extremely involved with their portfolio companies, helping them with everything from hiring, building products, deals, and business development. Keane was hired to run Action Network as CEO in 2019.
  • TCG invested just over $20 million in Action Network over the years, and sources say it saw more than 4x return on its investment.

The big picture: TCG aims to take strong brands in durable categories and help them build strong ancillary businesses in things like subscriptions and commerce.

  • There's an "idea of durability," Beatty says. "The categories that we're in, these are super durable. They've been around forever. They're not trend categories."
  • For example, "MeatEater was strictly a content brand prior to TCG's investment," says Steven Rinella, host of MeatEater. "TCG then doubled down with us in 2019, when they provided additional funding for us to acquire the hunting apparel brand First Lite in 2019."
  • "All of their businesses have have a deep content strategy at their core," says Sullivan. "They understand the importance of building organic audiences."

What to watch: "This whole creator economy is going to migrate towards the blockchain," says Jacobs. "There are thousands of niche interests we could tap into," he says, noting a recent investment in the bike space led by Beatty.

The bottom line: "They've really built themselves as the de-facto partner for media and tech companies that want to edge into a consumer focus," says Dicker.

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