MrBeast & The Paltrowian Reality

Over the weekend, Jimmy Donaldson (aka MrBeast) tweeted that he’s moving on from MrBeast Burger, a ghost kitchen concept launched during the pandemic. Initially intended to help with restaurant profitability, the effort has grown to include 2,000 restaurant partners and has expanded into owned brick and mortar – its first physical outpost opened at the American Dream Mall in September 2022 (note: it’s unclear if the shift away includes the mall restaurant).

According to Jimmy, his decision stemmed from 1) his inability to oversee quality control, and 2) his personal preference for his snack brand, Feastables. Undoubtedly, Jimmy’s a perfectionist – it’s what makes him an incredible creator and entrepreneur – and we’re unsurprised that he’s committed to ensuring high quality customer experiences. But, the more interesting point is arguably the latter: his desire to focus on the project he’s more passionate about.

Earlier this year, at our conference in Miami, we spent a great deal of time discussing focus – specifically, that a creator-led company’s probability of success is commensurate with its creator's level of attention. This is an important consideration for any investor wading into creator-led waters. To our knowledge, MrBeast Burger has not raised any outside capital (given its partnership with vc-backed Virtual Dining Concepts)… but Feastables has. And we’d bet that Feastables shareholders are hugely relieved that Jimmy’s preferences weren’t inverted.

Whether due to quality control issues, brand equity concerns, or simply personal interest, the reason why Jimmy has moved on from MrBeast Burger doesn’t actually matter. All that matters is that he can and has. In other words, Jimmy’s tweet illuminates the most compelling argument for investing in a creator’s holding company vs. in a specific project or company.

As we’ve previously discussed, the holistic nature of a holding company benefits both the investor and the creator; the counter, exposure to only a portion of the creator’s work, introduces the following challenges:

First, the success or failure of these companies is so driven by the creator’s attention that investors may worry about putting in their own capital for fear that the creator will get distracted or move on. Second, it forces the creator to do slightly unnatural things with their time and effort such as dealing with low-level problems that have little to no expected returns vs. investing in content to support system-wide growth.

A consideration when investing in creator-led companies, holdco or otherwise, is key man risk – but the size of risk differs based on what you’re underwriting. If, one day, the creator forgoes creatorhood in favor of a traditional career like dentistry (and doesn’t make TikTok videos of it), then any of their investors might be SOL – especially if the company/brand has not yet managed to transcend the creator. If you decide to back a specific, creator-led project, you must believe that the creator will both continue creating and maintain their focus on that venture. Be warned – a double backflip is tricky to land.

This risk is not new – in fact, Sam often references a Paltrowian reality: Gwyneth effectively stopped acting to make Goop work. We’ve seen this time and again: while there are many inputs to (and gradients of) success, focus is the most crucial. By definition, creators, like entrepreneurs, are generative; however, unlike entrepreneurs, their output is often directly tied to their persona. And if you’re investing at the early stages in a relatively nascent industry, we believe you’d be prudent to ensure exposure to what that creator does, or may someday, care most about.