How The Chainsmokers built a fund that doesn't rely on their celebrity status | TC Disrupt 2024

The Chainsmokers' Foray into B2B Investing

• The Chainsmokers, a well-known music duo, have invested in B2B startups, which is an unusual move for celebrity investors who typically invest in consumer startups 11s.
• Dan, a startup founder, first interacted with the Chainsmokers on April Fool's Day when he received an email from Alex, one of the duo members, expressing interest in investing in his company 1m12s.
• The Chainsmokers' interest in investing in B2B startups stems from their desire to move away from consumer investing, which they felt was becoming too focused on basic needs like distribution and marketing 2m8s.
• They were drawn to B2B startups because they found the space exciting and felt that they could provide a different perspective and type of value to these companies 2m47s.
• The Chainsmokers' strategy is to be a unique investor that provides support, perspective, and connectivity to B2B startups, unlike traditional funds 3m20s.
• They aim to be a "Robin" to the startups' "Batman," offering a different level of support and perspective 3m17s.
• The duo's music business is "sacred" to them, and they wanted to separate their investing activities from their music career 2m27s.
• They believe that the needs of companies have changed significantly over the past 10 years, and their fund is modeled to address these new needs 3m13s.
• The goal of Mantis is to provide value to founders and give them the best chance for success, while also being a complementary component to other investors, rather than a replacement for a tier-one investor or specialist investor 3m33s.
• The Chainsmokers' celebrity status was not seen as valuable by businesses in their key verticals, such as cybersecurity, B2B SaaS, and fintech, as it was not applicable in the same way it would be for a consumer brand 4m15s.
• To change this dynamic, Mantis aimed to outwork other investors, add value in any way possible, and build their brand within the community, with the goal of getting founders to help them build their reputation 4m44s.
• The concept of being a "role player on an All-Star team" rather than a starter on a crappy team is important, as it allows Mantis to help out in ways that lead investors can't, and provide value to companies in a different way 5m6s.
• Mantis wants to learn from the best investors and firms in the space, and position themselves as a valuable component of a great team, rather than trying to be a lead investor 5m42s.

Mantis' Strategy: The Role Player on an All-Star Team

• The firm aims to absorb best practices from other successful firms and provide value to founders in a way that is unique to Mantis, rather than trying to replicate what other firms do 5m53s.
• The idea is to be like Robert Horry, a basketball player who won multiple championships by being a valuable role player, and to be known for bringing specific skills and talents to the table 6m5s.
• Mantis wants to be proactive in reaching out to founders and finding ways to add value, rather than waiting for opportunities to come to them 6m22s.

Leveraging the Chainsmokers' Network and Connections

• The Chainsmokers have been able to offer support to companies they've invested in through their venture fund, leveraging their connections with powerful decision-makers and leaders in various industries 6m29s.
• They've built relationships with these leaders by performing at events for Fortune 500 companies and taking a non-transactional approach, focusing on meeting people and building connections 6m40s.
• The Chainsmokers can facilitate introductions between their portfolio companies and these leaders, putting them in a great position to win deals 7m5s.
• They've also gone above and beyond to support their portfolio companies, such as attending black hat conferences and recruiting efforts 7m27s.
• Every investment is an opportunity for the Chainsmokers to build their reputation and show their impact, rather than being a typical passive investor 7m37s.
• Dan has also been a strong supporter of the Chainsmokers' fund, going to bat for them in various ways, such as reference checks and advocating for them to other companies 7m58s.
• The Chainsmokers' network and connections are distinct from those of other investors, such as Sequoia, and offer a different type of value to their portfolio companies 8m32s.
• The Chainsmokers are able to add value to their portfolio companies through their unique network and connections, such as recording cameo videos to help close deals 8m41s.
• They also host events that are well-remembered by attendees and help to attract great candidates and companies 8m53s.

Learning and Growing with Portfolio Companies

• Chainu Guard is a potentially generational company for the Chainsmokers' fund, and they're able to learn from the company's approach to quarterly reporting and communication 9m7s.
• The value of being part of a successful team and learning from great leadership and investors is emphasized, as it is considered more valuable than owning a larger share of a less successful team 9m25s.

The Value of Events and Community Building

• Working with a firm like this provides a different kind of value, as they offer unique help and opportunities that others do not, such as access to high-profile events and connections 9m57s.
• The events hosted by this firm, such as private dinners and conferences like Black Hat, are particularly valuable for building connections and generating revenue 10m27s.
• One successful event was a VIP dinner at Black Hat, which led to building real connections with people and generating revenue 10m59s.
• The goal of these events is to make everyone feel acknowledged, connected, and welcome, which is at the center of the Chainsmokers' brand philosophy 11m32s.
• These events have led to the creation of an advisory network, where the firm can call on industry experts to bounce ideas and inform decisions 12m2s.
• The value of these events and connections is not limited to one direction, but rather provides value in many different ways 12m19s.

Building a Reputation and Adding Value

• The Chainsmokers' fund aims to create something unique that plays off existing funds in a helpful way, with a focus on their strengths and weaknesses 12m36s.
• People often ask if they will repeat their successful events, and they see this as an opportunity to build on their past success 12m48s.
• The Chainsmokers have been helpful in providing references for Limited Partners (LPs) and have played a pivotal role in connecting with companies in the cybersecurity space 12m58s.
• They are happy to do reference calls and discuss the value they add, whether it's for LPs or other founders 13m14s.
• They believe that helping other companies and founders is not a zero-sum game, and that the more companies they get into, the bigger and better the events can be 13m30s.
• They have a tremendous amount of respect for other founders and investors in the cybersecurity space, which they find to be challenging and technical 13m42s.
• The Chainsmokers have a team member, Savina, who helps lead their cybersecurity practice and has done an amazing job building that space for them 13m49s.
• They aim to be active members of the cybersecurity community, not just tourists, and have learned a lot through their investments and relationships in the space 14m7s.

Investment Philosophy and Approach

• One of their successful investments is Chain Guard, which was a solid bet due to Dan's experience in open-source supply chain security software 14m17s.
• The Chainsmokers believe that investing is a psychological game, and they have earned goodwill through their investments and relationships 14m27s.
• They have a hands-off approach to their investments, with one of their portfolio companies, Chain Guard, growing rapidly and achieving significant success 14m57s.
• The Chainsmokers also provide guidance and support to their portfolio companies, with one of their sales reps seeking feedback on an email to a founder 15m28s.
• The Chainsmokers' team works closely with individuals, and the team's efforts have been exciting for them, as they value building real relationships and providing value to both sides of an equation 15m35s.

From Music Promotion to Venture Capital

• The Chainsmokers come from a background of promoting their music through email and blog aggregators, teaching them the importance of communication and building relationships 15m51s.
• They understand the perception of the "entertainer investor" and the extra work required to change that perception, with Ashton Kutcher being a North Star for them in terms of what that type of investor can look like 16m20s.
• The Chainsmokers are excited to change the perception of being taken seriously as investors and are working to achieve that goal 16m37s.
• To be taken seriously in the space, the Chainsmokers think about finding conviction in companies and having the confidence to invest in them, with the goal of being taken seriously as investors 17m9s.
• The strength of Mantis and the Chainsmokers has been about community, inclusivity, and figuring out how to infiltrate a network, which has helped them build relationships and grow as artists and investors 17m19s.
• The Chainsmokers' early success came from remixing songs and promoting them through personalized emails, which helped them build a following and eventually become relevant in the music scene 17m45s.
• Alex Pall, one half of the Chainsmokers, would send 500 personalized emails to promote their music, which helped them stand out from the typical promotional emails sent by record labels 18m8s.

Building a Unique Approach to Investing

• The approach to investing is centered around adding value, inclusivity, and fun, which is often lacking in the industry 18m49s.
• The initial strategy was to learn and step in with humility, acknowledging a lack of expertise in certain areas, and choosing who to listen to 19m10s.
• A key strength is having a diverse set of skills, often referred to as a "Swiss army knife," which can be offered to those they work with 19m40s.
• The goal is to be humble and offer services while learning as much as helping, with a focus on being resourceful and helpful 19m52s.
• The first email received after announcing the fund was negative, stating it was the end of venture capital, but this motivated the team to prove otherwise 20m2s.
• The team's approach is centered around showing up for founders in a meaningful way, caring about their needs, and being versatile in providing support 20m30s.
• Having a diverse team with different backgrounds is intentional, allowing them to pull different strings and be resourceful and helpful 21m10s.
• The team prefers to let their results speak for themselves, rather than engaging in talk, and values the opportunity to learn from successful companies in their portfolio 21m31s.

Lessons from the Music Industry and Building Community

• The music industry taught the importance of listening to the core community of users, which is crucial for successful businesses to stay connected with their initial group of power users and not lose focus while expanding. 23m21s
• Not losing sight of core users and building everything with them in mind is essential to best serve customers or fans, as they are the best promoters of what you're doing and can influence others through word of mouth. 23m49s
• The music industry experience has been applied to other businesses, including cyber security, where having users vouch for the experience created for them is vital for growth and success. 24m30s
• It's easy to lose focus on core users as a business grows, but it's essential to remember that the initial group of users is still the target audience, even if the business expands to cater to a broader age range. 24m45s
• Humility and a willingness to learn from experts are key to success in new ventures, and people are often more open to helping than expected, as seen in the experience of reaching out to investors and founders for guidance. 22m6s
• Building a reputation and brand takes time, but it can lead to a significant shift in how others perceive the business, with other investors and companies seeking introductions and wanting to work together. 22m35s

Focusing on Core Talents and Values

• The Chainsmokers focus on their core talents and values when starting new businesses, ensuring they align with their essence and what they're good at, such as inclusivity and creating community 27m1s.
• They advise against trying to do everything and instead recommend focusing on what you're naturally good at and what aligns with your values, using the example of not making a country album 25m10s.
• The Chainsmokers have started various ventures, including a tequila company and a VC, but have deprioritized some due to the success of others, and they emphasize the importance of self-awareness in decision-making 26m49s.
• They suggest that success comes from natural extensions of one's talents and values, citing Jimmy Buffett's Margaritaville empire as an example of creating an environment that feels like a natural extension of his brand 27m51s.
• The Chainsmokers also mention the importance of learning from mistakes and that everyone will mess up in some way, but it's how you learn from those mistakes that matters 26m21s.
• Mahare, a senior at UC Berkeley, asks for advice on how not to mess up, given his involvement in multiple ventures, including a real estate company, an alternative alcohol drink, and being a DJ with over 100,000 followers on Instagram 25m52s.
• The Chainsmokers emphasize the importance of harnessing one's energy and focusing on what's close to their core, rather than just pursuing exciting opportunities 27m35s.

Mantis Investment Focus and Criteria

• They also highlight the value of relationships and showing up, citing their experience with their VC, Mantis 28m20s.
• The founders of Mantis, a fund established by The Chainsmokers, focus on seed and series A investments in five core areas: cybersecurity, cloud data infrastructure, health tech, gaming, and an opportunity bucket, with a particular interest in AI 29m19s.
• They are price-sensitive investors who model and underwrite their investments carefully for long-term success, and they prioritize a great founder and team, as ideas can evolve and change over time 29m52s.
• The founders believe that a solid deck explaining the founder's background, the opportunity, and finding common ground with the investor is crucial in building a relationship 30m33s.
• They are open to being approached through various channels, including LinkedIn, and value responsiveness and a clear thesis fit 29m33s.
• The founders emphasize the importance of timing, community, and awareness in investments, and sometimes pass on good-sounding investments if they don't fit their quarterly investment plans or thesis 30m24s.
• They are interested in meeting founders who have a strong background and understanding of their area of expertise, citing the example of Dan and Kim, who have extensive experience in open-source cybersecurity 30m3s.