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).