Greycroft, the now 17-year-old, New York and Los Angeles-based enterprise agency, has grown up in additional methods than one. What started with three founders has advanced right into a 60-person staff. What started as a $30 million fund has grown into an enterprise that’s at present managing greater than $3 billion in belongings, together with two funds totaling roughly $1 billion that have been introduced in late April.
Like each agency, Greycroft, which targets investments from $250,000 as much as $50 million, has had its ups and down with its portfolio corporations. Cell video games maker Scopely stated in April that it’s promoting to Savvy Video games Group, owned wholly by Saudi Arabia’s Public Funding Fund, for $4.9 billion. (Greycroft invested roughly $100 million into the corporate and owned greater than 5% of the enterprise.) Greycroft additionally backed the courting app Bumble — which staged a profitable IPO in 2021 — and invested in Shipt, which offered to Goal for $550 million in money in 2017. Different bets have proved extra problematic, together with The RealReal, which staged a standard IPO in 2019 and has since seen its market cap crater; and Chicken, the scooter firm that went public by way of a particular function car in late 2021 and is now on the verge of getting delisted from the NYSE.
To be taught extra concerning the trip, we had a wide-ranging chat late week with agency co-founder Ian Sigalow, who, for what it’s price, doesn’t have a stance on Saudi Arabia-backed U.S. enterprise funds (although Greycroft is just not amongst them), says Greycroft is in rarified firm on the subject of its potential to write down large checks, and observes that anybody can play enterprise capitalist proper now, given among the costs within the public market — not that Greycroft is procuring there, he added.
You possibly can hear that dialog right here; within the meantime, highlights from that chat observe, edited calmly for size.
TC: You’ve raised principally two thirds of your belongings below administration in the previous couple of years. On reflection, do you suppose that you simply invested that too shortly?
IS: If I might take a ‘do over’ of 2020 and 2021, we’d most likely look again and say [that] half of the capital deployed throughout that interval, we’d have been higher off ready. On the flip aspect is that the opposite half of the capital employed throughout that interval, I feel we are going to make a extremely sturdy enterprise return on. Time will inform [but] we constructed very significant possession positions in a pair hundred corporations going into form of the late section of this asset bubble and [something like] $4 billion or $5 billion of follow-on capital went into Greycroft corporations in 2020, and that quantity grew in 2021. It was like $6 billion to $7 billion — monumental numbers.
After we began Greycroft in 2006, the complete U.S. enterprise capital business was $30 billion. Our personal portfolio [companies] have been commanding a lot capital, and also you have a look at it and also you form of must make a dedication, [asking about] each single firm, The place am I going to guard my possession and and the place am I not? The problem in that market dynamic is that in case you don’t increase the cash and your rivals do, you’re actually at a strategic drawback. So our corporations needed to go get capital. And for our half, as a result of we have been the most important shareholder in lots of of those corporations, we needed to make investments one thing. And I feel we deployed $250 million to $300 million in 2020 and 2021, which is a small sum relative to the $10 billion our corporations raised throughout that interval, however was nonetheless a big sum for us. And I’m very glad sitting right here in 2023 that our companies have the stability sheet they’ve . . .however the draw back of it’s that not each greenback deployed throughout that window goes to generate a 10x or better return.
Massive asset managers say development at a reduction is the place enterprise is heading. Are you searching for a much bigger possession proportion in offers than lately?
Enterprise in the meanwhile is a story of two cities. The capital is flowing into the very best development, best-quality corporations that I’ve seen, and we’re nonetheless assembly with companies which might be going zero to $100 million of income in a few years. And people companies can command steep valuations and quite a lot of mindshare and quite a lot of funding. It’s virtually as if the occasion didn’t cease for these corporations in 2022. You then’ve received a second set of companies which might be rising slower, are usually not more likely to be marquee belongings for a handful of causes, or simply have one thing to show earlier than they’ll get away. And I feel the problem at present is sorting by that record and understanding what has to alter – what market unlock has to occur — for that second set of corporations to blow up with development. For those who do, you’ll see the valuation and the a number of improves; in case you don’t, there simply isn’t capital for them.
There’s clearly quite a lot of nice worth available relating to publicly traded corporations whose shares are down and are extremely liquid. Is [shopping for these] one thing that Greycroft is doing on this market?
We’ve got the power to spend money on public equities. We’ve frolicked fairly a number of names which have offered off within the public market. We’ve got but to make both a PIPE or normal open market buy of of a public fairness but. After all, we personal public securities as a result of we’ve taken corporations public; we proceed to handle these. However I truly suppose it’s an fascinating space to look, and it’s an space that’s open to everyone. I imply, you’ll be able to go be a enterprise capitalist at present within the public market. If you’ll find an undervalued enterprise that’s received good development prospects — as a result of the businesses with a market cap under $1 billion or $2 billion don’t commerce very effectively, there’s not quite a lot of institutional protection, their market cap is usually talking too small for the Fidelitys of the world to take an curiosity in — in case you get into a type of companies early, you’ll be able to you can also make 10 instances your cash. In actual fact, I feel 10 years from now, individuals will look again and say, ‘Wow, there was a 50x funding to be made, if someone checked out these couple of names within the public market.’
Once more, you’ll be able to hear the total interview right here, the place we additionally speak with Sigalow concerning the round economic system, versatile dwelling, and the way Greycroft is considering AI — and the place it’s inserting its associated bets.