Three billion dollars for YouTube videos with nursery rhymes and basic animation?
This is how precious it can be to capture the attention of children – and parents.
You might want to sit down for this …
Not only is the children’s streaming entertainment deal that I’m about to tell you about an incredible indicator for the media industry at large, but it’s also an amazing story of how investors from all over. days can use private investment to build lasting wealth.
In today Venture capital collection, I’ll tell you this story.
Better yet, I have two such stories today.
As we have discussed here at VC Digest, private investment is one of the best ways to create a generational wealth for you and your family. But until recent changes to federal regulations, the ability to invest in private companies was reserved for the ultra-rich.
Now ordinary investors can grab their share of the wealth.
In the first of today’s two stories on this topic, it all started with amateur cartoons and children’s songsâ¦
YouTube hits the tycoons of children’s entertainment
It all started in 2006, when a small business started producing children’s videos and posting them on YouTube. Using low-quality animation and simple nursery songs, these free videos were made for everyone.
After years of creating and publishing videos, this small business rebranded itself as âCocomelonâ in 2018. If you’re a parent or have been around young children in recent years, you’ve probably seen these videos.
Even if you are not … you may still have seen Cocomelon.
That’s because it’s the second largest YouTube channel, with over 120 million subscribers and well over 100 BILLION views.
To put that number into perspective, here’s the YouTube subscriber count for the world’s biggest media outlets:
- BBC: 11 million subscribers
- CNN: 12.9 million subscribers
- Fox News: 8.3 million subscribers
- ABC News: 12 million subscribers
- Al Jazeera: 8.3 million subscribers
Cocomelon has more subscribers and views on YouTube than the top 5 media outlets combined.
These tens of millions of subscribers are why, in July 2020, Moonbug Entertainment Ltd. acquired Cocomelon, along with another popular children’s channel, Blippi, for $ 120 million.
Since last year, Moonbug has been able to create partnerships with major streaming platforms such as Netflix (NASDAQ:NFLX), Hulu and Roku (NASDAQ:ROKU). Internationally, Cocomelon is now present on different platforms in several languages, including Mandarin, German, Spanish, Portuguese and Arabic.
Here is the part where you should sit:
Moonbug Entertainment agreed to a deal last week that it would be acquired by two Disney alumni. (NYSE:SAY) executives in a deal valued at around $ 3 billion.
Remember, Cocomelon and Blippi were bought by Moonbug just over a year ago for $ 120 million. Although Moonbug already owns several other brands, Cocomelon is by far the star of the company’s portfolio.
If this deal goes through and Moonbug is acquired, the return on capital for the private investors who have backed Moonbug will be huge.
Do you know which company has the most single family homes in the United States? With over 80,000 homes in its Residential Real Estate Investment Trust (REIT), black stone (NYSE:BX) wins this award.
And Blackstone backed the $ 3 billion deal to buy Moonbug.
Which brings me to our next story on the profit potential of private early-stage businesses …
Blackstone’s bet on electric trucks
Private manufacturer of electric trucks Rivien plans to make its public market debut this week with a valuation close to that of General Motors (NYSE:DG) and Ford (NYSE:F).
Founded in 2009 by CEO RJ Scaringe, Rivian has already raised more than $ 10 billion from some of the world’s largest private investors. This listing includesâ¦ Blackstone.
Blackstone has agreed to purchase an additional $ 5 billion of Initial Public Offering (IPO) shares, as well as Amazon (NASDAQ:AMZN), Price T. Rowe (NASDAQ:TROW) and Mantle management.
If Rivian’s IPO goes as planned, the company would be worth around $ 70 billion. By comparison, Ford and GM both have market caps of around $ 80 billion.
With a legitimately US-built electric truck, Rivian could disrupt the auto industry.
Although Rivian is a competitor for both GM and Ford, only one of these historic automakers needs to really worry …
That’s because Ford has already invested around $ 1.3 billion in Rivian, making Ford and Amazon the biggest investors in the startup. Amazon is estimated to own up to a quarter of the company at this point.
Let’s be clear. This does not mean that Ford or Amazon owns Rivian. This means that they will have significant influence and most likely the first rights to acquire or associate with Rivian in the future.
But the real winners?
The real winners here are Rivian’s early investors. Let’s do some math here to see what a seed investor in Rivian might walk away with …
Let’s be cautious and say Rivian’s round table was valued at less than $ 70 million (most of the firm’s round tables are valued at well under $ 10 million). If this is true, Rivian’s seed investors would be eligible for up to 1,000 times their initial investment.
A simple $ 10,000 investment in Rivian’s funding round could now be worth it over $ 10 million.
However, as with fundraising startups, early stage investors experience dilution with each round of funding. This means that an investor’s equity decreases each time the company raises funds.
The best way to think about this is if you imagine a giant pie. Each round of financing decreases an investor’s share of the pie. Butâ¦ each round of the table increases the total size of the cake. So even if your slice of pie gets leaner, the total size gets bigger.
I’ll cover private investment in more depth here at Venture capital collection in the weeks and months to come, including how you can find the next Moonbug or Rivian on your own.
(Additionally, you can find three private investments you can act on right now in your free special report: Top 3 investments by private companies for 2022.)
For today I think you get the picture:
Early investors in breakthrough companies can make life-changing earnings.
And here at Venture capital collection, that’s what we aim to do.
Editor, Venture capital collection
As of the publication date, Cody Shirk does not have (directly or indirectly) any position in any of the stocks mentioned in this article. The opinions expressed in this article are those of the author, subject to the InvestorPlace.com Publication guidelines.
Focusing on the megatrends that will shape the future, Cody Shirk uncovers generational wealth in the private investment space. To make sure you never miss Venture Capital Digest, click here to subscribe.