Shane Kelly — MCT

Posted on Wednesday, September 29, 2021

Media tech expert Shane Kelly joins to discuss the business of financing feature films and tech startups.  

Shane also shares his passion for Pharrell’s Black Ambition Price and his thoughts on the state of capitalism.

 

View Transcript

Shane Kelly is with me today. Shane is a film tech expert having financed over 20 feature films and invested in over 20 tech startups. His primary investment fund is MCT a fund that will finance content creation and also invest in the tech that enables the media industry. He’s also involved with Pharrell Williams, Black Ambition Prize, a board director for Plugin South LA and managing partner at Wolverine angels.

Hey Shane, thanks for coming on the pod.

Absolutely Minnie, thanks so much for having me. 

Well, let’s start with MCT, I thought, cause that’s kind of your primary vehicle right now. 

Absolutely. Well, first I just started with just a little bit of context. MCT was born out of this notion that there are going to be kind of new modes for investing in content going forward. And I learned about that through, as you mentioned, financing about 20 films that did 300 million at the box office and then spent the last decade just investing in tech startups and building tech startups. 

And so, MCT is really an organization that is set up to fund the future of content. And MCT was formed, to not only be able to invest capital into the new pipelines for content that have emerged with streaming as well as traditional but also now with the disruption that’s happened from COVID, there are massive opportunities for deploying capital into the space that really didn’t exist before. And so that’s really, the thesis of MCT is to take advantage of really opportunistic places to deploy hundreds of millions of dollars into content.

And that was hard to do if you were not a studio up until now, and now we actually have an opportunity and a window to invest, you know, significant chunks of capital into content. 

Yeah, so tell me how that works in kind of the new model. Like, you know, I know seed financing, which is, you know, a syndicate of people who are writing checks into a seed round. Is that sort of the model you’re talking about or how does it work?

It’s actually very different. There’s the traditional financing of content that is how it’s been done for decades. Right? A lot of that was the major studios providing the capital and also providing the distribution apparatus to be able to monetize that. So it was more like a, uh, think of it a little bit more like a late stage PE model, where you want to take a majority stake and monetize it, you know, and retain control of the monetization. What’s emerged now is models where you can actually invest alongside of studios. You can invest alongside of production companies. So it’s not typically a syndicated pool of capital, but where it is similar Minnie to the seed financing rounds is the level of risk. So you could invest at the development stage where you have scripts or you have stories, or you have talent, packages. We call them talent packages, right?

Where you’re pulling a group of really talented director, a producer may be And you could invest in the content at that stage, but it’s typically one investor or a producer that’s kind of shepherding that through.

 and then the stage that we’re seeing a lot of opportunities right now is investing in content that has been produced and providing the opportunity, get into content. that’s been significantly be risked, which historically is just very difficult. 

 like, you’re not going to see, uh, really high quality piece of content. Just go to zero. Like you can start up right where it’s just getting no money back on that deal.

Like that’s happened to me for sure. it’s never happened to me on, on a really high quality. 

When did you

anytime or TV, project or video, like anytime you have really high quality, like there’s monetized value there, so you’ll get something back on it, and being able to two X, three X, four X, five X that right. and even maybe a 10 X, you know, I don’t think you’re going to get as much into the a hundred or a thousand X that you get sometimes in venture. but you can get significant multiples on your, on your capital in that space.

and why no flops does that have anything to do with changes in distribution, that sort of thing 

Yeah. I mean, it’s like it’s IP, right? Like that’s how we talk about it. That’s how we think about it It’s just a different kind of intellectual property. And then we invest in, in tech. So the intellectual property that we’ll invest in is, okay, well, we have this incredible piece of content. No one in the world has seen it, except the folks who created it, That’s [00:05:00] incredibly valuable. The only question is like, how much is it worth? And we’ve seen, that’s been really interesting is the tech world and the content world kind of playing together.

Right? So recently had a couple deals that Netflix has done with Sony. And, this is a traditional content studio that is doing deals with this new entrance, the streamer, And that’s just for access. After the films have come through the studio, gone through theatrical distribution, the initial, exploitation window. And then it will go to Netflix immediately after. And that alone, even sight unseen for a lot of the pictures in that slate is incredibly valuable to a Netflix 

And how does your tech investing fit with your investing in IP? 

Uh, We think about the IP and then being able to invest in all these areas around it. and technology is absolutely one of the areas And that’s something that I’ve done through Wolverine angels.

It’s something I’ve done as an angel investor is something I did when I was running the fund that crowd smart, Uh,

So tell me [00:06:00] though about those tech investments a little bit, like does innovation in the tech of film and content? You know, I kind of assumed that it mostly came from the studios. Like I assumed that, you know, next generation, I don’t know, computer graphics would be coming from Pixar. Like how much does it come from venture and how much does it come from within the existing media industry?

That’s a great question. I mean, You’re absolutely right about Pixar, They have differentiated technology a hundred percent. Like that was a core area of differentiation for them.

however, a lot of these large entertainment companies are so big that they faced the innovator’s dilemma, just like everyone else. It’s like this technology is so nascent that hundred million dollars, like, does that really help me get out of bed in the morning for a company, the size of a Disney or NBC universal not necessarily, you know, and you see that throughout the industry, right? Where you have technologies tech that gets built and then gets acquired. But the [00:07:00] other side of it is more like a Netflix, right? and it’s not technology for technology’s sake to support others, it’s technology in support of a new consumer experience.

Right. And I like to call that kind of tech enabled, content products, as opposed to technologies that provide services to the entertainment industry?

these companies that are getting acquired, do you think that a lot of them are coming from entrepreneurs who are already within the industry, or do you think there’s, you know, an opportunity for people who come from like a tech background 

to be honest, I see. You know, I see operators from, in the entertainment industry, stepping out and starting their own ventures. They tend to think a little bit differently than we do in venture. you know, in the venture space, in the tech space, we kind of think about it as how does this scale, right? like, that is how we think in venture and it serves as well to think that way is like, how does it scale and how do you remain ahead of the curve when there are all these competitors that I, as [00:08:00] an investor have seen and that’s a really important lens in film and TV and content. It’s a very different angle. Right. the similarity is, the director or the show runner in that space is who you bet on.

Right. And it’s kind of like equipping them with all the resources. it’s like, I’ll run through walls for filmmakers so that they can focus on their vision. it often sounds insane. Like that is something that’s similar in both, right?

Like what this, what you want this person to do? What, like onscreen for Halla. And so the director of that film has to be that CEO right. Of that enterprise and has to have the vision that no one else can see and rally people around that.

And It’s a short stint, it’s a venture that lasts a year and then you monetize it for years and years and years and years, right.

So it’s a very different life cycle in the venture space. It’s more like I need to get married to this founder, right? If this goes really well, I’m going to still be on the board in 10, 12, 15, [00:09:00] 20 years. Maybe, 

And the business models are really good. 

let’s be honest. I mean, it is that situation where you have an incredibly profitable engine Consumers will pay like a hundred dollars a month for access to cable and then watch ads on top of it. Right? Like that is something that in the tech world, we’re like, wait, that doesn’t no one would do that. Right. But it’s been around for so long that it’s an incredibly profitable enterprise–things like network television, where it’s like, you’re making money on top of making money on top of making money.

So for entertainment companies to invest in disruption. It’s like, it has to meet this incredibly high profit bar? And so it’s kind of like, well, let me just stave off any disruption to preserve this cash cow for as long as I can. And then I have the cash to go acquire these companies.

So I think it’s that, that is a big difference. One commonality though, many is like the home run. Like getting one out of 20 companies that does extraordinarily well and [00:10:00] returns the fund. we don’t exactly look at that, that way at MCT, but we do understand that like one in 10 investments could, could dwarf the returns on nine investments.

What about, differences in culture? And I’ll say I find tech and I’ve always been in tech, but I find it fairly open. I find film or the media industry less approachable, I guess.

I’m curious how you experienced both the industries.

Yeah. I mean, I think we have this notion in tech of like sharing resources, sharing information, you know, open is good, right. And in the media industry, it’s kind of like, well, I have this project and I need to keep it quiet. 

Yeah.

 in mature industry, the big money part of the industry has kind of like, well, I’ve got this project. I might as well keep it under wraps because it doesn’t serve me to announce it. It does serve me to do this big PR blitz when it’s time to launch my movie So I think out of that comes a culture of keeping your cards close to your chest because [00:11:00] you do want to preserve that like excitement, you know what I mean? And create that scarcity around the project.

 However, one interesting thing to come back to on that is I often coach first time founders, like get as much feedback on your idea as possible. Tell people about it, talk about it, practice talking about it. I say the same thing the first time filmmaker. 

Interesting.

it’s like go up there and tell everyone about it. get this pressure tested, understand who wants to see this, film. Um, do you want to talk at all about some of your other investments that have been on the tech venture side of investing?

Absolutely. I mean, there are a couple of companies that are, that are really top of mind right now, that straddle the kind of content world and the tech world. one of them is durable, durable is founded by Ramsey’s arcade, who had this experience like a pretty close relationship of his who did not have use of his body from the neck down, lost the use of his body from the neck down when Ramsey’s was. [00:12:00] And he kind of committed himself to solving that. And the way he did that was he dove deep into neuro tech. So he did a PhD at university of Michigan in neuroscience while he was there. He’d been developing these, sensors that you could kind of put on your head. He developed the algorithm really to interpret the signals that come out of your brain, just through a simple EEG.

and he was able to read that and ascribe it to intent. So he could run correlations effectively between, okay, when you wanted this or you thought this, my screen would light up in this way. So, what he was able to do is allow individuals in his lab with 24 sensors, attached to their head to be able to steer a wheelchair with their thoughts, 

wow.

uh, steer a car, um, play a game that then evolved into a form factor inside of a VR headset.

About three, four years ago. I invested in 20 15, 20 16, and now it’s [00:13:00] evolved into a form factor that is a basic pair of headphones. So think of a Bose set of headphones, where you could put it on your head and it can understand when you’re in focus mode and when you’re losing focus, which songs help you focus more or less in the future, what we’ll be able to do. Is allow you to skip a song with your thoughts, or call someone with your thoughts like that is where this is headed, but we just did a crowdfunding campaign and pre-sold a ton of these headsets earlier this year. 

and so it’s just reading sort of your neural signals somehow.

That’s right. If you think of like an EEG, it’s just reading electrical signals from your brain noninvasively. Right? And now they’ve gotten all those wet sensors that they attached to people’s heads in the lab. And now it’s just literally sensors are woven into the fabric of the headphone that touches your ear so they’re, they’re just simple over your headphones. I’m so excited for, for the, for where this could go. For sure. Driving wheelchairs with our [00:14:00] thoughts really does sound like the future. Uh, do you have thoughts on broader trends, maybe around media consumption? 

I think of the opportunities that’s emerged is that you have all these streaming services, right?

From apple to Disney, to Amazon, A lot of them are doing really well. they’re doing is they’re taking, some pretty interesting machine learning approaches to data to run regressions and correlations. To understand if you watch this video, you’re more likely to watch this video and stay on platform for long.

The opportunity that I think has opened up in that space is that if you correlate videos to increase, watch time, what I think you miss is an understanding of the viewer. So how do you really start to develop a cohesive understanding of the viewer?

Right. Like if I watch a documentary right now on app, on Afghanistan, I’m probably going to get a lot more Afghanistan, So now I find it so hard to break out of my [00:15:00] algorithm on Netflix, right? Like I really have to search and know exactly what I’m searching for to find something that’s not my normal. And I think that is a challenge for those companies that are actively working on. And it’s a huge opportunity for innovation is how to we, figure out, How to match content with audiences more effectively.

 I think it’s a very interesting question. The other is like, what are those modalities for experiencing. and I, fundamentally think that there’s another shift coming and human computer interaction very soon, which is part of the reason I invested in durable.

 Uh, I also think there’s an opportunity for new approaches to providing content to audiences, given the un-bundling that’s happening, Like cord cutting, we think has this massive thing. But in reality, it’s extremely slow. Right? Most people are still like have their cable TV, Little audio glitch, Shane, while Shane reconnects, his Bluetooth, I will. Ask you to give the podcast five stars.[00:16:00] 

 Um, You feel free to reach out to me, minnie@tenoneten.net. If you have anything you’d like to chat about, um, okay. Okay. Shane is back

good.

to go. Cool. So yeah, the unbundling, I really think there are going to be interesting dynamics at play and lots of disruption as this unbundling happens. And as these acquisitions happen and mergers happen, what happens is companies that were already huge get even bigger. So the bar for investing in new technologies or disruption becomes even higher, which I think creates even more opportunities for tech startups to find those hundred million dollar opportunities, that $500 million opportunity that they can carve out and pursue, and then hopefully kind of sell to one of those companies So I think that is something that folks should really watch carefully as who are the organizations that are emerging.

Sure. And what are their strategic priorities? Where are they going to be interested in looking to make those acquisitions? Um, let me switch gears a little bit. And I mentioned at the [00:17:00] beginning that you have been involved with Pharrell Williams, black ambition prize. Maybe you can tell me what that is and what you’re seeing there.

Yeah, no, it’s been absolutely amazing. So from Williams founded black ambition prize, black ambition prize started out kind of as its competition, right? To bring together black and Latin X founders, and provide them support and provide awards for the folks that win. And it grew from there, there ended up being, I think, 10 winners.

you know, in the prizes were anywhere from a hundred thousand to a million dollar. And there were over 200 finalists And what black ambition did. and for all Williams decided to do was engage an organization to run a mentorship program, basically think of like a five month long accelerator program.

 And we ended up recruiting 23 mentors to mentor, you know, [00:18:00] close to 200 founders who participated in that program every other week for five months.

And they brought me in to be lead mentor. So my, you know, I’ve been mentor for backstage capital for Techstars LA Techstars, anywhere, and a bunch of other programs. And they were like, well, you’re like a professional mentor. Like I was like, I guess I have done a lot of mentoring.

So, um, 

So. I’m getting so much from these founders and I’m absolutely loving it. 

Like I learned so much from, from these founders, you know, about the, where the world is headed. And so the program that competition, the first round of the competition has ended prizes were awarded, but this program is still going and they’re going to do it again.

Next year. 

That’s great. I mean, it comes through, so you sound like, you feel very inspired by black ambition. how are you experiencing sort of. The movement in tech, the recognition that most people I think are having that they’re sort of waking up and saying, oh, we don’t have [00:19:00] diversity in our industry.

Like how, how are you experiencing that 

Well, I mean, I think I’m getting invited to speak a lot more, you

know? Um, and, and I think that’s great. and I think, you know, diversity is important, right? It’s, it’s a stepping stone in some ways it can be helpful. but I think what’s, even more important as inclusion. 

and what I mean, by kind of going into inclusion and then equity here’s an example, right? is literally black ambition is a great example because the founders in the program, they didn’t pay cash or equity to participate in this mentorship accelerator program. And. Black ambition prize was able to raise the funds, right? Because they’re a nonprofit to be able to support these founders in that journey. And many of the founders in my network, they just don’t have access to the relationships in Silicon valley or even in, Santa Monica, and so I think providing that access is one of the key elements, but I think [00:20:00] we also just have to do the deep work ourselves do the reading. Like we need to read like, you know, how to be an anti-racist you know, folks that are, that are providing this deeper understanding of what roles, race, gender, physical ability. sexual orientation have played in our society so that we can have the language for it to be able to understand our own biases. Right?

I’ve learned a ton about my own biases and trying to work hard on that. And then reading the books doing the work to make sure that we can build inclusive environments for, diverse groups. For example, HBCU VC is doing great work to diversify venture in a lot of ways. I think the Annenberg foundation with the work we’re doing in plug south LA, right, where we’re bringing people together from Santa Monica and south LA 

You know, I think all of these things are great ways like. I’m going to be calling you at some point and saying, Hey Vinnie, I want you to get involved in our plugin accelerator and meet with these founders. 

Do you think your excitement, sort of your mission [00:21:00] driven work has grown for you over time as you’ve progressed in your career?

Absolutely. Yeah, 

 why do you think that is? Is it just seeing more, you know, how, how has that evolved for you?

I’d say it’s a couple of things. One is when I was working in New York, doing finance and accounting and ops for upstart film production finance company, It was more like, okay, let me just kind of eat. I need to eat. Right,

I feel like I need to build my career. I need to build my experience. They need to learn, you know, so I was really hungry for all that learning.

And then at some point That journey of lacking scarcity and moving to abundance was definitely helpful, right.

Where I have, I am in the privileged position now of being able to choose what I work on. Right. Most people don’t have that luxury and I have that luxury. So I use that to kind of say, okay, well, I want to work on things that are more aligned with my values are more aligned with the vision of the world that I want to see happen.[00:22:00] 

The second piece, I think, has been an educational journey, right? Where I went down this path, really trying to understand how the world works and how oppressive systems and the world work, and how that impacts people of different groups, people of different locations. You know what I mean? If you’re in the Midwest or the coast, um, if you have black or brown or white skin, and it’s, I’ve really come to believe that like capitalism in the last 50 years, we’ve come to think about capitalism in a very different way than we used to. It’s a very new notion that the purpose of the economy issue value to shareholders that’s brand new. And if you look at value to shareholders above all else, and that’s the only thing that matters. Then that’s the only thing that’s gonna matter right. To businesses. And they’re going to govern their decisions by that. And I think going down that path of kind of value to shareholders own way, as opposed to some of the great entrepreneurs of the past, like Henry Ford [00:23:00] made decisions that prioritize the interest of the employee.

The corporate form that we had a hundred years ago was specifically not only value to share well there’s was also value to society. It was also valued employees. And I think that is, that is another of those notions that I’ve had to go do the deep work of history to understand like how have these systems of economy evolved over time.

Right. we kind of have this notion of, Hey, this is just how capitalism is. It’s just how it works. Now, it’s new. This is a university of Chicago idea of capitalism that came about 50 years ago, right? 

And I think that like value to shareholders, super important. But I think like if we ruin the world for value to shareholders, then we won’t have a place to live. Right. If we, if we oppress people for value to shareholders, then it’s not going to be a very good world to live in. Right. 

100% Shane. We are out of time, but what a good inspiring note to end on Shane? [00:24:00] Congratulations on the work that you’re doing.

I’m glad you’re here in LA and I look forward to hearing more from you and from MCT.

Thank you so much, many, and it’s been delightful to have this conversation. I really appreciate you bringing me on, and I appreciate the work that you’re doing at ten one ten.