Smash Ventures: The Quiet Investor Behind Epic Games

Smash Ventures: A Rising Force in Venture Capital

In 2018, Smash Ventures first gained recognition as an investor in Epic Games’ substantial $1.25 billion funding round – a record-breaking investment for a video game company at the time.

Early Recognition and Growth

The firm resurfaced last summer during an even larger funding event for Epic, with the games developer securing $1.78 billion. This resulted in a post-money equity valuation of $17.3 billion. Interestingly, a diner near Epic’s headquarters in Cary, North Carolina, selling “smash waffles,” began receiving inquiries from journalists, as noted by Eric Garland.

The Founding of Smash Ventures

Garland, previously leading venture and growth initiatives for The Walt Disney Company after selling BigChampagne to Live Nation in 2011, co-founded Smash Ventures alongside Evan Richter. Richter formerly held a position within Disney’s corporate strategy and business development division, having previously worked as an investor at Insight Partners.

A Newly Launched Fund and Notable Backers

The pair initially focused on establishing their firm, and have now successfully launched a $75 million debut fund. This fund draws support from strategic partners and prominent investors. These include Kevin Mayer, former CEO of TikTok and Disney executive; Ed Catmull, a co-founder of Pixar; and Willow Bay, the current dean of the USC Annenberg School for Communication and Journalism.

Unique Capabilities in a Competitive Landscape

Richter and Garland suggest that Smash Ventures possesses unique capabilities in a market where capital is readily available to many founders.

Leveraging Limited Partner Networks

Smash Ventures demonstrates an ability to quickly establish additional investment vehicles for promising deals. Their connection to Epic Games originated through Disney’s accelerator program in 2017. When they secured a larger investment from Smash Ventures in 2018, they were able to assemble “several hundred million dollars” from their limited partners (LPs) for a stake in the company.

Strategic Investments in Portfolio Companies

Furthermore, they utilized their LP network to allocate an additional $200 million to other portfolio companies. These include DraftKings, prior to its public offering; Nobull, a footwear and apparel brand; Manscaped, a men’s grooming company; and Byju’s, a leading e-learning platform in India.

The Disney Connection

A consistent element throughout these investments is the involvement of Disney. The company included Epic in its accelerator program and initiated an educational app collaboration with Byju’s in 2018. Additionally, Disney held a 6% stake in DraftKings at the time of its public debut.

Support from Former Disney Executives

Kevin Mayer, the former Disney executive, acknowledges that Richter and Garland identified “a lot of really cool companies like Epic” during their time at Disney. He has continued to support them, recognizing their strong investment acumen.

Utilizing a Powerful Network

Mayer emphasizes the strength of their former Disney network, noting that he often provides strategic guidance and discusses potential exits and mergers & acquisitions with portfolio companies, in addition to being a limited partner. Garland adds that Catmull also assisted in finalizing the Epic deal.

Maintaining Positive Relationships with Disney

Garland clarifies that Smash Ventures’ activities have not caused friction with current Disney executives, stating that Disney is not typically involved in venture capital outside of its accelerator program.

Facilitating Storytelling for User Engagement

Smash Ventures also focuses on assisting companies in crafting narratives to engage their user bases. Richter explains that leading consumer software and internet businesses are building large, dedicated user communities. Media collaborations, such as Travis Scott’s experience within Epic Games, or partnerships between Marvel/Disney and Byju’s, can effectively retain and expand these user bases.

A Focused Investment Strategy

The firm maintains a concentrated approach to investing. Despite writing its first check in 2018, Smash Ventures currently has only five portfolio companies. They intend to invest in a total of 10 to 12 companies with their $75 million fund, with initial investments ranging from $5 million to $10 million.

Publicizing Efforts to Attract Opportunities

Richter suggests that Smash Ventures is now increasing its public profile to attract new investment opportunities. However, Garland emphasizes that the partners prefer to remain focused on their work, prioritizing support for their portfolio companies while maintaining a low profile themselves.