The Promising Value Of Consumer Companies With Tim Holladay Of Spacestation Investments

Tim Holladay recognizes the unique potential of consumer companies in today’s creator economy. Therefore, he has committed to funding them through Spacestation Investments. Joining Scott Kelly, he shares how their investment strategy has connected them with top influencers, pro athletes, and leading brands who bring so much promise to the world of consumer companies. Tim also looks back on his career journey that saw him try engineering, sell a company, and ultimately become an investor.

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The Promising Value Of Consumer Companies With Tim Holladay Of Spacestation Investments

Scott, that was a pretty darn exciting interview I read, so I’m looking forward to having Tim Holladay of Spacestation Investments. He’s great.

Honestly, it’s a great backstory. It was interesting. Tim and his brother pitched at my VC Fast Pitch event with his previous company, Crow Mics. It might have been 2009. He and his brother pitched for one minute. During lunch, he had an investor from Menlo Park reach out to him. They had lunch together and had dinner a few weeks later. They invested $270,000. A couple of years later, they invested $3 million. A few years after that, their company got sold, and they took the profits and launched Spacestation Investments. They proposed that pitch to an entrepreneur that I interviewed.

They have the coolest space. You held an event there, and I got to speak there. It was so cool.

It’s phenomenal. I remember we did a pitch event there. Before the event started, I went down the slide to the stage to begin the event. It’s a phenomenal event. They’ve got this great group of companies. They have this influencer agency, which has all the top eSports and brand influencers that co-invest along with them. They have one of the most successful eSports teams, Spacestation Gaming, which has won all kinds of international competitions. It’s like an entrepreneur at Disneyland when you go to his venue.

I love how he talks about what he does with such passion. I have a passion for products because that’s how I started. I started designing products as he does. It’s a sorely underlooked category. Investors scoff at it, like, “It’s too risky,” which cracks me up because they’re actual physical goods. It’s way less risky since some of the software ventures.

Everybody thinks they need technology, but they all need to eat.

That’s right. Let’s hear from Tim Holladay, and then we will catch up with our thoughts.

That sounds good.

I’m happy to introduce a good friend of mine. We worked together for many years. He is an up-and-coming fund manager, but a seasoned investor, Tim Holladay. Tim, welcome to the show.

It is always good to hang out. Thank you.

Introducing Tim Holladay Spacestation Investments

Thank you. Before we get started on your fund and where you’re going with that, why don’t you share a bit of background prior to starting the fund?

I’m a guy who was a failed engineer. I got a degree from Arizona State University in engineering and was never an engineer. I built and bombed a couple of companies on my journey, but built and sold 1 in 2016. That’s where you and I met. I’m trying to get this company off the ground. We had a product in market but at an early stage. We needed some capital.

I don’t recall exactly how we connected, but I was invited to pitch at one of your pitch events. It was a 60-second pitch. I practiced, got up there, and threw my pitch out there. It landed enough that it caught the ear of one specific investor from Silicon Valley. That started the road for us to raise over $1 million for that. We sold that company in 2016.

I was able to transition from that into some consulting, and then my brother pulled me up here from Arizona to Utah to build out here at what’s called the Spacestation. You and I have some history, and we’ve hung quite a bit over the years. I love being able to understand and have some of that in-the-gut intense founder feel from back in those days, but be able to transition that to an investor.

Share a little bit more about Spacestation and what you’ve been doing since you started that.

Spacestation is unique in that we’re founded by a creator or an influencer, Shaun McBride. He goes by Shonduras. He was a top Snapchatter who moved to YouTube and built out a number of a couple of channels that have incredible view counts. He has successful YouTube channels. He joined my brother. They were buddies. They decided to build more in the creator economy.

Instead of riding off into the sunset as a YouTuber and building up more channels, he decided to focus on, “What could we build inside the creator economy to support?” The first thing was an influencer marketing agency. We work with top brands and top creators and put those deals together. We also have an eSports org, Spacestation Gaming. It’s one of the top orgs for teams like Halo, which we won a world championship in. Rainbow Six, we were at the top. Rocket League, Brawl Stars, and a number of games. We also have an animation studio internally.

Where I get to come into play is we had a friend of ours from back in our startup days, Crowd Mics days, that said, “I see what you guys are doing at Spacestation. You should be investing in early-stage companies as Angel investors.” I was like, “What do you mean?” He was like, “You guys have this unique ability to create and build an audience. You have deep connections in the creator economy. You can become strategic investors in these consumer companies. I can make an introduction to this little company called Magic Spoon.” Magic Spoon, for those that don’t know, is a high-protein, no sugar cereal for adults.

We, in late 2019, cut a check off the balance sheet on a whim and put a check into Magic Spoon. COVID hits, and Magic Spoon becomes one of the fastest-growing direct-to-consumer companies of all time. After twelve months of us trying to help them build, in fact, we accidentally invented the famous bowl and spoon that Magic Spoon sends to their subscribers. I was trying to package up a cool package for influencers. I had a laser-etched bowling spoon sent, and Gabi, the founder, was like, “That’s awesome. Can we steal that idea?” They successfully did that.

Long story short, after that first round of Magic Spoon, we kept rolling. We jumped another round of Magic Spoon, and then we started to syndicate. We syndicated Magic Spoon, Olipop, Slate Milk, Grassa, and all these better-for-you foods. We then transitioned into health and wellness with Oura Ring and Hyperice. We got into supplements with Momentous. We got into Web3 and crypto in 2021. We got into a couple of fertility companies, some AI ad tech, and an incredible yogurt brand.

All in all, as an Angel group, we’ve invested in 109 companies and deployed over $32 million into those companies. We’ve been busy the last few years here at the Spacestation, building out this strategic Angel group. The last piece here is that where consumer companies get excited is that we bring interesting people into these syndicated rounds. We’ll bring top influencers. We’ll bring pro athletes and Olympians as investors into our rounds. Consumer companies love that. That’s been our thesis.

That’s awesome. You’ve gone from entrepreneur to Angel investor, and you’re launching the fund. Talk about the fund. Talk about the thesis. Talk about what you’re trying to accomplish with the fund.

The fund conversation started early. As we were syndicating even these early deals, we were like, “Should we build a fund?” but we felt that we needed to learn, frankly. We needed to learn the business and what companies needed, so it took us about four years to get the timing and the conviction to build this fund. We’ve been working on it for about nine months. The fund will be very similar in thesis to what we’ve been doing, which is early-stage consumer, so pre-seed and seed stage consumer companies.

We define consumer pretty broadly. It’s not just CPG, which is great. That’s Consumer Packaged Goods. We try to invest in some of the top CPG brands, but consumer, for us, is anything that touches the consumer. That’s where you can get into FinTech and health tech. That’s where we can get into even B2B companies that support eCommerce. We call it eCommerce or consumer adjacent.

We’ll get into those types of companies as well, including some that are using some incredible AI tools to help support certain functions in eComm. That’ll be the thesis. We’re looking to raise a $40 million fund. We are getting ready to circulate it, so the timing is incredible. I’m not sure when this airs, but we will be here in Q1 of 2025, starting to circulate this fund.

Investing In First-Time Founders

You answered some of my other questions, so I’m going to jump into another question. I want you to talk to two audiences. First, let’s talk to an entrepreneur who wants to get an investment from Spacestation and your new fund. Then, I want you to talk to potential LPs. Let’s talk about entrepreneurs first. You told us about the types of companies and the industries. Tell me about the types of entrepreneurs you would invest in.

It’s so nuanced. Here’s what I’ve learned as I dove into this world and industry over the last couple of years. It’s as much art as it is science, which is probably somewhat disheartening or maybe heartening for entrepreneurs and founders because it’s quite subjective. For us, we have always maintained that at these early stages, it’s all about the entrepreneur. That is the number one thing that we look at. “Is this person the right person to build this product or this company?” We look at the human we want to hang with and all of that type of personal connections that we feel are important. As you’re building a team or building out your investor stack, you want to have a person that you want to be around.

For us, our number one checkbox is the founder. Honestly, that’s where it gets hard and subjective. What metrics do you put around that? What metrics do you put around, “This is a great founder.” Partly because sometimes, these are first-time founders. We’ve invested in many first-time founders. You can’t point to some exited company or anything else in terms of building. You have to spend some time with them to try to figure out what they’re made of, how they think, and how they operate. That’s been tough.

Ideal LPs For The Fund

Let’s talk to potential LPs of the fund. Tell me. Who is your ideal LP, or what attributes would you want to see in LPs, quite frankly, outside of money?

All money is green, to some degree. Cash is cash. That’s a critical piece of this business. That’s what we do. We’re investing capital and trying to help multiply that both for the founders, the LPs, and the industry to move the industry forward. For us, an ideal LP is someone who is excited about exposure to consumer. The key LP for us is that they’ve got exposure to maybe cool tech funds. Maybe they put some capital in the market and, in different ways, public stock. That’s all awesome. We firmly believe you should allocate to all those different kinds of pieces and assets.

When it comes to early-stage VC or early-stage Venture Capital, we think that there’s an exciting opportunity specifically in consumer. From a thesis perspective, our fund is a little bit on the fringes. Consumer, at times, can be looked at as, “It’s not AI. The multiples aren’t there. It’s not going to slap a 20X on me. The potential isn’t there.” We beg to differ. We have a contrarian view of consumer that we think is powerful, which I could explain.

Why Choose Spacestation Investments

In the last couple of years, we have had challenges on the liquidity side of venture capital. I’ve been telling entrepreneurs for years that putting money in is the easy part for investors. Getting money out is the challenge. I’ll phrase the question as why your fund now? Maybe you can also share where you see the venture community going in general and maybe specifically for you.

Why now for us is that we have spent enough time in market, specifically in consumer, to see how cycles work in consumer, specifically, and also in venture, to some degree. It’s cyclical as most things are. We have gone through an all-time low in liquidity in general in many markets. I also spend a little time in the energy market for one of the port codes for which I’m on the board. It has been across the board. Liquidity has been all-time low. Investor sentiment has also been all-time low. When people are not feeling bullish or optimistic, that impacts their allocation strategy.

For as much as we like to think that investing in anything is a numbers thing or is math, it is as emotional as almost anything you do. There is emotion involved, at least at this level, in what we do. First of all, our timing works for us because we think that we have a track record as managers. We’ve got something that we can point to and say, “Here are the companies that we’re in. Here’s what we’ve already seen in terms of returns or some attractive potential.” We think we can continue to do that. In fact, we think we have better access than we’ve ever had. That’s one thing in terms of why us now.

Also, I’m an optimistic guy, in general, and so are you. We know each other well enough to know that. I think we are moving into a different and better cycle from a venture perspective. Liquidity is and will go up. M&A is starting to loosen up already. IPOs were frozen for the last couple of years. From IPO down through M&A, private equity, and then into venture, as those tiers loosen up, liquidity loosens up, and investors feel bullish and they allocate. With finding LPs that are excited to allocate, the timing is better now than it was some time ago.

The Team At Spacestation Investments

I would agree. You’re dealing with the cold, specifically. It’s been a little cold on the liquidity side. Share a little bit more about the team. You got yourself. Who else on the team is going to be managing this fund and working with the port codes?

Our partners are similar to what we’ve had. The partners are myself, my brother, who’s the Cofounder of the Spacestation, Shaun McBride, the influencer Cofounder, and then Chris Bennett. He’s a prolific Angel investor. He’s the one who introduced us to Magic Spoon and has an incredible deal flow. Those are the four partners. Side by side running the fund with me is Jaxon Stuart. Jaxon is a top-notch utility belt of a guy who has deep analytical capabilities. He is very personable. He has a great instinct for founders and consumer specifically. We have a couple of assistants and others.

Honestly, we’re a very lean team. As far as emerging managers go, I’m sure we’re not unique, but we’ll be a few of us, maybe three of us, full-time day-to-day on this. We think it’s sufficient. We know what we can do and what we have done. For us, this fund is a new vehicle or an additional vehicle to offer to our network.

The Promising Consumer Space

What else do you want to share with the audience? Is there anything in particular? Is there anything we haven’t covered yet?

From an LP’s perspective, you want to find your own risk profile and what you get excited about and allocate accordingly. If you have a little bit higher risk profile, then find some great venture funds. Find some higher-risk, higher-reward opportunities. In our case, with consumer, here’s what we’re finding. We’re finding that the amount of capital that goes into consumer on the private side versus the public side has a 3X offset, which is rare.

In almost every other industry, like IT, healthcare, and other industries, it’s roughly 1 for 1. You’re putting in X amount of dollars before they go public, and the public market is putting in about the same amount of capital. Consumer is offset by 3X on the public side. Meaning, 3X capital goes into consumer companies after they go public than before. We think that opens up an opportunity for investors to allocate to consumer because it will be rewarded disproportionately.

One little fact that we’ve learned as we’ve been diving deeper into this world is that I don’t know what LPs believe and think we will find out here as we push out this fund. It’s like, “In consumer, you can’t get the returns. You’re not going to find companies that’ll have a 10X multiple on their revenue. They’re not going to be these software companies or AI companies.” While AI is a bit frothy, so let’s maybe exclude that slightly, the top consumer companies are as likely statistically to trade at a 10X multiple in a liquidity event, so IPO or M&A, than a software company, but you don’t feel that or sense that.

That’s one thing we want to get out to the world, in general. For our fund and any other fund in this world, consumer is exciting. Something like 70% of GDP is related to consumer. It’s insanely robust and has some staying power. Also, we think that the hunting for unicorns method is not going to be our approach. We don’t know that that provides the best return profile.

We talked about this before we started recording. Some of these big firms are not able to show the multiples that an emerging firm can show. We think that’ll play out in consumer. Instead of hunting for the $5 billion or $10 billion exits, there’s a very robust M&A market specifically with PE and then also in the consumer space with these 5,000-year-old companies that innovate by acquisition.

We think that there’s a $200 million to $800 million exit potential for these companies that is incredibly powerful for the founders, very lucrative for the investors, and is a piece of the ecosystem that doesn’t have to be a $2 billion or $3 billion exit. We are fortunate to have in our portfolio four unicorns that became unicorns during our tenure. That’s awesome. They’ll pop up. We think that we’ll continue to find those, but our strategy isn’t hunting unicorns. It’s building a bunch of, in the baseball analogy, singles, doubles, and some triples.

I was going to say that. You can bat for average and not strike out as much. Honestly, from an investor standpoint, a lot of investors will invest in a software company not even knowing what the company does or what their product is.

That’s right.

With your fund, they are products that they can feel, touch, eat, drink, or whatever the case may be. They can understand the product. All you have to do is help them exercise to work on their business model.

That’s it. You’re exactly right. That’s one thing that’s fun and sexy about consumer. You can consume it and be a part of it. You’re right. Our specific go-to strategy and unique value is that we are connected to the creator economy. We know how to help early-stage consumer companies grow, working with creators and influencers. We’ll continue to deploy that strategy as a fund. We think that’ll be a help to boost these early-stage companies.

You are the consummate of smart money when you’re working in your vertical.

I don’t know how smart we are, but we’re trying. That’s debatable.

We’ll find out, right?

Yeah, we’ll find out. That’s the thing about venture. You don’t know if you’re going to invest for a decade. The feedback loop is so slow. We have some nice indications that we’re on the right track.

Episode Wrap-up And Closing Words

Where can people learn more about Spacestation, the fund, and you?

I’d love for anybody to reach out. As we push this out to credit investors and we push out this opportunity, we’d love for you to reach out. My email is Tim@Spacestation.com. Email us and hit us up. Also, our portfolio is found at SpacestationInvestments.com. We are also on LinkedIn as Spacestation Investments. I’d love to connect with anyone.

If anything, it’s enjoyable for us on the LP side to talk through the consumer. LPs understand, like, “Is this a thing?” There’s so much talk about software and AI. We are invested in software and AI as well. We are very pro that market, but not just exclusively, and not enterprise. We think that there’s an opportunity in consumer. If you’re an LP and want to talk it through and see what we see, let’s talk that out.

If you are a founder and you’re building something incredible in the consumer space or thinking of doing so, we’d love to chat. It’s the same email. I have a call right after this about a very early product development formulation of a new product that could be interesting with a celebrity to give our two cents on what we see, where we see pitfalls, what the challenges are, and what the opportunities are. If you’re a founder, give us a ring as well, and we’ll see how we can help.

Thanks for being on the show. I wish you the very best of luck with the fund. Congratulations.

Thank you for all you do. For emerging managers, this type of exposure and this type of discussion is so important because it is challenging for us to find our audience. Thank you for not just this show, but all the things you’ve done for decades to help guys like us build. I appreciate it.

My pleasure. Thanks a lot.

Thank you.

Thanks for coming.

You bet.

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He called himself an engineer who’s not an engineer from ASU. My dad was an engineer who was not an engineer from ASU. I didn’t realize we had that in common. It’s so funny. I forgot about that tie-in. He has $132 million in investments. That’s phenomenal in consumer goods.

He got started in investing in that cereal company, and now, that is $1 billion.

$1 billion in cereal. I’ve tasted it. It’s good.

They took in an investment of $1.8 billion, and they’re at a $3 or $4 million valuation. They’ve done pretty well.

I know that you get this a lot at your events. Since I have such a product background and lots of patents and other things in consumer products, I get a lot of people reaching out to me, too. I’ve always been like, “It’s hard. You’re going to have to bootstrap this. It’s hard to get investment.” They have a good formula and a good way of looking at the types of consumer product goods that they should have investments in and can make a difference in.

When you hear the one I did with Chris at Softeq, they don’t just invest. They bring in their influencers to co-invest with them. You’ve got these eSports and media influencers that have millions of followers and are like, “I own a stake in this cereal. I’m going to eat this cereal.”

That’s way better than hiring these influencers who will run off to the next thing. They’re invested in it. It’s a great strategy, and it’s working for them. He’s so right that consumer products are 70% of our GDP. If we don’t get a different investment strategy, then how are we going to expect consumer products to stay here in the US? It’s not going to happen.

A lot of them get developed overseas, and they get acquired by US companies. Most of them aren’t even US companies anymore. They’re on the US stock exchange.

That’s right. I love that he also said this quote. He said he’s not hunting for unicorns, but he finds them anyway. What a great strategy.

He’s like the Forrest Gump of VCs.

I love that you said that. That’s awesome. Tim Holladay is the Forrest Gump of VCs. I’m also glad you asked about the liquidity events. The liquidity in consumer products is very different. There is so much brand consolidation that happens behind the scenes that people don’t understand and don’t see. Your average product inventor, product designer, or product creator doesn’t understand what it takes to prove to them that you’re valuable enough to be bought.

That happened. Celsius bought Alani Nu for $1.3 billion. The reality is they’re trying to keep their market share. That’s been the model in consumer products, especially food, for years.

He has hit on something. I want to go back to Utah, hang out in his office for a while, eat some of the fabulous foods that they represent because they have them all over the place, and ride down the slide again. I am excited that you mentioned Chris Howard. We’ve got some great interviews coming up that tie in. You’ve got such a great breadth of interviews, so I’m super excited for us to continue on and review them.

It’s becoming interesting. It’s moving to the next thing. I sent you the calendar invite. The metamorphosis of this is that it’s going to become the Emerging Managers Summit.

That’s awesome. I love that.

That’s what I’m going to be doing at Expert DOJO. We’re going to start taking it on the road. It’s like, “You saw these guys on TV. Now, see them live,” kind of situation.

I love that. Everyone, you read it here first. We’re going to be on the road doing a summit in LA. It’s coming up. We’ll give you more details as we go forward. Everyone, thanks for tuning in to the show. We are very excited to bring you the next emerging manager.

Important Links

• Spacestation Investments
• Spacestation Gaming
• Spacestation Investments on LinkedIn
• Tim@Spacestation.com