Dissatisfied with simply promoting brands on social media, Richards is now focusing on buying stakes in startups and then making them popular with his 25 million TikTok subscribers.
Animal Capital explicitly markets itself to investors as the premier venture capital firm with access to over 100 million engaged consumers – social media users who can become crucial clients for startups. These influencers not only have their finger on the pulse of the culture, but they say they are helping to create the culture.
“We are the pulse,” Richards told CNN Business. “We will be able to leverage the millions of subscribers we have and tap into a new generation of potential customers.”
Supported by the Winklevoss twins, Scaramucci
For example, Richards recently asked his fans who they think would score more points in an NBA game: Philadelphia 76ers big man Joel Embiid or Milwaukee Bucks superstar Giannis Antetokounmpo. Richards partnered with VersusGame, an online prediction money market he invested in before launching Animal Capital.
“My subscribers love to play these games now because they have become very integrated into my content. There are now hundreds of thousands to millions of people using this platform.”
Animal Capital claims its investors include Anthony Scaramucci, Tinder co-founder Sean Rad and former TikTok CEO Kevin Mayer. He also has a team of eminent advisers, including Tyler and Cameron Winklevoss, Twitch co-founder Justin Kan and Sukhinder Singh Cassidy, former Amazon and StubHub executive.
Richard’s TikTok page features what you might expect from a 19-year-old social media star: clips of him working out, dancing, lip-syncing, pranking and pretending sneak into Alex Rodriguez’s house.
Fight against the stigmatization of influencers
Richards exudes confidence in his foray into venture capital and sees it as an essential part of achieving his goal of becoming a social media billionaire.
“Once this fund is completed, we will be raising a second and a third, fourth, fifth, sixth and seventh,” said Richards.
When asked if he’s worried Animal Capital might not be taken as seriously as more established companies, Richards said, “I’m worried about themselves. They’re going to miss something.”
He predicted that more influencers will follow his lead by stepping into the VC act.
“We create trends. We start trends. That’s what we do,” said Richards. “It will be just another of them.”
The 19-year-old, who grew up outside of Toronto, said he hopes to open up new career opportunities for other internet sensations.
“A lot of social media creators get ranked or told they need to increase their accounts, do business with brands, try to become a musician or become an actor,” said Richards. “They’re kind of attached to that stigma. We want to break that down. That’s who we are, to prove people wrong.”
Jay Ritter, professor of finance at the University of Florida, said the wide reach of Richards and his TikTokers colleagues can help consumer-oriented startups.
“Name recognition helps open doors,” Ritter said. “It’s the same reason Nike hires athletes to put their names on stuff. It doesn’t necessarily improve clothing, but some consumers see it as certification.”
Richards sees this social media influence as the key to differentiating Animal Capital from all other venture companies.
“We can play that role of everyone’s best friend. That’s what really sets us apart,” he said.
Of course, not everyone thinks social media influencers should enter the venture capital market.
“It’s absolutely scary,” said Jonathan Macey, professor of corporate finance at Yale Law School. “We gamble and trivialize the financial markets – and the financial markets are really important.”
A steep learning curve?
One risk, Macey said, is that good companies are sidelined by those backed by social media stars.
“Weird companies become darlings and suck a lot of oxygen out of the system,” he said.
Macey added that there is more to a startup than a cool product backed by a large social media fanbase – which may or may not stick around. Fundamentals like quality management, people and strong balance sheets still matter.
“People are going to get burned. I think there will be a lot of missteps,” Macey said.
“We have learned from the best. We are doing our best to make sure we don’t make these early mistakes,” said the co-founder of Animal Capital. Sandman, a 29-year-old man who worked at WarnerMedia, CNN’s parent company, after a stint at Goldman Sachs. “We expect to make mistakes. This is about how we handle the downturn.”