This is a summarized written version of a special podcast episode featuring Joachim Laqueur and Thomas Thurston, the General Partners of 432 Legacy, presented in a quick-read Q&A transcript format.

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Q&A Transcript: Leaders from 432 Legacy on Creative Industries Investment

1. Vitrina: Could you provide an elevator pitch and background on 432 Legacy, and detail your core thesis for investing in the media and entertainment industry?

Joachim Laqueur: The way we approach the fund is really starting at its most global, like on a global market view, to hone in on where bottlenecks exist due to sort of disruption taking place within that market that we’re focusing on. For this fund, we started out really looking at the content stack and how that’s being disrupted. The latest iteration really looks through the lens of how we can basically safeguard human creativity in the age of AI. The fund is targeting the media and entertainment industry or the creative industries.

Quote: “The latest iteration that we did really looks through the lens of how can we basically safeguard human creativity in the age of AI…”

2. Vitrina: What was the “aha moment” that led you to focus on the creative industries, and how does your data-driven approach guide your investment strategy?

Thomas Thurston: I’m a data scientist and I’ve been in venture capital almost 20 years now. My specialty was to try to bring big data approaches to startups that have no data. The focus has culminated into thinking a lot about value chains in a big data sense. We look at systems like media and entertainment and rights management. We try to understand how we can use the big data approach… to understand those dependencies and value drivers and try to figure out where is value created.

Joachim Laqueur: I got introduced to the world of tech when I was living on the West Coast. One of the key moments was a conversation with a very experienced Hollywood financier, who showed me a breakdown of a fairly successful film, $150 million in revenue, and what went to the actual production company was like three or four percent. I was like, my goodness, that’s not net profit, that’s gross revenue for the creative company itself. So that’s wrong. If creativity can’t be rewarded anymore, that’s not a world I want my grandchildren to live in.

Quote: “If creativity can’t be rewarded anymore, that’s not a world I want my grandchildren to live in.”

3. Vitrina: You mentioned that the value is drifting away from creators. Can you elaborate on the problem and how 432 Legacy intends to help solve it through investment?

Thomas Thurston: I can’t help but notice that the value is drifting almost perpetually away from the creators themselves, the artists, the musicians, the designers. I’m always interested in trying to figure out how can we affect these systems through investment… in ways that can also help bring some of that value back to the artists. What I’m seeing is a very disturbing erosion and a commoditization, of course, of the content producers themselves.

Quote: “I can’t help but notice that the value is drifting almost perpetually away from the creators themselves, the artists, the musicians, the designers.”

4. Vitrina: Can you explain the process of identifying a “bottleneck” within the value chain and how this is used to pinpoint investment targets?

Thomas Thurston: We’re looking for imbalances between supply and demand. Where you start to get more demand than supply, especially in more extreme cases, that’s where we start to look and get more excited because now we’re finding that the world needs a solution. Ideally, if you can capture the bottleneck, everyone else around you has to start paying some kind of rent. We figure out where to focus, find all the companies and then quickly evaluate them through data signals, through AI and really identify who’s gaining all the traction and creating all the value.

Quote: “Ideally, if you can capture the bottleneck, everyone else around you has to start paying some kind of rent.”

5. Vitrina: Can you share an example of a specific bottleneck you’ve identified in the media and entertainment value chain?

Thomas Thurston: I’m just looking now at automated cross-platform content fingerprinting and real-time licensing engines. Right now, we’re seeing there’s a bottleneck there. You have a few proprietary big players and the demand is higher. There’s a backup there. That’s the level of specificity we’re talking about here… we can get down to very granular, very technical components and technologies in the system where we’re seeing challenges pile up.

Quote: “We can get down to very granular, very technical components and technologies in the system where we’re seeing challenges pile up.”

6. Vitrina: How does 432 Legacy’s approach to evaluating startups differ from traditional venture capital, particularly concerning market size and deal flow?

Thomas Thurston: We are not relying on our fund on our deal flow based on our personal networks and how many planes we can get on and how many cocktail hours we’ve been to. It’s irrelevant. I really don’t care that much about the TAM (Total Addressable Market). What I really care about is, is it the right beachhead for this startup? We use the island hopping metaphor. We don’t want to invest in startups… going head to head with big incumbents tacking a fortified castle.

Joachim Laqueur: We tend to look for sort of the picks and shovels that need to be enabling technology companies. This data approach allows us to do is actually spend more time where it actually matters. And that’s the founder itself or him or herself.

Quote: “I really don’t care that much about the TAM… What I really care about is, is it the right beachhead for this startup?”

7. Vitrina: Are you primarily focused on any specific geographical markets or technologies, such as Generative AI or gaming engines?

Joachim Laqueur: We don’t specifically look at a geography. It doesn’t matter where a startup is from. We want to see it if it’s there. If it’s solving this bottleneck, we want to see it. I guess the first analysis we did was actually from the lens of how all of these stacks, the way these pieces of content are created are converging.

Thomas Thurston: I, in principle, do not care what technology the startup’s using. I don’t care if it’s blockchain. I don’t care if it’s AI. It’s just, frankly, irrelevant to me. What I care about is, is this business in an interesting place doing something disruptive with a good business model. We’re not thematic around the technology components.

Quote: “I, in principle, do not care what technology the startup’s using… It’s just, frankly, irrelevant to me.”

8. Vitrina: Could you share insights into the fund’s current stage and what characteristics you seek in your Limited Partners (LPs)?

Joachim Laqueur: We’ve just started raising for this fund. Investors can be from all over the world. What we see is that especially those with a good sense of data science or have experience on the public marks on the quant side, they really get what we’re doing. The bulk of the capital that we raise with this fund should indeed be from people that have either affinity with the industry that are from the industry that really see the change that is needed.

Thomas Thurston: For the ones that they do, and talking about alignment, I really only want investors that really care about the subject matter, the theme that we’ve defined. We want people who really share the common cause. We all depend on each other. We only win if we all win.

Quote: “We really want meaning. And I want people who share that meaning.”