MrBeast’s early YouTube videos have hidden value, and Spotter is unlocking it

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Aaron DeBevoise wants to pay YouTubers for their old videos.

DeBevoise is the founder of Observer, a company that identifies YouTube creators with high growth potential. He strikes deals that give them money upfront to help build their brands, in exchange for licensing their backlog of content. Los Angeles-based Spotter derives advertising revenue from its previously released videos, and the creators keep all money generated from uploaded videos after the deal. This is not a loan and the creators retain ownership of their content. They can do whatever they want with the money, whether it’s hiring an assistant, buying a new camera, or building an entire production studio. So far, Spotter has closed about 1,100 transactions.

DeBevoise founded Spotter in 2019 after building businesses on YouTube from 2006. He co-founded Machinima, a production company, and StyleHaul, a fashion and beauty marketing company.

Spotter’s fund is made up of investments from groups such as Access Industries, CoVenture and GPS Investment Partners, as well as a loan from SoftBank. He says SoftBank gave him a valuation of $1.7 billion after being founded only three years ago.

Rachyl Jones of The Observer recently interviewed DeBevoise. This interview has been slightly edited.

Aaron DeBevoise

How did Spotter start?

The creators were struggling to figure out how to make enough money to survive and not have a second job. Over time, YouTube solved this problem by sharing its ad revenue and creating a recommendation engine so creators were incentivized to create lots of consistent content. But what YouTube hasn’t solved is how a creator leverages the audience they’ve generated. There was this gap in the market where creators could use a lot more capital and accelerate their growth – becoming businesses rather than just earning a living.

What was Spotter like when he first started out?

There were seven of us. We are a data-driven company, so our decisions are not emotional decisions. In fact, I don’t even have to watch the content until the process is complete. We identify content that has a lot of engagement, and that’s what drives predictable behavior. We now have 125 [employees].

Our capital was actually one of the hardest things for us because you couldn’t deploy enough capital just by raising equity. You had to raise debt and equity. So we had to collect a lot of money at the beginning.

Can you explain why you needed debt and equity?

We don’t know if a creator will work as we expect, so if you invest in a creator, it’s really risky. If you invest in 10, it’s less risky. The more we invest, the more secure we are and the more we can pay.

To do that, if you had to raise capital early on – say you needed $50 million – to get the right size portfolio, your company isn’t valued enough to actually raise $50 million of equity in advance. So you have to add debt and prove the asset – that the videos themselves – could support the debt payment. This mix of debt and equity got us to where we are today. We’ve deployed just over $600 million for creators. Our goal is $1 billion by the end of the first quarter of next year. And I think we’ll get there.

Can you introduce me to the data side of your business?

We have 10 years of historical data on YouTube. We built machine learning models that allow us to identify key parameters of predictability. It’s mostly metrics, like watch time, likes, favorites, comments, things that suggest people are watching and interacting with you rather than just clicking and bouncing. The data may also be used by creators to improve their performance. We don’t charge for it. It’s so we can make a deal N°2 and N°3 with them and continue on this path of partnership.

How do you earn money?

We make money from advertising on licensed videos. We collect AdSense revenue but also through direct advertising. We believe it’s a unique value proposition to provide premium content that is brand safe and found in a library. It’s not the latest content, but new doesn’t really matter on YouTube. After YouTube is removed, we receive 100% of the revenue from licensed videos. Creators get 100% of every video they upload after the deal.

How many creators are interested in it?

We talk to thousands of creators. The period in which creators decide to move forward varies depending on where they are in their careers. For some creators, it took us six months or almost a year to show them the proofs and then they accept.

This financial talk does not come naturally to many people. In the beginning, how hard do you try to explain all this to the creators?

That’s why we decided to focus on YouTube because we have data on YouTube that allows us to educate. We can say, “Look. Here’s how your videos performed over time. Here are the performances of your new videos. That’s what we think you’ll earn over the next 12 months. And it’s normal that it takes us six months to complete the transaction. We need them to trust us. We need them to hear their peers.

How did you get started working with some of YouTube’s biggest names like MrBeast and Dude Perfect?

When we did the MrBeast Okay, it started when I was talking to Jimmy (Donaldson aka MrBeast) about data and YouTube and the excitement of YouTube. And then the funding part came down to us working with his manager, figuring out what he needed, and proving the model. With Perfect man, it was like, “Hey, what are your needs?” And I think for a while with Dude Perfect they weren’t quite sure yet. But it put them in the mindset of “What could we do?” These two deals ended up being multiple transactions over time.

This interview originally appeared in The creatorsa newsletter about the people powering the creator economy. Get it in your inbox before it goes live.

MrBeast's early YouTube videos have hidden value, and Spotter is unlocking it

Shirley K. Rosa