There are two main reasons that most ad agencies shy away from investing in the start-ups they help promote: lack of money and lack of investment expertise. That's apparently not stopping New York-based Anomaly. The indie agency, founded in 2004, has stakes in or is incubating six projects, including Eos, a shaving cream it launched with Target, and a mobile commerce app with ShopText.
Its latest investment is in YouTube hit Lauren Luke. Her how-to makeup videos have grown into the most popular YouTube channel in the U.K., and now Adweek reports that agency is helping her launch a cosmetics line. Anomaly also helped broker a book deal for Luke with U.K. publisher Hodder & Stoughton. I talked with co-founder Carl Johnson about why the agency is moving more heavily into the venture business, and how it plans to avoid the problems that have plagued even agencies with big bank accounts that have tried (and sometimes failed) at the investment game. (Witness WPP Spotrunner, or Publicis' Honeyshed).
How big a stake do you take in these projectsand more importantlyare you making your money back?: It's usually between a 10 and 50 percent stake. That depends on the level of responsibility we carry, and whether we have to invest just talent and time, or money as well. We've invested quite a lot of money in various projects, and we've lost some, but the six we're working with now are growing. If any one of them faltered, we'd replace it.
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How do you pick your start-ups or projects? There are five criteria: we have to trust and like the people, completely believe in their product, honestly believe that our agency is what can make the difference, see a clear way to make money, and know that we have the manpower to do it. And in that order.
Why isn't making money up further on the list? We're investing in equity and ownership for the long haulnot just trying to raise this month's fee; what's most important is doing business with people we trust and like. That's the difference between us and some of the larger agencies. We're completely private, we can afford to invest the talent without being forced to think about revenue in the short-term. We do think about the transactions that will be taking place, whether it's a content or commerce project, but the main point is growing a successful, enduring business.
Have you had to raise money for your own growth? We've actually had to decline some. There have been a number of offers to buy in, but we're too young for that. But we are in conversations with PE firms and VCs about helping them leverage investments they've already made, and possibly the creation of an adventure capital fund.
Do you foresee a point where these investments will become your primary focus rather than other clients' campaigns? I don't think it has to come down to an either/or situation. We don't want to be just an agency, an incubator or a brand-strategy shop. We can continue to work as intently on client business as we do on our own IP.
By Tameka Kee