The ties that bind the tech industry and Hollywood continue to get tighter as the Creative Artists Agency launches a startup studio to develop new businesses with -- and for -- its roster of clients.
Continuing a tradition that began with the incubation and launch of Funny or Die (alongside Sequoia Capital and Will Ferrell's Dirty Sanchez productions), one of Hollywood's top agencies is partnering with a group of Canadian investors to finance a new venture studio, Creative Labs, with $12.5 million.
"We have been incubating companies at CAA over the years," says CAA's head of business development, Michael Yanover.
Yanover was the principal architect of the agency's work with Funny or Die and Whosay, an influencer marketing company, as well as the firm's work with CAA Ventures -- its venture capital arm. That business has backed some solid companies, including: August, Bark + Co., Drone Racing League, Giphy, Medium, and Patreon.
For Yanover, the creation of Creative Labs was a response to the shifting expectations of later stage venture investors -- including his own CAA Ventures, he said.
"Every time we came up with one of these ideas we had to put the money together and raise the money… it was somewhat tedious to build this stuff from scratch," he said. "The marketplace was changing [and] today you can't really do that. You have to build something because investors want to see a product and something launched."
So in 2015, when the capital crunch in startupland was beginning to take hold, Yanover and his team decided to build a startup foundry model that could incubate and spin out companies with fully baked products.
In a sign of both the globalization of the entertainment business and the tech industry, the new studio will be based in Vancouver and includes backing from large Canadian and UK-based media industry players like Entertainment One, Boat Rocker Entertainment and The Telegraph Media Group.
"Vancouver we picked for a couple of very clear reasons," says Creative Labs co-founder, Leonard Block, a Canadian serial entrepreneur and investor. "It had a very strong developer base that was more loyal and [is] less troublesome keeping talent than you would see in other hubs… [and] you have this real deep strength around project management and product management."
For early stage companies that, in some cases, are little more than an idea and a celebrity advocate, the need for a project managers to guide a business is critical, according to Block.
Creative Labs' chief executive, Mike Edwards, agreed. A former social media marketing executive, Edwards was brought on board to head operations from Mobio Technologies where he had served as chief executive officer.
To ensure the alignment of interests, employees of the studio have an equity stake in the venture studio and will be able to receive equity in all of the businesses that are spun out from it. They also have the option of graduating from the studio to participate in the development of the individual startups as those businesses mature, Edwards said.
"Part of the genesis story of the lab was also a realization that the media and entertainment and sports world has really changed," said Block. "The industry itself has changed. The old model was you used to sell product for other people… you were selling stuff for others… as the platforms evolved where talent could speak direct to consumers you realized you could sell your own things and build your own brands and really have the direct relationship."
That's what Creative Labs is trying to capture.
Yanover said that the venture studio has identified three kinds of opportunities that correspond to the three ways he was building businesses internally at CAA in the past.
One is developing an idea around an artist or athlete that the agency represents -- like Funny or Die. Already, Creative Labs has one such company waiting in the wings.
Founded by the actress Emma Roberts and the former Huffington Post video producer and creative talent manager Karah Preiss, Belletrist is sort of a next generation book club for a new literary set.
The company soft-launched in April with an interview between Roberts, a lifelong lover of literature, and the literary icon Joan Didion.
If Belletrist is an example of a platform created around a CAA client, then Creative Labs' other brainchild, Ground Control is a company that was created with CAA's roster of talent in mind.
The startup looks to tap actors, athletes and other celebrities and bring their talents to the voice operating systems developed by tech companies like Apple, Amazon, and Alphabet. Founded by former Aol executive Michael Macadaan, Yanover said that Ground Control is akin to the firm's development of Whosay in that it's a platform that can use CAA's client roster to succeed.
Finally, there are companies that dovetail with the work that CAA does internally, or tap the company's own talented pool of developers, designers and programmers. There's a yet-to-be launched game development company that falls into that category, according to Yanover, Edwards and Block.
Yanover, Edwards, Brody, seasoned media and gaming executive Pauline Moller, and CAA’s Head of Mobile Michael Blank will all serve as members of the Creative Labs board of directors.
"The premise of anything that we incubate is that we want to bring a piece of CAA’s DNA into the mix," says Yanover. "We want to embrace the company as one of our children and we want to give it all of the resources that CAA has."
This article originally appeared on TechCrunch.