Joe Robinson on iHeartMedia's CVC, AI Strategies, and ESG Investment Insights | E26

Oh, Yankees for sure.

I did. Interestingly enough, I've been going to iHeart concerts before I was ever at iHeart, and I was taking my kids to iHeart concerts before I was ever at iHeart or even thought about going there. So I've been a long-time fan of all of iHeart's events. Yeah, they were pretty cool.

Sure. I've been investing in companies for 25-plus years, really starting with the beginning of the internet boom, starting in 1994, 1995, and then going on to work with many of them, or work for them, or operate them, or be participating in their growth in terms of building their sales teams or building out different systems and processes that these companies may need over time. Throughout that journey, I was able to start my own fund, which did quite well, and then ended up working with Bob Pittman, who is the CEO of iHeartMedia Inc. We were working together on a variety of different projects, and he sort of saw what I was doing on my own and said, 'Would I like to come and basically do the same thing here?' We came up with a notion around that, and that's how I got here.

Sure. I definitely know how the game is played at the traditional venture world. I know a lot about how that space works, and I know all the nuances and detail that is required to run a sort of traditional fund. The thesis that we used in coming in here was that iHeart has two types of currency. It has its capital that it can deploy, but it also has its media, to the tune of which iHeart's customers purchase approximately $4 billion worth of cash media from the company annually. So there are a lot of people who value our media, and therefore there are companies that can utilize our media. We came up with the notion of, 'Hey, what would happen if you utilize them together to help the companies we work with?' Which we'll get into more.

Sure. iHeart, formerly known as Clear Channel, is an amalgamation of about 850-plus stations around the United States that were part of a large rollup pre-2000. The idea was that with scale, you would be able to drive a lot of margin out of that business. It was one of the last great rollups. As the company was transitioning into more of a consolidated media company, the notion was, 'What would happen if you took all of those stations and created a brand called iHeart, and then created a way of distributing iHeart content—which was primarily radio but expands to everything from video to concerts and other things—across digital mediums?' And then we grew that into the digital environment we are in today. So the history was traditional radio in the form of an LBO, but it turned into a way of taking all of the different assets we have, consolidating them, and figuring out how to distribute them across the world in different ways.

No, we did a consolidation and change of our debt structure several years ago. In the process, we shed the outdoor business and retained the audio business. In fact, we're the largest audio distributor on the planet.

Yeah, kind of going to where I was headed before. When I was looking at the company and I was offered to come and work with Bob, who's terrific and a great CEO, I started to look at the different assets that the company had. In CVC and in traditional media, even in my traditional media days, it was always about how you can add value to the companies that you invested in. Some great VCs take a lot of time to work with their VC partners and investments closely; other VCs are strictly a financial investment and they're looking at that way. So because we have all of these media assets, it dawned on me that there's a value to those. Was there a way to leverage the media we have, both with our existing customers that may need some help and with new customers that weren't familiar with our media, in order to help them grow? So we started to experiment with that, and it worked quite well with the right types of partners, the right types of companies at the right stage. We also developed a technique of doing it in a way that was quite favorable for the company as well as for its investors.

100%. And also we do it in a way that other venture partners find attractive, founders find attractive. When we deploy capital and when we deploy our media, we do it in such a way that it doesn't hit the company all at once. Obviously if it hit the company in that moment, it would be rather difficult on the cap table, so we do it in a way that it spreads out across the cap table in a very soft way and allows for the company to grow its valuation before it hits the cap table, which is a nice structure and has been received quite well by the market.

Sure. Our team consists of seven people that are actively out in the world looking for deals. We also pick categories that we think would work very well within our structure, depending on what's happening. So several years ago that might have been fintech or insurance, or pets or some consumer goods or things like that. That's sort of on the consumer side. On the technology internal side, we'll look at companies that are audio-focused that can help us to grow our audiences, media companies that will help us expand our reach, that will help us sell our products more conveniently. So we'll look at those types of deals as well. In all honesty, the best way we have found to find companies is to connect with the venture community. The venture community very quickly understands how our model works, and getting an introduction from somebody who gets that and can introduce us to companies that they like is a much faster and much more elegant way of finding our resources.

We've had a lot of that. In our early days, we've been doing this for quite some time now, we would take on young companies. What we found is that a lot of them are not quite ready for media at scale; they haven't learned where their markets are, where their KPIs are. So we will stay close with those companies and help them as they go into their follow-on rounds. Occasionally there's a company that has an impact on our technology roadmap, and maybe we'll get one or two a year that we think are just out in front. We like what they're doing, and we'll make an investment predicated on what we think it means for audio and what it means for audiences into the future. We do a small amount of that. I would say we prefer to wait until late Series B and track with those companies as they need it or test with them. We do two or three events a year for young companies to come in and we engage with them on a regular basis. The good part about that is we actually do a concert for them.

Sure. I think AI spans a wide range of different things. We often get asked the question about AI and music. We are very supportive of our partners and our label partners relative to AI. We believe that the human experience is super important, and as a general rule, we are going to stay in that lane relative to how we express our audio. We keep an eye on the output from a content point of view, but it's super important that we support artists and our partners, and we take that position quite seriously. But when it comes to driving efficiencies and looking at new ways to express our web presence, an interesting one is for our podcasts. Can podcasting information, which is audio, be consolidated inside a large language model? If you look at the top of your Google search, there's your normal search, then shopping, then video, then news. The one thing that's missing from all of that is audio. Why is audio not a search item? The answer is we probably produce more content on a net basis than any other form of media because the human voice—iHeart as well as all the people in our industry and all the podcasters—represents an enormous amount of content created in terms of geography, category, local linguistics, you name it. So we're very interested in participating in that and have been looking at it quite a bit, both in terms of participation in the large language models, transcription, and searchability within those models. It's super interesting relative to what we're doing and making sure that audio remains part of the broader ecosystem as that continues to develop.

It's true. The nature of audio in general is that audio is in most people's ears for a considerable portion of your day—you wear headphones, you're in your car. Audio, whatever format you consume it in, you consume a lot of it. One of our core premises is that audio builds companionship. It's about that level of companionship, and the same thing goes for music. We would never want to lose touch with that; it's a very important piece of what we do.

For sure. It's audio on demand. What we have found, which is quite interesting, is that if you listen to a podcast on a regular basis, much like with radio, you start to feel like you know that person as a friend. You become accustomed to their voice, and it's as if you could talk to them as if you know them. That's a really interesting human experience.

It depends. If it's a strategic play where there's a snap into the company, we would want a significant amount of buy-in. We would want to run that through different business units to see how that would snap on and work well, either with an MVP or as a customer or with an integration. We would go through that process for sure. If it's a good play and we simply like the company, we create a deal memo which will then be vetted by our senior management and validated predicated on the work we do, and we do it for the upside.

We have both. That's one of the reasons why in my title it's Corporate Development and Ventures. I would say in at least about 10 or 12 companies over the years, we've actually acquired these companies. Some of them where the relationship has gone well, we've made an investment, we like it, it becomes integrated into the broader company on a lot of levels, and where it makes sense for us to make an acquisition. So it's a really nice way for us to learn with our partners, develop with our partners, and then at a certain point say, 'Hey, this makes a lot of sense. Would you like to become part of the iHeart family?'

It definitely started out as all over the board. Over the years, we have built a lot of relationships, and we have a very defined strategy about working with partners these days. In fact, we had a meeting today on this to ensure that we're always in touch with the industry. This is one of the reasons why we do these events—to make sure that we have opportunities to communicate with our partners. We also want to make sure that it's a two-way relationship. We don't want to be calling up partners to say, 'Hey, what have you got for us today?' and not be able to express some of the things that we're seeing in the marketplace. We want to make sure that we're good partners to the VC community. Again, we try to make it fun. To some of those concerts and events that I was talking about, we will invite our VC partners and relationships to join us. That's a good time to meet in person and share ideas. Then every now and then, we'll come up with a thesis for different companies that we like or categories that we think will do well with us, and we'll then express that thesis to our partners and see if there's a fit somewhere.

Rarely. I think that given the nature of the deals that we construct, it's super hard for that to happen. We have to find the right company at the right time that understands the medium and understands what we're doing. So unlike if we were just deploying capital, that relationship might be more of an option, but it's really not as much relative to what we're doing.

We invest off the balance sheet, but we have strict models that we work with.

There is a pretty strict protocol that we follow relative to follow-on investments. If we see success in the original premise and we can positively prove that, we will notionally do another round. So it's not uncommon for us to do that, but just like any ratio of portfolio analysis, there are the best that will get that treatment and others that we will not do that with.

Sure. We have to remember we reach 270 million people monthly through all of our different mediums. That's basically the United States. It's super important that we stay close to local communities, that we are attentive to what's going on in the United States and what's happening culturally, and that applies to ESG but it also applies to ERS services during storms, helping people out as things are happening around the country. That's a big notion as to what radio does and how it can be impactful, as well as podcasting. ESG is relevant. We have made some ESG investments. I think that the ones that do best are the ones that have a really straightforward plan and can figure out how to leverage the size of our megaphone to help them where they're at at that moment.

I think that's a terrific question, probably the most important question given what we all do. Having some experience is a big deal. Bringing someone onto your team that has some experience is a big deal. We all see lots of amazing ideas, lots of great initial starts, but the ability to actually effect meaningful change onto the company and growth takes skill sets that develop over time. Whether it's building sales teams—I personally come from building sales teams—but whether that's product development, product adaptation, audience growth, growing sales at the retail level, whatever that might be, those are skills that people have done with repetition that we look for in the companies that we invest in. We take a lot of time to ensure that's what we do. I would advise any company to ensure their advisor should have those skill sets, and if possible, one of your team members should come from that space, especially if you're entering a market that you don't know. Those relationships in that market are everything, and having somebody who has those relationships and can actually deliver on that is a big part of success.

Sure. We will measure the size relative to the scale of the business. We've written checks that are in the mid-seven figures, and we've written checks for the mid-six figures. It's very much dependent on where the company is. It's also dependent on how well they use their media. When we first started this, we would have companies that would take a tremendous amount of media and not know how to deploy it. Then they would use it inefficiently and need more cash to keep the ball rolling. The whole point of taking the media is that it should reduce your burn rate, because that's going to come directly off your marketing line. As we all know, headcount and marketing are the two biggest elements of most companies. If you can take one of those down dramatically, then you should have a longer runway to achieve what you need to achieve. That trait and that understanding helps us decide the deal, along with all of the other features that you would expect.

Not specifically. We typically end up with somewhere between 10 and 15% of the company.

Ultimately, our exit strategy is twofold. One is that—and this is indicative of the industry overall—we find ourselves in companies that will be acquired quickly, scale up and then be acquired. That's another benefit of using media, because your brand will be much more visible. What I would say is that we wouldn't specifically look for companies that we think will have an IPO or exit or be standalone. That's not a prerequisite of what we're doing. I'd say the bulk of the companies that we invest in are typically going to get acquired ultimately.

I think that's more a factor of how the company is doing. We will always look to limit risk. We're not a swing-for-the-fences type of shop. We'll look to limit risk and parse our investment intelligently. There's no taking 50 or $100,000 bets on hundreds of companies.

It's interesting. There was a moment there when we were doing a lot of investing in podcasting. Podcasting for all the obvious reasons was really big. I think one of our most successful deals was when we made an investment in and ultimately acquired HowStuffWorks, or Stuff Media. They have one of the largest podcasts in the world with Stuff You Should Know and Stuff They Didn't Teach You in History Class, etc. We did several acquisitions in the space. That was really fun and exciting because we knew exactly what to do with those assets. We knew exactly how to deploy them, we knew how to test for them, we knew what was going to work and what wasn't going to work. When you look at some of the other players in our space, we've seen much more success than some of our competitors, and that just comes from our history and experience with the medium. That was a lot of fun.

That's interesting. I'm a heavy reader, a very, very heavy reader, and that happens at all hours of the day and night. I would say I consume at least two or three hours worth of relevant content on any given day. Then I always make time to, at least once or twice a day, reach out to somebody from within the industry just to have a check-in call. We are an industry of relationships; people don't necessarily realize that. As you think about the venture world, especially corporate venture, we are an industry of relationships. Managing those relationships is really, really important. So those two things are what's on my mind, and I will often take notes and remind myself to reach out to people that I've met over the years and just say hi.

My team will be there. It's time for them to get to know the industry. As I say to those guys, I will have failed if you guys do not know your industry backwards and forwards.

It's corny, but never give up. Never, ever give up. It's never over until it's over, and if you get knocked down, you got to get right back up again. It's as old as time, but it's as true as it can be.

Well, I look forward to connecting with you guys. Thank you for the call today, and we'll catch up soon.