Hollywood Talent Giant CAA Aims to Invest in the Next Pixar

(Bloomberg) -- Creative Artists Agency has spent 40 years looking for the next Paul Newman. Now it’s looking to invest in the next Pixar.

The talent agency, whose clients include Brad Pitt and Chris Paul, has teamed up with venture capital firm New Enterprise Associates to form Connect Ventures, a fund that will invest in media and technology companies, the partners said Wednesday. CAA and NEA have each put in $50 million to start, and plan to increase their investments going forward.

Connect’s first investment is in Spire Animation Studios, a new animation studio formed by “Ratatouille” producer Brad Lewis and entrepreneur P.J. Gunsagar. Connect declined to give the size of the investment, but said it aims to invest an average of $3 million to $5 million in each deal.

Spire epitomizes Connect’s investment thesis, according to Rick Yang, a general partner with NEA, which is targeting brand-new companies that marry high-quality technology with entertainment and pop culture. Spire is seeking to supply animated movies, which are more in-demand than ever, to a growing array of online suppliers.

“These two amazing founders mirror the CAA-NEA partnership,” Yang said. “One is a veteran of Pixar, and the other is a serial entrepreneur.” Yang will oversee Connect for NEA, a firm now in its fifth decade that has active investments in media company BuzzFeed Inc.; online self-improvement startup MasterClass; and Robinhood Financial, a mobile, zero-commission stock brokerage.

Hollywood talent agencies long ago moved into adjacent industries, from consulting corporate clients to representing chefs and professional athletes. Over the past decade, talent agencies have set up their own venture capital units, and have also established structures to advise clients on potential investments -- and benefit in the process.

United Talent Agency Inc., ICM Partners and Endeavor, CAA’s biggest rivals, have all made investments in startups ranging from Lyft Inc. to Epic Games Inc.

This isn’t CAA’s first fund. The company set up Evolution Media Capital, a boutique investment bank, with backing from private equity firm TPG Capital, its majority owner. Evolution invested in companies including IFlix, a Southeast Asian video service. (The firm continues to operate an advisory practice, and has previously worked with companies such as Illumination Entertainment Inc., the animation studio behind “Minions,” and Blumhouse Productions, producer of “The Purge.”)

Connect will differ from CAA’s past efforts in that it will be investing in companies in the early stages of fundraising, when both the risk and the potential rewards are greater, according to James Burtson, CAA’s chief financial officer. “A lot of the best opportunities that go through CAA and through NEA are these early-stage opportunities,” he said.

The plans for Spire arose in a film meeting at CAA, which then led to a conversation between executives at the agency and NEA, according to Michael Blank, who will oversee CAA’s involvement in the fund.

Animation has been one of the few industries spared by the coronavirus, though Spire does plan to work on technology that would allow its animators to work in smaller groups. Spire plans to release its first film film in 2023.

©2020 Bloomberg L.P.