When things are serious, we need humor more than ever. 

At this unique point in history, bringing more laughter and authenticity to a wider audience when many of us are aching for connection is vital. Our investment in Headgum is based on this belief.  

Headgum is a business of three parts: Headgum Studios, Headgum network and Gumball marketplace. Headgum Studios is a comedy content production company that owns and operates original content on the Headgum network, including hit shows Dead Eyes and Newcomers

From the start, Headgum was built by its users. Comedy duo and former CollegeHumor writers Jake and Amir initially launched the Headgum network upon the success of their podcast If I Were You

Gumball, a marketplace for brands to buy host-read advertisements directly from podcasters, was then developed for Headgum’s own content network, which received an average of 10M monthly listens network-wide in 2019. This self-sustaining model allowed the Headgum team to bootstrap the company to profitability over the past few years. 

This powerful three-part structure – owned content, distributed content network, ad marketplace – creates meaningful network effects. More unique content makes the platform more valuable to listeners, and user growth in turn boosts desirability for creators to join.  This is true for most content networks. For Headgum, there is an added network effect between creators and brands. Better shows lead to cross-pollinated ad audiences which generate better ad opportunities within the network. We believe these effects, in tandem, are a formidable mechanism for building a trusted brand at scale.

One way we thought about Headgum’s unique model is as a vertically-integrated media company. Just as a vertically-integrated D2C brand owns IP, manufacturing, and distribution, Headgum unlocks creation, distribution, and monetization through its combined studio, network and marketplace. The benefits created by this full-stack approach for defensibility and scale got us excited about Headgum’s potential not only as a media company but as a venture-backable one. 

Free podcasts remain the best way to broaden access to this content. Headgum enables creators to keep their content accessible rather than behind paywalls by monetizing through host-read ads. Host-read ads may also be the most authentic and intimate form of marketing and particularly resonant in a world of dislocation. In 2019, US podcast ad revenue was $708M, of which host-read ads contributed 66%. 

As brands move away from advertising on Facebook and other large platforms, we expect even greater demand for authentic and safe channels. However, ad-buying opportunities within podcasts have historically been manual and limited, not unlike the process of purchasing web ads pre-2000. As podcasts continue to gain market share, Gumball’s self-serve ad marketplace has the opportunity to be as transformative to the podcast industry as Google Adwords was for web ads. 

In keeping with our other media investments (Recount Media, Meet Cute) we believe that Headgum’s vertical-specific focus creates an important constraint that engenders trust and consistency for users. In some ways constraints have always been integral to comedy, from knock-knock jokes to the “yes, and…” construct of improv. When you tune into a Headgum show, you know it will be about 30 minutes in length and make you laugh when you need it most. These constraints also enable serendipity and discovery; as Andy wrote about Sofar, another USV portfolio company: “The beauty of creating a simple container, with known constraints, is that what goes into the container is dynamic.” 

In March, Headgum’s LA-NYC split team moved to fully remote operations. Since the time of our investment, the Headgum team has learned to produce content remotely during a time when the largest media studios are struggling to create TV shows and movies. We think this operational DNA will continue to benefit the Headgum team for years to come. We are excited to back Marty, Jake, Andrew, Amir, and Amir (yes, there are two) and the rest of the Headgum team, creators and technologists alike, on this journey. 

We believe that Headgum can both be a meaningfully large business and make all of our lives meaningfully better. Podcasts are big, and more people than ever before are listening. We are too. 

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