Meet Smash Ventures, the low-flying outfit that has quietly funded Epic Games among others

When in 2018, Smash Ventures showed up as an investor in a $1.25 billion round for Epic Games -- reportedly the largest ever investment in a video game company at the time -- it was the first time many had heard of the investing outfit.

When the brand showed up again last summer in an even bigger round for Epic -- last August, the games giant announced $1.78 billion in fresh funding at a post-money equity valuation of $17.3 billion -- a diner near Epic's Cary, North Carolina headquarters that sells "smash waffles" started getting calls from reporters, says Eric Garland, who used to lead venture and growth deals for The Walt Disney Company after selling his company, BigChampagne, to Live Nation in 2011.

"Some reporters really turned over rocks," he says.

Garland knows this, he says, because he co-founded Smash Ventures with Evan Richter, a former member of Disney's corporate strategy and business development team (and who, before that, was an investor at Insight Partners).

The pair say they weren't trying to duck the press after striking out on their own a few years ago; they were mostly just trying to get their firm off the ground, which they've seemingly done and then some. First, there's the newly closed $75 million debut fund from strategic partners and notable investors like Kevin Mayer, the former CEO of TikTok and the former Disney executive; Pixar co-founder Ed Catmull; and journalist Willow Bay, who is now dean of the USC Annenberg School for Communication and Journalism. Yet it's just a small piece of what they have assembled.

Indeed, at a time when money is more of a commodity than ever and can be accessed easily by many founders, Smash has a few tricks up its sleeve, Richter and Garland suggest.

One thing to know, for example, is that the two apparently have little trouble spinning up side vehicles when they wedge their way into an interesting deal. While they got to know Epic Games through Disney (it made an investment in the company in 2017 when Epic took part in its accelerator program), when they persuaded founder Tim Sweeney to take a bigger check from Smash Ventures in 2018, they were able to package together "several hundred million dollars" from their LPs for a stake in the business.

They also "flexed up" with the help of their limited partners to put a separate $200 million into others of its handful of portfolio companies. These include DraftKings, before it went public through a blank-check company last year; the footwear, apparel and accessory brand Nobull; the men's grooming company Manscaped; and India’s biggest e-learning startup, Byju’s.

Disney -- one of the world's most powerful brands -- is a common thread throughout. In addition to inviting Epic into its accelerator program, Disney began work on an education app with Byju's back in 2018 and it owned 6% of DraftKings when it went public last year.

Mayer, the former Disney exec who more recently began launching special purpose acquisition vehicles, credits Richter and Garland with finding "a lot of really cool companies like Epic" while inside Disney, saying he has "been supporting them ever since, because I think they're great."

Underscoring the strength of that former Disney network -- another apparent advantage here -- Mayer says that in addition to being a limited partner, he will sometimes "try and talk to their CEOs, give strategic advice, and talk about exits and M&A with some of their portfolio companies." (Catmull, who was the president of Walt Disney Animation Studios after Disney acquired Pixar in 2006, was also pulled in to help seal the Epic deal, says Garland.)

As for whether Smash's dealings have irritated current execs at Disney -- it isn't hard to imagine the entertainment giant would have liked a bigger stake in Epic -- Garland says no, adding that, "Outside of its accelerator, Disney is not generally in the venture business."

In the meantime, Smash also says it's getting into deals by helping companies tell stories to their respective, captive audiences. As Richter explains it, "The leading consumer software and internet businesses are building massive, and dedicated, user bases, and media, whether it's a Travis Scott experience within Epic Games, or an IP collaboration between Marvel or Disney [and Byju's], or whether it's doing something with the UFC [which last year partnered with Manscaped], can be an incredible way to keep and grow a user base."

The firm certainly appears to spend a lot of time with its portfolio companies on these efforts. While Smash wrote its first check in 2018, it has just five portfolio companies to date, and it plans only to invest in 10 to 12 companies altogether with that $75 million pool of capital, writing checks as small as $5 million to $10 million, with the ability to write far larger checks when the opportunity arises and its LP network says yes to it.

It's because the firm is on the hunt now for that next big thing that Smash is suddenly going public with its efforts, Richter suggests. Not that a lot of public speaking is in the partners' future, seemingly. "We like to stay focused," Garland says. "We make a lot of noise for our portfolio companies, but we are ourselves very heads down."