On the latest episode of Behind the Buyouts, Arenova Capital founder and managing partner David Li discussed applying private equity principles to the creative business of visual effects for Hollywood and beyond.

In a little more than two years, Arenova’s Dream Machine FX built the fifth-largest pure-play visual effects company in the world through acquisitions. The company has $100 million in revenue and forecasts for 70% to 90% organic growth this year. Credits include an Emmy for VFX work on “Shogun” and nominations for “Dune: Prophecy” and “The Last of Us,” among others.

Dream Machine’s structure borrows from ad agencies, luxury goods and film studios.

While Li comes from finance, he starts his analysis of potential targets by watching a studio’s reel. “You need to understand the product first before you understand contextually what is happening in the financial statements,” he said.

The founder also discussed running a profitable, growing studio in the wake of the strike, streamers’ belt-tightening, TikTok and the coming of AI.

Check out the podcast with David Li:

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