The Industry Focus cast turns its attention to Funko (NASDAQ: FNKO), a maker of licensed pop culture collectibles, which joined the public markets in Nov. 2017. On top of the company's business model, find out about the lucrative licensing market for tchotchkes, toys, apparel, and other "fun" merchandise. A full transcript follows the video. 10 stocks we like better than Funko, Inc.When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.* David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now… and Funko, Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys. Click here to learn about these picks! *Stock Advisor returns as of June 4, 2018 This video was recorded on June 19, 2018. Vincent Shen: Before we get into our main topic, I know that you wanted to briefly cover Funko, ticker FNKO. This is another company from the IPO Class of 2017, but it's not one that we spoke about during our recent IPO update episode from a few weeks ago. Funko is a small-cap, currently trading with a market capitalization of about $550 million. The company priced its IPO last November at $12 per share. It's experienced some rocky trading since then. It's only recently recovered to above $10 per share in the past month or so. The company makes pop culture-inspired consumer products. Take some of your favorite movie or video game characters or musicians or athletes, and Funko basically turns them into figurines, plush toys, apparel and other fun items. As part of its business, the company has a lot of licensing agreements with different intellectual properties, including all 15 of the highest-grossing movie franchises in history. Last year, Funko generated $516 million of revenue, and that was 21% growth over the prior year. Its primary product category has historically been these figures, but it's starting to branch out into different product categories. I'll stop there, Asit. First, I wanted to ask you how Funko ended up on your radar, because it's a smaller company, not one that would necessarily come up in terms of some of the screens that we do and things like that. I'm curious how you heard of it. Asit Sharma: Sure, Vince. I want to credit one of our dozens of loyal listeners on this one. This is Brandon Stokes, who's actually a friend of mine. He is a young investor, and invests in very forward-looking companies. We have coffee every few months and sit down and talk about stocks, and he brought this to my attention. Brandon bought Funko after its IPO and cued me in onto this company. I realized much later that I did know about Funko because I have three teenage sons -- listeners, you've probably heard me talk about them from time to time -- and I realized we had a couple of Star Wars bobbleheads around the house that emanate from this company. That's how I found out about it. I did some research, and I think it's very interesting, as well, Vince. I really love the idea of intellectual property. We've talked in the past about so many franchise-style companies. Marriott is one that we've discussed in terms of having strong intellectual property and then licensing that, letting other people do the hard work. Funko is on the flip side of that model. It actively seeks out licenses from major companies. As you named, Disney is one, for example. Then, they create whatever the ebb and flow of pop culture is alighting on at the moment. I love this idea: everyone is a fan of something. That's Funko's motto, and it really speaks to the idea of this stream of fun things that people alight on and can be monetized. The company is also a manufacturer. Once it gets a license, it goes out and uses manufacturers in Vietnam and China, for example, to manufacture these goods at a low cost. It has gross margins of about 30%, which we'll get to in just a moment. I think those can improve some. But, just to give you a little bit more information about the company, they have over 1,000 licensed, what they call properties. Any time the company goes out and figures, let's take Han Solo, for example, let's license Han Solo's likeness into a bobblehead or a vinyl figurine -- that's called a property. They have about a thousand of these licensed properties, and they can go from the idea stage to a pre-order in about 70 hours. This is an example of how quickly tastes in pop culture move. So, these are just a few more facts about Funko. I think, again, with this IPO Class of 2017 we talked about, another one to put on your radar screen and watch over the next few quarters. Shen: The only thing I'll add -- we have to move on quickly here -- is, with that time to market that you just mentioned, the fact that they have to capitalize on opportunities like a new movie release, a new video game release, for example, they compare, I saw in their 10-K, the way they do this, bringing products to market quickly, they compare it to fast fashion apparel companies. They talk about how they can go from the design stage to store shelves between about 110 and 200 days traditionally, sometimes in as few as 70 days. To give a specific example, with the release of the Guardians of the Galaxy movie in 2014, the company said they were pre-selling a figurine for Baby Groot within a week of the film's release. They move very quickly when the consumer interest in these properties, as you described, is at its peak. The other thing I would like to add, in terms of the high-level opportunity, in terms of pop culture and accessories and how much consumers might want them, in the company's IPO filing, they present a pretty interesting case for the growing influence of pop culture thanks to there being more movies, more TV shows, more video games, and the increasing quality of that content, and then, the ability for fans to connect and engage with that content through, for example, social media and other forums. They really make a solid case for that. GameStop actually gets brought up. Its traditional retail business is falling apart at this point since most video games can simply be downloaded without any sort of actual disk or cartridge now. The company is placing a lot of its hope in its Collectibles segment, which is pretty comparable to what Funko does. That Collectibles segment for GameStop has more than doubled in the past few years. Revenue was up almost 30% in 2017 to $635 million. It was up another 25% in the most recently reported quarter. If you read GameStop's earnings call discussion of that segment, they mention several times the importance of being quick to market with their collectibles. Obviously, again, that speaks to Funko's abilities there.Asit Sharma has no position in any of the stocks mentioned. Vincent Shen has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool recommends Marriott International. The Motley Fool has a disclosure policy.