Content creators

Online content creators earn millions. VCs also want to cash in on the booming ‘creator economy’

Editor’s Note: This analysis is based on Crunchbase’s list of startups in the content creator space and focuses on tools and platforms for independent content creators. This does not include crypto companies or NFT markets. Learn more about our data methodology for this story here.


Tejas Hullur had been posting regularly on TikTok for about eight months before he teamed up with a company for his first brand deal.

Venmo reached out to Hullur, which creates videos about ways to make money online and how creators build careers online, in April 2021 and asked for their rate. The payments giant wasn’t the first brand to approach Hullur, but it was the first partnership it wanted to do, and it wasn’t sure about its pricing. Venmo offered $1,000 and he traded it down to $1,500.

This agreement marked a turning point: Hullur was no longer just a company, but a creator.

“When I heard about that first brand deal that was $1,500, I was like, ‘Oh my God,'” Hullur said. “I was like, ‘OK, I’m going to do this, I’m going to keep going, and I’m going to see what else happens to me.’ ”

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Hullur has amassed more than half a million followers on TikTok, where his content offers a behind-the-scenes look into an online creator’s life and career. He started a limited liability company, produces content for clients, teaches courses and consults for businesses. In other words, it’s a business all on its own.

Hullur is among the nearly 50 million people who consider themselves creators, and among the growing culture that is successfully monetizing their audiences as part of the so-called “creator economy.”

Broadly, the creator economy encompasses the industry of people who create content online and earn revenue from it, independent of a third-party brand. That could mean posting dance videos on TikTok and getting sponsorship deals, reviewing beauty products on YouTube, or writing about current events for paid subscribers on Substack.

“The beauty of this industry is that there’s no playbook for it,” Hullur said. “It’s a blank canvas and it’s building right now.”

VCs move in

Increasingly, venture capitalists are also supporting the creator economy: not by investing in creators themselves, usually, but rather in the fast-growing industry of services that cater to these creators. , from specialty credit cards to business management tools.

Funding for startups backed by content creator-focused companies has hit $637 million so far this year, far surpassing last year’s record, according to data from Crunchbase. Funding for venture-backed creator-economy companies in 2021 was $939 million, double 2020 levels.

“For the first time ever, you have people who can make a living creating this content for other people and finding ways to support themselves,” said Eric Wei, co-founder of Karat Financial, a startup best known for its credit card. for content creators. “So I think for VCs, they’re thinking, ‘Oh, here’s a new type of company forming. And every business faces challenges like how to get customers, how to monetize customers, how to sustain and scale those operations? »

What is the creator economy?

From our perspective, the industry surrounding the creator economy can be loosely categorized into three categories: platforms, payment tools, and operating systems.

Platforms are usually social media companies like TikTok, YouTube, or Instagram, where creators post their content and build and reach their audience.

Once a creator has enough viewership, they usually start monetizing. Once you start making money, you are a business. Many startups have developed payment tools specifically for people monetizing their content online. Companies in this category include Patreon and Creative Juice.

Finally, there are companies that help with the operations of being a creator, such as marketing and payroll. An example of this is Monet, who focuses on “the finance and back office of the creator economy.”

“One of the biggest things for me to understand where we’re going with this is that creators are the future of small business,” said Adams Conrad, director of QED Investors who has invested in companies like Stem Disintermedia. “And small businesses are the foundation of the American economy.”

Timing is key

People making money from YouTube videos or influencers landing lucrative endorsement deals on Instagram are nothing new. But the idea of ​​the “creator economy” as an industry that could be backed by institutional capital really gained traction among venture capitalists in 2020, when the COVID-19 pandemic hit and that everyone lined up.

There wasn’t a single event that caused VCs to start investing in the creator economy. However, published data on TikTok’s engagement was certainly a factor. For Conrad personally, “there was a striking interview around, I believe it was around kindergarten or elementary school students who were more excited to be YouTubers than astronauts.”

The timing of TikTok’s popularity alongside the pandemic has created a slew of new creators, and advertisers have taken notice as well. As Hullur points out, advertisers could get more data from social media than traditional advertising, including view counts, qualitative comment data, and link conversions.

Following the success of TikTok, a number of other creator platforms have also formed and raised funds. Social audio app Clubhouse has raised $110 million since its inception and paved the way for some users to sign with major talent agencies. Other social media platforms, including BeReal, Poparazzi and Dispo, which was founded by creator David Dobrik, have also been founded in the past two years and have attracted VC funding.

Investment opportunities

The opportunities of the creator economy are tied to what matters most to creators, that is, what will help them produce content.

Number 1 is “anything that helps you make more money,” according to Wei of Karat Financial.

One of the most popular areas is content monetization, an area in which a growing number of companies are competing. Wei thinks the company that comes out on top will be the one that comes out on top.

There’s also a need for tools that take other aspects of running a business off of a creator’s plate. For example, managing payroll, managing revenue, hiring employees, etc. Virtually any SaaS payment tool that a small or medium-sized business finds useful could be replicated and adapted for creators, Conrad said.

“The best creators do what they love to do and they (delegate) the things they’re not as good at,” Hullur said.

Some of the space companies that have raised funds include Karat, Pico, and Earnr.

Attention to the creator economy has generally focused on the most-followed creators. It’s people like Charli D’Amelio or Addison Rae who became famous by making dance videos on TikTok. Now they’re raking in millions from brand deals, partnerships, TV shows, and movies.

But there’s a big opportunity to invest in tools to support the so-called “middle class” of creators, or people who earn $50,000 or less from their content, according to Hullur.

There are micro-communities on platforms like TikTok and YouTube, Hullur pointed out.

“Everyone is trying to build for creators right now, but creators to me are just entrepreneurs,” Hullur said.

Crunchbase queries used in this article

Methodology

We’ve included funding from venture backed companies globally that have been tagged under “content creator” in the Crunchbase database. For funding fintech companies focused on the creator economy, we included venture-backed companies in the financial services sector that included “creator,” “influencer,” or “musician” in their Crunchbase descriptions. We have not included crypto companies or NFT markets in this dataset.

Illustration: Dom Guzman

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