Rifts — On the Creator Economy
How creators are shaping the next era of business: the creator economy
My background as a creator
The creator economy has always had a special place in my heart. Growing up, I would watch countless hours of Youtube, Twitch & Vine. I was always interested in becoming a creator myself until I did so in college. While in school, I was a photographer & videographer who did concert shoots for people like Mura Masa, Charli XCX, Still Woozy. I also jumped onto the Instagram/Youtube influencer bandwagon with travel photos and videos. And then enter TikTok @venturecapitalguy — I started working full-time as a VC and making TikToks on the industry, amassing almost 10K followers and over 3M views.
The Covid Boom
The peak of the creator economy was synonymous with the rocketship rise of Tik Tok. There, anyone & anywhere could be famous overnight, easier than Twitter, Instagram, and practically all other social media platforms. Covid also accelerated the digital transformation of the creator landscape bringing over 600,000 creators across all platforms in 2021, more than triple that from 2019, over $3.7B in creator economy startup funding, and the proliferation of funds for creators like Tik Tok’s creator fund. A few things worth thinking about: COVID forced us to find connections and hobbies online, and TikTok’s distribution allowed people to find people they normally would not have easier, most people also probably didn’t think they would go viral and that launched their creator journey
We saw explosive growth in the number of creators on platforms like Twitch as it grew to 9.2m streamers, and Tik Tok where it went from 381m users in 2019 to over 1+ billion today.
With all the talk about transforming creators from a passion to a business, over 2 million creators globally make over six figures today while over 50 million people worldwide consider themselves as creators. Looking deeper at the numbers of these 2 million creators that earn over six figures, sponsored influencers are worth over $8 billion dollars due to their power to not only affect purchasing decisions of their audience but to add, niche creators, albeit not having as large an audience as celebrities, are seen as “experts” in their niche and have a following that is closer and more engaged typically.
GenZ is the core is spearheading the creator economy movement. In a career survey asking about their dream careers, over 50% of them said social media influencers versus only 13% saying they wanted to be a doctor or only 6% of them saying they want to be a lawyer.
As GenZ become older and attains more purchasing power (currently $143B and on track to surpass the Baby Boomer generation in spending by 2025), the places they spend will directly be correlated by the creators they watch on Twitch, Youtube, Tik Tok and a variety of other services. Companies are looking more and more to creators as their means of distribution as traditional ads and marketing don’t work on Gen Z
From Creator to Business — tooling
Many of the startups that emerged from the creator economy boom have been tooling startups. These tooling startups have sprung up to fit into an industry where creators are now realizing their passions are businesses but need as much data, integrations and more to make their business as seamless as possible.
Companies like Stir & Karat have been at the forefront of handling everything backend about a business. Just a few years ago, virtually no tools or credit lines existed for creators whose income streams depended on sponsorships. Then came Stir which assists in simplifying and integrating all of a creator’s income stream to one place, and Karat which offers credit lines to creators based on metrics such as follower count and engagement.
Outside of the financial end, the rise of the creator economy gave way to startups focusing on productizing a creator. First came the explosion of the link-in-bio startups with Beacons & Linktree leading the way for creators to have an easy and quick way to set up landing pages for all of their relevant links from business, their most recent videos, and socials. What exploded onto the scene ended up being a myriad of link in bio startups offering more than just links in the bio but combined with detailed analytics and further customization.
The big players in these spaces Stir, Karat, Beacons, & Linktree have all raised huge rounds from some Tier 1 VCs. I believe these companies will represent creator economy 1.0 — the necessity items that creators need to become a full-time creator. It is going to be hard for non-incumbent startups building in the creator economy 1.0 space to outcompete with these places and hence, why I see the creator economy and much of its early-stage funding moving away from these spaces into a new subsector, startups that help to directly monetize creators.
The Path to Creator Monetization — Generating Multiple Income Streams
Analytics & financial backend tools are great for creators but if they can’t make money, none of it matters. Solely relying on AdSense & sponsorships has been the antiquated way for creators to generate revenue. Sparked in part by Mr.Beast’s multiple lines of businesses (Mr.Beast Burgers, chocolate bars, & more) creators have shifted away from having unpredictable and unstable income caused by AdSense & sponsorship to multiple streams of income they control through various avenues. The three largest include…
- Fan Subscriptions Interactions, Content & Supercommunities: As seen in the form of bloggers and writers writing (Substack), a place for creators to share exclusive content to paying audiences (OnlyFans & FanHouse), minting creator NFTs, and interacting directly with fans (Cameo). We also have a cohort of companies on helping creators grow, scale and monetize with their super fans & communities like Astro.
- Creator Courses: Masterclass led to the emergence of creator-led courses but still, Masterclass has been historically gated to only the top industry professionals globally, leaving millions of creators behind. Companies such as Maven & Disco have stepped in to democratize learning by allowing smaller/niche, but equally, as qualified, creators to build out their own courses for their followers.
- Branded Merchandise, CPG, etc: Mr.Beast accelerated the trend and viability of creators launching their own individual brands beyond simply merch and T-shirts. Creators are making the shift to more CPG that align with their personal brand and content. I.e. Emma Chamberlain with coffee that you can buy in mainstream grocery stores. Binging with Babish launched his own cookware line that is seamless to his content. However, for many creators out there, launching their own brand from scratch is unviable and too costly unless you are on the Mr.Beast level. Enter companies like Pietra & Cura that are a one-stop shop for easily white-labeling goods and products under a creator’s brand with everything from fulfillment & logistics all in the lands of these companies. This leads to creators only having to convert their audience into customers and having these companies handle the rest. On the flip side, companies like Jovie cater to businesses to find the right creators to partner with.
From Creators to Investors
From Sway Boys to Jake Paul to the D’Amelios, all started off as creators angel investing on the side to launching full-on venture arms. In a funding environment where the top deals are so much more competitive to get into as investors, creator led venture funds bring some of the best value add to a startup. Funds such as Animal Capital (The Sway Boy’s Fund) & CreatorLed( Blake Michael’s fund) bring a network unlike any other for their portfolio companies. For CreatorLed, we see influencers with big followings across different niches such as people like Graham Stephan, Erika Kullberg, Alexis Ren and Julius Dean all be a part of the fund. For a prospective founder, the value add of having Josh Richards or D’Amelios talk about your product to the millions of fans they have represent a whole new level of marketing as startups are looking to creators as a new form of distribution and court creators for equity and participation in their company. With just 1 post, founders will instantly have achieved major growth without having to spend on traditional advertisements.
The Rise & Fall & What the Future Lies Ahead
After an explosion in the venture funding landscape of the creator economy in 2020 & 2021, there has been a drastic fall in how creator economy companies are funded. In Q1 of 2022, $1 billion was invested into the creator economy, over 30% less than the quarter prior and the second consecutive slowing in funding for the industry.
I personally think it’s for good measure. Like what we see in the explosion of funding in Web3 companies right now, much of the explosion during the early days of the creator economy boom was in companies all trying to solve the same problem in giving creators tools & analytics to turn themselves into a business. The true work to be done to accelerate the industry is to build to help creators make a livable wage, only 12% of full-time creators make over $50k a year, and the real goal should be figuring out ways to increase that percentage so being a full-time creator becomes as achievable as becoming a doctor.
So what happens next in the creator economy space - my few cents
- The Creator Middle Class: The creator middle class has always been the holy grail. The early creator economy companies really focused on creators who are already at the top, and often those creators don't really the help. Startups that enable and elevate part-time creators to become full-time ones will be winners.
- Sustainable Long Term Brands: The focus for creators is creating a more sustainable, long-term brand that can reach more than just their viewership. Becoming a household brand name can bring way more value in the long-term and that comes in the form of creating CPG, courses and more that align with their personal brand and content.
- Creators with Equity: The top creators will become investors, either through creating their own venture funds or as angel investors. The smaller creators will be getting equity by becoming ambassadors and community creators for brands they are aligned with.
- A Shift Away from Creator Analytics Businesses: A shift away in both funding + new startups being built in the creator analytical/business tooling space in the early stages.
- Teaching Creators How to Become Creators & Creator Burnout: 90% of creators have experienced burnout and 71% of creators have considered leaving social media. It’s extremely hard being a creator and there’s no set path on how to be one either. Companies that help teach creators how to become a creator and focus on mental health are going to be huge.
6. Creator Monetization: Only 12% of full-time creators are making more than $50,000 per year and 46% of full-time creators make less than $1,000 annually. These aren’t your Mr.Beasts or D’Amielo’s of the world, these are your average, middle-class creators, having a small (by creator standards) following that struggle with generating a livable wage. Companies that win in this space will help create more steady and reliable sources of income streams for your everyday creator.
Thank you to the people that helped me whether through inspiration, spending time to talk with me through this or reviewing this article. Shout out to Sully @ WorkWeekVC, Blake Michael @ CreatorLed & Lumanu, Michelle Fang @ Dive, Tim White @ Jov.ie, Rylie Jennings @ Behind Genius Fund, Alex Ha, Daniel Koss @ Creable, and more for your help with this article.
Enjoyed reading? Got Thoughts? Email me [email protected] if you want to chat.