Creator economy startups VC Cafe

Opportunities for startups in the creator economy

Mapping the opportunities for startups in the Creator Economy.

The creator economy consists of a new set of tools designed to support content creators from all walks of life (from doctors to hobbyists). Let’s start with a short definition:

[the creator economy] is defined as the class of businesses built by over 50 million independent content creators, curators, and community builders including social media influencers, bloggers, and videographers, plus the software and finance tools designed to help them with growth and monetization.

The creator economy market map, Singalfire

A new flock of startups has launched to support content creators to craft (videos, art, newsletters, music, games, courses, etc), find an audience, generate income (subscriptions, tipping, ecommerce, NFTs, etc) and engage their communities.

I’ve written a lot about the rise of the creator economy and its abundance of challenges, why monteziation is the key to unlock creativity, who are the creators and how they make money and how tools like link-in-bio became a hot piece of digital real estate for the creator economy. I’ve also shared my insights with Techcrunch, in “5 creator economy VCs see startup opportunities in monetization, discovery and much more“.

As venture capital investors, one question we think about a lot at Remagine Ventures is “where are the opportunities for startups in the Creator Economy?” In this post, I will take a stab at how we think about the current trends and opportunities for startups in the creator economy.

Challenges with the creator economy today

Can people make a living by being creators? The answer is not trivial. While Signal Fire estimates there are 50 million creators in the US alone, and that the number is expected to grow significantly in the coming years, the real number of creators who able to make a living from their passion is much smaller, approximately 2%-5% only are able to generate enough income to make their passion a career.

The Creator Economy was supposed to offer financial freedom to creators to live off their passion. But the New Yorker argues that at the current state, the Creator Economy resembles the gig economy for digital content:

But this emerging field, in many ways, resembles a gig economy for digital content. Participants are still precarious workers, relying on the whims of corporations for their livelihoods. Much like an Uber driver or a twenty-tens Instagram influencer, the creator is responsible for her own marketing, health care, and tax contributions. She makes money for the platform that hosts her without receiving the legal and financial protections of employee status, or the stock options typically given to the platform’s engineers, designers, and managers.

“What the creator economy promises, and what it actually does”, The New Yorker

Li Jin, in many ways the face of creator economy venture capital, says that the creator economy is broken.

But just as the gig economy mode of work brought about negative consequences, strong parallels are emerging between the gig economy and creator economy, rooted in the commoditization of work and erosion of worker leverageAs we’ve traveled up the adoption S-curve, social media platforms have shifted from supporting creator individuality to commoditizing creators in order to maintain their grasp on user attention, a necessary ingredient for advertising-based business models. This dynamic undermines creator success and independence, making the creator economy just as corrosive for online workers as the gig economy.

“The Creator economy is in crisis, now lets fix it”, Li Jin’s newsletter

So where does it leave us? To be a successful creator, you need to be an influencer after all. The creator economy offers independence and the ability to monetise fan’s attention in a variety of ways (as opposed to advertising/sponsorship only), but the road to get there is riddled with challenges. This is where new startups can help.

Social Media platforms remain a serious threat for creator economy startups

Many of the creator economy startups have conjured different ways for creators to generate revenue outside of advertising, which has been the bread and butter of ‘influencer’ platforms like Instagram, Youtube, TikTok etc.

The social media giants have internalised the fact that all these creators are already active on their platforms and having creators migrate their fans outside of their platforms might risk their ad revenue. So most of them have fully embraced the creator bandwagon, especially when it comes to monetisation tools. This chart by Axios shows how much diffusion there is between the platforms – nearly all the major platforms introduced tipping and creator funds.

Social media platforms adding creator offerings and copying from one another (source: Axios)

This represents an additional challenge for startups in the creator economy space – competition for the creators comes from the platforms as well as from other startups. The platforms have shown that they won’t hesitate to copy a successful format (i.e. TikTok and Reels/Youtube shorts or the explosion of social audio following the early success of Clubhouse).

A look at Creator Economy Startup Landscapes

A quick look at the various creator economy landscapes reveals that there’s a growing number of startups entering the space. According to CB Insights, there are approximately 125+ startups innovating across the creator value chain.

The creator economy startup landscape cbinsights
From hobbyists selling PDF’s to professional creators, CB Insights considered about 125 creator economy startups in their landscape.

Arm the creators, a popular newsletter published by Hugo Amsellem, mapped over 150 startups in a landscape published on December 2020.

A more recent landscape, Creatorscape 2021, published by Influence.co shows over 438 startups active in the creator economy (click here for the full list of companies). This is quite a broad look at creator startups, including music streaming services like Tidal, and enterprise video editing platform Descript, both are not limited to use by creators and therefore this landscape is a bigger than what I’d consider ‘creator economy’ startups.

The 2021 Creatorscape by Influence (source)

Note that most of the density in these landscapes is around ‘business model’ – ad revenue, marketplaces, memberships, affiliate. The other half is more distributed, but consists on tools for content creation and distribution and finally a minority of tools focused on admin tools (fintech, managing the business, back office, etc).

According to CB Insights, the Creator Economy has attracted over $1.3 billion in investments in 2021 (up to June 15), more than 3x the amount raised in this space in 2020.

There are already a number of Unicorns in the Creator Economy space, which are likely increasing the overall VC interest and belief that it’s possible to build large companies in the space.

Source: The Information

Several funds, such as Andreessen Horowitz, an early believer in the creator economy, have made several prominent bets in the Creator Economy in the first half of 2021. A combination of platforms (clubhouse, substack, Turntable), monetisation tools and back office (Maven, Whatnot, Stir) and Web3/NFTs/Crypto (RTFKT, Bitski, Opensea).

Source: “The Next Creator Economy Unicorns” by The Information

So where are the opportunities in for startups in the creator economy?

Looking at the list of unicorns in the space may suggest that the biggest outcomes are in platforms. And indeed, I’ve seen a large number of pitches of startups trying to become a platform – for example, become the place where people come to consume video, or offer 1:1 paid consultations with their favourite creator. It’s very hard to scale a new platform and compete with Twitch in live streaming, Zoom in video calls, Youtube in video, etc. It’s not impossible, especially in new areas like social audio where the foundations are still a bit shaky (Clubhouse was famously built in one week), but it’s a steep hill to climb and execution is key.

Below are a few suggestions or themes that I believe are where there are opportunities for startups in the creator economy in the near term.

Creative Automation

At the heart of the Creator Economy is content creation. Much of content creation is still manual and time consuming.

For example, HourOne (disclosure: Remagine Ventures portfolio) only requires text to create high quality synthetic video using human characters. Copy.ai can help creators create engaging social media content or marketing campaigns to promote their digital products, etc. I covered this in detail in my previous post, the state of Creative Automation

The growing landscape of creative automation offers a lot of opportunity for the creator economy (source: CB Insights and VC Cafe)

Help create a creator economy middle class

This a big theme on its own, described by Li Jin of Atelier Ventures as the biggest challenge for the creator economy – how to enlarge the pie so more creators are able to make a living from their passion. There’s no silver bullet but Li offers 10 sub areas of opportunity. I’ll mention the top 4 in my opinion:

  • There are riches in niches – understanding where there’s demand. This framework offers a proven structured way to finding a niche. Companies like Whatnot, which just raised $150M series C to enable people to do live auctions for collectibles like Pokemon cards, is a great example. Online shopping is not new – but live auctions for collectibles, is a market that’s growing quickly and Facebook and TikTok aren’t yet offering the service.
  • Algorithmic content recommendations – discovery is still an issue for the long tail
  • Funding for creators – social tokens, creator funds, and the equivalent of invoice lending for creators (Juice, Willa, Karat, etc)
  • Creator education and training – Think about how many of Ycombinator startups develop products for other startups? In the creator world, we’re seeing a lot more ‘personal saas’ tools where the creators are expected to be the client. Kajabi is a great example of this (and a unicorn in its own right). Check out Nas Academy, who raise $11m for creator education.
Source: Building the middle class of the creator economy, Li Jin

Creators as SMBs

Looking at creators as a new type of small business (SMB of 1), translates to a slew of needs that are currently under served:

  • Fintech:
    • Creator banking
    • Creator lending
    • Creator insurance (health, life, etc)
    • Creator accounting, invoicing, tax
  • HR tech:
  • Back office and admin:
    • Creator bookkeeping
    • Creator expense management
    • Creator payroll
    • Creator office space
    • Creator advertising
If you replace “SMB” with “Creator”, what needs do you see emerge?

Connect the creator economy with Web3

According to A16Z partner Katie Haun, the fund’s investments in web3 are closely linked to the creator economy as “crypto and NFTs would catalyze new business models for creators”.

There’s a new slew of platforms offering creators to leverage Web3 and crypto to control how their content is being used and monetise in various ways. Two categories have emerged:

  • NFTs (non-fungible-tokens)– platforms enabling creators to ‘mint’ their art/music/tweets/videos/ etc as and sell them directly to their fans as digital collectibles. This is usually done via marketplaces like Opensea, Rarible, etc and the fans essentially purchase a unique digital collectible (using Ethereum) that comes with verified ownership on the Blockchain. The NFT can be traded (and potentially increase in value) and the minter (i.e. the creator) receives a fee from every secondary transaction as well.
  • Social tokens – creators, communities, and artists are minting their own digital money (ERC20 tokens) in a way that is branded and specific to their audience. In theory, a creator will only need a loyal audience to grow her income, and fans can cash in on their loyalty by being early supporters of the creator and seeing their social tokens rise in value. without the dependancy on platforms like TikTok, Facebook or Youtube.

Since your typical designer/musician/gaming streamer isn’t always also a crypto expert, there’s been a rise in the number of platforms offering “NFTs as a service” for content creators. Examples include Bitski, offering NFT storefronts, Rally or Roll for social tokens.

This topic probably deserves its own post, but I recommend watching “The Rise of Social Money” by Singularity university and reading Packy McCormick “Status Monkeys” as a good primer.

The rise of user generated capital, by Bradley Miles (Source)

Final thoughts

The creator economy will continue to grow and we are just in the early innings. The social media giants will continue to invest in creators, in an effort to keep them engaged on their platforms to support their multi-billion dollar advertising businesses. The challenge for founders will continue to be finding niches that can start small, but have the potential to be very large in a short period of time. They will be copied in time, but venture capitalists are betting they can grow category winners so fundraising rounds are compressed in a short period of time at growing valuations.

Pre-seed founders building interesting tech in the creator economy space? I’d love to chat!

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Co Founder and Managing Partner at Remagine Ventures
Eze is managing partner of Remagine Ventures, a seed fund investing in ambitious founders at the intersection of tech, entertainment, gaming and commerce with a spotlight on Israel.

I'm a former general partner at google ventures, head of Google for Entrepreneurs in Europe and founding head of Campus London, Google's first physical hub for startups.

I'm also the founder of Techbikers, a non-profit bringing together the startup ecosystem on cycling challenges in support of Room to Read. Since inception in 2012 we've built 11 schools and 50 libraries in the developing world.
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