The Only Thing Which Has Failed About The ‘Creator Economy’ Thus Far Is Venture Capital’s Attempts to Get Their Piece. Why There’s Never Been a Better Time to Be a Creator.
I judge the health of the creator economy by one single controversial factor: ease of wangle and probability of survival for its participants. That is, if you are someone who wishes to earn a minimum viable living stuff creative, what is the likelihood you’ll be worldly-wise to do so? A singer who wants to sing. An animator who wants to draw. A spectacle troupe who wants to make you laugh. A writer who wants to blog well-nigh culture. With the question – can I icon out how to make unbearable money to alimony doing this?
My unvigilant statement is that there has never been a largest time for Creators by that objective function. I veritably concur that if you want to maximize virtually other objectives, or examine particular types of creative industries, you might disagree with me. For sure there were periods where smaller groups of participants had largest lifestyles, increasingly stable employment, increased societal influence, or a less taxing fandom. But all of these moments were based on strained scarcity and cultural gatekeeping. It might be harder than overly to earn $1 million/year as a creative but it’s never been easier to make $50,000.
Software and technology in unstipulated has driven lanugo the forfeit of most creativity and powerful tools are in the hands of increasingly than 1 billion human beings.
Creativity is happening within communities and platforms which bring together distribution and collaboration.
And you can directly and indirectly monetize your creativity in a myriad of ways.
Put in flipside way, my framework for the Creator Economy is that there are three wholesale areas of value
Create: Tools that help people be creative and touch the production process in some manner
Distribute: Tools which help people find, growth, interact with, understand their audience/community/fans
Monetize: Tools which help people make money from their creative outputs
I am not saying it’s easy. I’m not saying it’s fair. I’m not saying it’s without tradeoffs. I’m not saying everyone will (or deserves to) succeed. But it has never, overly been a largest time to try if you’re willing to commit. My primeval encounters with a personal computer, initial uses for the Internet, and 12 years of product work [Second Life, AdSense, YouTube], were all driven by the conviction that everyone deserves the endangerment to be creative. And that the world benefits when little stands in between creator and audience.
But if I’m so optimistic well-nigh the world of Creators, what’s going on with the startups worked over the last few years to help this market succeed – why are so many struggling? I’d been thinking well-nigh this post for a while, waiting to get to it at some point, but nice essays from Mike Mignano [LSVP], Andrew Chen [a16z] and Kaya Yurieff [The Information] brought my hands to keyboard.
Mike, who we backed when he started podcast megacosm platform Anchor, wrote last year well-nigh what he calls the “Creativity Supply Chain” – how basically the market for Creativity is really much much larger than how we originally specified the Creator Economy, which became overly focused on Influencers and social platforms. I agree!
Kaya covers “How Influencers Dodged the Destruction in Creator Startups” and notes “times are grim for startups that sell products and services to creators. Some are folding, while others can’t pivot their businesses yonder from the creator economy fast enough. The creators themselves, however, are proving to be far increasingly resilient.”
Chen penned “Creator Economy 2.0: What we’ve learned, why it’s hard, and what’s next” and analyzes why so many of the first wave of startups failed to scale productively:
The two posts pair nicely and I often stipulate with the snapshots. However, I wanted to add a few of my own observations to Andrew’s hypotheses.
1) The Creator Economy as an Investable Concept was ZIRP Accelerated. Too Much Capital Too Fast.
Handful of temporal factors turbo’ed the value of dollars and number of startups in the Creator Economy space.
i. COVID – lots of sustentation focused online, via social platforms, waiting to engage/be entertained/informed/etc by online creators
ii. Velocity of venture dollars deployed increased considering of ZIRP
iii. Lots of new VCs (both new funds and new hires at existing firms). Do these folks want to be the 100th investor chasing SaaS or do they want to define/invent new categories where they can be the thought leaders? So there’s a little bit of fake it until you make it, where the incentives are to find white space to invest in. It’s scrutinizingly unchangingly good faith just a byproduct of incentives and competition.
iv. Lots of founders with ‘relevant’ wits – FB, IG, YouTube, Snap, etc shedding talent and this CV is a suppositious pattern matching checkbox for VCs who seem these founders have the depth, insight, and relationships to build in this market. There moreover weren’t a lot of novel ‘consumer startups’ stuff built in non-gaming areas, so Creator Economy was lulu to folks who didn’t want to work in B2B.
v. Crypto speculation made NFTs, altcoins, etc all seem like viable mechanisms for creatives to scale
Prediction for Next Wave of Startups: Optimistic! Sometimes the weightier companies get started when a market is out of favor, vs overheated. Today’s founders got to see a tuft of experiments run on other people’s time and dollars!
2) “Creators” Are Not a Single Consumer Segment
“Freelancers,” “SMBs,” “Creators” – these are all examples of wholesale categories which can span too wholesale a variety of personas, needs, geographies, and so on, to really be targetable by a product wedge. Of undertow there are some needs which can cuts wideness a significant number of segments, but it’s nuanced and you need to pick an initial consumer wiring that’s big unbearable to be meaningful but specific unbearable in the job to be done. Too many Creator Economy startups targeted overly widely (“Influencers”) or overly narrow (“sports coaches want to create video”) ICPs.
Prediction for Next Wave of Startups: Increasingly startups that build for defined, but not yet venture scale, markets. And then only raise VC once they can (or want to) jump from that profitable first consumer to a broader goal.
3) Creators Might Each Have 1000 True Fans, But There’s Overlap and Cannibalization Wideness Creators
Many CE startups were running on the proposition of 1000 True Fans, basically the notion that minimum viable success comes from a Creator finding the 1000 folks who like them the most and figuring out how to monetize this group to its fullest level. This is what allows CE growth spreadsheets to imagine a Creator Economy that plane if it followed power laws, would still produce a very valuable long tail. There turned out to be two problems in relying upon this theory as ‘a given’ for your startup.
Cannibalization and Competition Among Creators. If the CE was going through a venture-fueled hypergrowth phase it caused a speedrun of 10x, 100x increasingly creators asking for your dollars to buy their merch, subscribe to their newsletter, tip their livestream, etc. Most consumers are True Fans for increasingly than one creator/interest and moreover have a stock-still upkeep to spend on content and entertainment (whether it’s predefined or increasingly just a sense of ‘spending too much/what can I sire this month). So getting to your 1000 True Fans meant not just finding 1000 people but 1000 people who could sire what you were selling and preferred you ongoing to all the other Creators competing for their sustentation and dollars. Hence, conversion rates and retention fall over time.
Global Fandom. Although it’s much easier to be Day One Global for a startup versus years ago, most still can’t take on the infrastructure, legal, and system integration hurdles to serve international creators and/or consumers right off the bat. This adds flipside friction in finding a Creator’s 1000 True Fans – your merchantry model relies on those Creators and their 1000 customers stuff in geos you can service and monetize (while moreover recognizing that not all regions are as valuable from a currency standpoint if your Creators are in US).
Prediction for Next Wave of Startups: Increasingly wide approached to consumer CRM/lifecycle management largest content windowing/price segmentation to help you segment and serve 100 Rabid Fans 1000 True Fans 10000 Casual Fans 100000 One Offs.
4) Most Creator Economy Startups Aren’t Greedy Unbearable
Margin. It’s nonflexible to create a big merchantry on small margins and low take rates. Too many of the CE startups started with sub 20% take rates or venture-subsidized subscription prices. I get it – you want to get to scale first, don’t want to be greedy and reach into Creator pockets. But it’s really tough to get your P&L rightsized this way.
Even increasingly essential (and subtle), I really believe your margin is your mindset! Think of it this way – how much value would you have to create for a Creator in order to justify taking 25% – 50% of a transaction instead of 5%? A lot of value! And it totally resets how you think well-nigh a minimum viable product offering or what success can be. If during the seed phase increasingly CE startups solved for the value proposition question *before* getting on the growth lines I believe we’d see (a) fewer move on to the Series A funding phase but (b) the survivors be stronger, largest companies.
Prediction for Next Wave of Startups: Higher take rates
so TLDR: I worked in the Creator Economy since surpassing it was named, believe in the creativity of human beings (whether it’s economically motivated or just for expression), and want to see increasingly products built for Creators. Many of these will originate from within the communities themselves rather than be originated solely by venture-backed entrepreneurs so you can’t judge the ‘health’ of the Creator Economy just by VC funding statistics.