In only the first half of 2024, startups within the sector drew the same amount of money as all of 2023. And during the second quarter of 2024, U.S. creator startups received nearly $700 million in funding — a 68 percent increase from the previous year.
Let’s consider the main reasons why the creator industry is booming, how startups are filling the gaps in the market and how venture capitalists can tell which startups to back.
Why Is the Creator Industry Appealing to Startups and VCs?
- It’s a burgeoning market.
- There are lots of opportunities for fintech solutions tailored to creators.
- There’s potential to form strong relationships with and grow alongside content creators.
3 Reasons Why the Creator Economy Attracts VCs
Finding an interesting investment idea before it becomes popular is key to VCs’ success, allowing them to invest in a startup early and profit later as it grows. The creator economy offers exactly this, including a wide range of opportunities for startups.
1. The Content Creator Market Is Growing
The number of content creators continues to grow. The main reason for this is a low barrier to entry in the creator economy. Thanks to accessible platforms, anyone can engage and start creating content with just a few clicks.
The ubiquity of social media also drives the creator economy forward. For example, global users’ daily time spent on social media increased by about 68 percent from 2012 to 2023. Today, the average user spends more than two hours a day scrolling social media, which significantly increases creators’ coverage rates and allows them to earn more money from more views.
The combination of the increasing number of creators and rising social media consumption offers significant opportunities for startup products enabling content creation, monetization, marketing and analytics.
2. Opportunities to Create Unique Financial Tools
Unlike other small business owners, creators often can’t open business accounts in traditional banks because banks consider them high-risk clients. This means their access to loans, financial planning or even basic tools traditional workers use is limited.
Fintech products designed for creators, such as payment systems and revenue management tools, have become a necessity. Startups that fill this gap have a lot of growth potential, especially with cross-border payments and taxes.
Different international regulations make it even more difficult for content creators to manage their incomes, raising worries about unexpected financial penalties. For example, Value-Added Tax for content creators is regulated differently depending on the country. If creators don’t determine their tax obligations in a specific region, they may face fines and, in some countries, even criminal charges.
Young creators are especially vulnerable, since they may be unaware of consequences like this. Fintech companies can adapt their technologies to protect content creators from these tricky financial situations.
3. Relationships With Content Creators Have Longevity
Startups that make solutions for content creators have significant long-term potential because they’re filling a niche gap in the market. They’re able to attract creators as they’re gaining traction and stay the best solution serving the underserved niche. By offering services that traditional banks overlook, these startups can build lasting relationships and strong customer retention.
How to Evaluate Content Creator Startup Potential
For investors entering this market, you want to be confident that the startups you bet on know what they’re doing. Here’s what to look for when evaluating these projects.
1. The Startup Understands Its Audience
Surveys show that two out of three YouTube users who are Generation Z consider themselves content creators. Since this generation was raised with the internet as a part of daily life, they’re usually adaptable to new technologies.
Simply striving to profit from Generation Z, however, is the wrong strategy; startups need to serve their needs. Take user interface and user experience design as an example. Young creators are used to accessible interfaces, and from a startup, they’ll anticipate the same. Startups should include all their product’s features on one platform for convenience.
A promising investment project is one where the founder understands all these things and tailors their product specifically to their audience.
2. It Acknowledges Its Barriers
The creator economy is a relatively new and specific field, and investing in such projects might carry risks. Investors should thoroughly evaluate whether a startup understands the market and has the potential for scaling.
Founders, in turn, should have a deep understanding of the specific obstacles within the industry, as it may pose challenges to their solution adoption. For instance, content creation or audience engagement tools may face linguistic or cultural barriers. VCs have to be sure that a startup is able to adapt to different markets.
3. It Designed Its Solutions for Multiplatform Integration
Make sure a founder has designed their solutions for multiplatform integration. Creators produce content on various social media and platforms, each with distinct characteristics. Startups that are tailored to only one platform are bad investment options. To be successful in this field, founders should consider the ability to integrate their solutions across platforms to ensure maximum reach.
Participating in the development of this field is exciting and promising. The industry will grow even more in the coming years; new trends, technologies and solutions will appear. New challenges may also arise, however, making the collaboration between VCs and startups ever more fruitful.
