Investment trends in Creator Economy

In 2021, the phrase “creator economy” became a buzzword as creators, venture capitalists, and entrepreneurs rushed to capitalize on a thriving industry.

According to the United Talent Agency’s IQ department, which tracks influencer-industry trends, more than 70,000 people used the phrase online between January and September 2021.

This did not stop here. Furthermore, marketers’ spending on influencer marketing is expected to surpass $4 billion by 2022, as per Inside Intelligence. Additionally, the growth is fueled by Millions of dollars being invested in startups such as Linktree (valued at $1.3 billion earlier this year) and LTK (valued at $2 billion in late 2021). Creators are also attracting investors, and groups like the esports team Faze Clan are going public.

The Future of Creator Economy

Who imagined that the same app would impact consumer choices a decade after we were first introduced to the world of Instagram or become the primary source of information for financial decisions? Ten years ago, Instagram was just an app used to exchange images. Today “Content Creator” is seen as a proper job that a millennial can justify to parents.

To put things in perspective, the ecosystem’s economy has steadily improved. Three years ago, a business might allocate 10% of its marketing budget to creator campaigns; today, this percentage is a significant 50% for most modern D2C brands.

The Creator Economy Startup mapping has audience monetization take up a significant portion of startups. Within audience monetization, NFTs and social tokens, and fan interaction take up the larger share. Audience curation and creator tools are the next big categories, followed by vertical platforms and community management.

Here’s what is up to kick soon

The technologies that enable smaller accounts to more directly monetise their own work are a major driver of the present strong creator economy. These consist of tip jars like Ko-fi, content-sharing websites like Gumroad, and websites for starting online courses like Teachable or Thinkific.

Funding trends

Venture capitalists are increasingly supporting the creator economy, though often not by investing directly in the creators themselves. Instead, they are supporting the rapidly expanding market for services targeted at creators, such as specialist credit cards and business management systems.

According to Crunchbase data, funding for venture-backed firms catering to content creators has already surpassed $637 million this year, on pace to greatly beat the previous record. In comparison to 2020, funding for VC-backed creator economy businesses increased to $939 million in 2021.A record $1.3 billion has been invested in the creator economy only in 2021.

How big is the Creator Economy?

SignalFire estimates that there are currently 50M creators.

Each platform has seen funding flood into the market for creators:

• According to Forbes, the top YouTube channels earned $211M between June 2019 and June 2020.
• Huda Kattan and Eleonora Pons, two well-known Instagram influencers, can make up to six figures every post.
• The highest paid writers on Substack can earn up to $1 million a year.
• Gumroad’s creators have made more than $460M since 2011 by selling their works on the website.

Top funded Companies

Several businesses have risen to unicorn or near-unicorn status as investment in the sector has increased, including:

• Patreon: The membership site recently secured $155 million in a Series F round at a $4 billion value.
• Kajabi: With $550M in financing at a $2B value, the online education platform is the best-funded startup on our market map.
• Cameo: With a $1B value, the customised video shout-out app has raised over $166M in total funding.
• Substack: The newsletter platform has received a total of $82 million in funding, valued at $650 million.
• VSCO: The photo-editing software has a $550 million valuation following a $85 million investment round.
• Splice: The audio-editing platform has investors including Union Square Ventures, True Ventures, First Round Capital, and Lerer Hippeau Ventures, and is valued at $500 million.

Unicorns

In the creator economy, 2021 was a big year for unicorns, with 11 firms, including Lightricks, MasterClass, Clubhouse, OpenSea, Axie Infinity, Cameo, Jellysmack, Flutterwave, LTK, PicsArt & Whatnot, achieving this status.

Spotter, Linktree, and Domestika are three brand-new creator companies that have already achieved unicorn status in 2022.

Conclusion

We at Rocket Capital believe that with the size of the creator economy reaching ~$100 billion the next couple of years will be defining leaders for this space. If you are excited about creator economy and want to share your experience, please reach out to us at mark@rocket.capital and akarsh@rocket.capital

About Rocket Capital

Rocket Capital is an early-stage VC fund investing in New Media Technology start-ups. We invest in pre-Series A, Series A and Series B stages, but we are open to investing earlier/later if we have strong conviction in the idea and founders. We have deep respect for all founders and the products they are building, and believe in creating long-lasting relationships in the industries we invest in.

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