I'm a principal investor at early stage VC fund SignalFire. Previously I was TechCrunch's editor-at-Large for 8 years.
More than 50 million people around the world consider themselves creators, despite the creator economy only being born a decade ago. It’s become the fastest-growing type of small business, and a survey found that more American kids want to be a YouTube star (29%) than an astronaut (11%) when they grow up.
We’ve created a crash course on over 100 of the top startups and tools built to help influencers, so whether you’re a creator seeking help, a founder identifying opportunities, or an investor looking for the next rocketship, this market map will give you both a broad and deep view of the creator ecosystem. I promise that the next 10 minutes of your reading will not be interrupted by ads. No premium membership required.
The definition of the creator economy, also called the passion economy, is the class of businesses centered around 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.
Using platforms like YouTube, Instagram, Snapchat, Twitch, TikTok, Substack, Patreon, and OnlyFans, content creators can earn money through:
If you are a founder building something special in this space, SignalFire would love to hear from you! We’ve funded tools to help influencers operate and monetize like credit card Karat, and led the seed round for YouTube co-founder Chad Hurley’s new company GreenPark. We fund both early and mid-stage startups, and help them with recruiting, advising, go-to-market strategies, and PR.
There’s been a societal shift in consciousness towards caring more about feeling fulfilled in our jobs, having control over how we spend our time, and being our own boss. Fans see creators doing what they love for a living and aspire to follow that path that never leads to a cubicle.
Meanwhile, better cameras on phones, larger screens, faster mobile networks, and creator-focused social networks have spurred an inflection point for the industry. Now all you need to join the creator club is a phone, an idea, and a willingness to be judged by strangers. Simple? Not quite. That will guarantee you 12 views (maybe 15 if you have many cousins). And don’t even dream about brand deals. To succeed, creators have to be incredible storytellers, relentless hustlers, and leaders of their fan communities.
Luckily a ton of companies have been built to support creators, especially the 2 million people able to make a full-time career out of it (just imagine all the tools and infrastructure that are needed if the entire population of Lithuania were to become YouTubers).
Here’s our bottom’s up TAM (total addressable market) analysis, which adds up to 50 million creators:
Professional Individual Creators (~2M+) – Monetizing content full-time:
Amateur Individual Creators (~46.7M) – Monetizing content part-time:
Before we dive into all the types of tools, it’s important to understand the evolution of the creator economy, which can be divided into 3 distinct layers that build on each other.
Essentially, creators have to balance the distribution potential of certain platforms with the risk of becoming dependent on them, and monetize by either earning a little off of each fan from mainstream content for a big audience or earning a lot off of deeper connections to a smaller set of fans through niche content.
The big trend we see here is that over time, creators are becoming more diversified in their revenue streams and are being funded directly by their fans.
Creators have shifted from being paid by platforms like YouTube with ad revenue shares in exchange for bringing in an audience to the platforms, to being paid by brand sponsors on Instagram and Snapchat in exchange for their reach to an audience they access through the platforms, to being paid by fans via patronage or tipping or ecommerce in exchange for entertainment and community beyond the platforms.
Now that we’ve gotten the brief history lesson out of the way, let’s talk about specific subsectors and exciting companies within them! We’ll also discuss the COVID-19 impacts as well as our assessment of the investment opportunities within each.
A list of all the usual suspects. No additional explanation needed, right?
COVID-19 Impact? Large tailwinds as consumer engagement in entertainment has increased. As users spend more time on these apps, they follow more creators, consume more of their content, and earn them more money. This, in turn, can grow the platforms’ revenues while making creators more willing to pay for tools that help them.
Some platforms have their own embedded content creation tools (i.e. TikTok video effects and Instagram photo filters) but there are many companies that provide point solutions for making enhanced content. Historically, content creation tools with social networks attached have been the most financially successful.
One meaningful exception is the giant incumbent in this space, Adobe Creative Cloud, which includes Photoshop and several other famous tools like Premier Pro and Illustrator. In 2013, Adobe shifted its business model from selling individual software licenses ($1,300-$2,600 for the full suite) to selling a subscription ($52/month for the full suite). However, the majority of Adobe’s customers are business creators (i.e. people who work on the marketing team of some corporation) as opposed to the individual creators who publish on the social platforms.
Some platforms have made acquisitions to become an “all-in-one” destination for discovery, creation, and monetization. In 2017 Spotify acquired Soundtrap, a music production software developer, so it could offer ways to make music rather than just distribute it.
Today, it’s common for creators to cobble together multiple tools for editing and earning money off their content they then share on social networks. For example, Instagram creators might finance a shoot with Karat, record in Snapchat, edit with inVideo or Pixlr, then post to Instagram where they monetize on platform with Grin or Captiv8, earn money off-platform with Teespring and Cameo, and track their analytics with Delmondo.
Vochi allows creators to enhance videos straight on their phone with different cool effects
Canva has countless templates for design work ranging from Instagram posts to Zoom backgrounds, greeting cards to mental health posters
Professional music makers and DJs love to use Ableton. Similar to Canva, Ableton comes with countless templates and an extensive sound library
COVID Impact? Large tailwinds as more people are staying at home and either becoming creators for additional sources of income or existing creators have more time to devote to their creations.
Pros: Innovative tools that get adopted by creators can go viral on social media.
Cons: Adobe is a huge incumbent in this space with clear network effects (it has become such a standard of file types that enables sharing amongst creators). Point solutions for creators are tough to monetize unless it has a clear ROI for the creator / product is very differentiated and defensible.
There are several types of companies in this space:
Influencer marketing by platform as of February 2018, via FourstarzzMedia
Influencers who use The Plug choose their own “work” and get paid in real-time
COVID Impact? Minor tailwinds as corporate and brands cannot do in person professional shoots so they are reaching out to creators for user-generated content, but other brands have largely paused marketing efforts to conserve cash.
Pros: There is an opportunity to build a large, scalable business in the platform/marketplace segment given that brand marketing is still the #1 way that creators generate income. Who will be the DoubleClick of influencer marketing
Cons: There has been no major outcome in this space, with Twitter’s buy of Niche and Google’s acquisition of FameBit only ranging in the tens of millions. Our hypothesis is that there are several reasons why:
With the long tail of amateur influencers at 50 million and growing rapidly, there is a lot more competition for brand deals amongst influencers, which forces them to seek alternative ways of generating an income.
We start by exploring the various donation platforms that allow fans to donate to their favorite creators. There are a few different ways this takes place:
Patreon CEO Jack Conte’s own Patreon page
COVID Impact? Net neutral. Supply has increased because COVID has encouraged many people to become creators in order to generate additional income streams. For example, Patreon added 30K new creators on their platform in the past 2 months. Patrons who are still financially stable are opening their hearts and wallets with bigger payments for ceators. However, this is partially offset by a decrease in demand because as unemployment rises, more people will be cutting discretionary spending on things like a monthly donation to a creator.
Investment Opportunity Assessment
Pros: Integrated platforms like Twitch or YouTube can charge a high 30-50% take rate because they can leverage the consumer engagement they already have to provide creators a ton of value on building an audience.
Cons: In contrast, standalone companies have a low take rate of typically 5% because they don’t have additional value add and need to align themselves with the creators. Given that the largest platforms in this space have under 500K creators, a 5% take rate off an average of $10/month donation will be tough to build a large business.
Example of a Ko-fi page — here’s a Japanese artist asking fans to buy her a “mochi” instead of a “coffee”
Selling online courses as a form of premium content
SignalFire’s Head of Content Josh Constine’s Substack newsletter page
COVID Impact? Tailwinds. As the unemployment rate in the US rose, more creators are turning to these platforms to supplement their income.
Pros: Companies that can build a robust business model in the entire creator economy should be ones that help creators generate additional income.
Cons: Will need to examine the business model on a case by case basis. For example, selling merchandise has become commoditized and really tough to scale as a business given that it is so operationally intensive.
One of my favorite YouTubers Blogilates with her shop-able merch store integration right below her description. And yes, that’s her dog also demonstrating a stretch
Several startups believe that increasing the engagement within the fan community as a first step before targeting them for various sales is crucial to increasing conversion rates. Community helps creators collect fans’ personal phone numbers while DSM is able to message fans across different social media platforms via a single porta, and Zebra lets creators build a dedicated community space for their fans. These platforms aim to create a more direct or efficient mode of communication from the creator to his fans. Vibely allows creators to create regular “challenges” for her fanbase, thereby increasing engagement within the community. Fourthwall on the other hand, creates a dedicated Shopify-like ecommerce page for the creators and enables them to send a personalized video shout-out to fans who’ve made a purchase. While all these tools have substantial adoption from creators to-date, the way they help creators ultimately monetize a more engaged community is via the selling of merchandise, which as discussed earlier, is not the most reliable source of income.
As creators begin to diversify their income and become more like small-to-medium-sized businesses, they will need more tools to help them manage their finances. Creators also don’t plug well into the existing banking infrastructure because they are very difficult for banks to underwrite — they don’t have W2s and instead have many sources of income that are unpredictable. SignalFire recently invested in Karat, a banking solution for creators. Karat gives creators the ability to aggregate all sources of income onto a single platform, offers income smoothing for creators on a week-to-week basis and provides instant loans based on predictable future income.
Karat: Finally, a “bank” who understands why subscriber count is more important than having a W2
We’re at an inflection point in history where becoming a professionalized creator is one of the most desired jobs. Creators become creators because they love to create. As they grow their audience and expand their revenue channels, the burden of managing the day-to-day of their business grows heavier. Startups that will dominate the next stage of this evolution are ones that are centered around empowering creators to seamlessly monetize while staying focused on what they already love — creating content. Being a creator today requires evolving from being an artist to being a founder. The job has come to encompass product management, design, community engagement, ecommerce, and data science along with being an entertainer. You have to build a team of experts and vendors to help you manage the tools to build a diversified business across platforms.But with that diversification comes resilience. Creators become less vulnerable to shifts in priorities of the tech giants or their algorithms by owning the direct relationship with their fans. Each creator can assemble a different balance of revenue streams to match their style, no matter how niche. That’s a big win for everyone, because creators catering to each of our esoteric interests can build a sustainable career. Instead of just homogeneic, lowest-common-denominator prime time sit-coms, we get content tuned to every sub-culture in the rainbow. Now there are finally enough creators to support a whole ecosystem of startups helping them turn their passion into their profession.
At our early stage venture capital fund SignalFire, we believe creators and the startups that support them are vital to the future of entertainment, advertising, education, and commerce. That why we’ve invested in startups like Karat’s credit card for influencers and HoloTech Studios’ FaceRig for livestreaming motion capture avatars.
Founding a creator-focused startup? We’d love to hear about it. You can reach out here or to any of our team members. SignalFire brings to the table our Beacon technology for predictive recruiting and market data analysis, our talent team that can ensure you score your dream hires, in-house experts on PR and go-to-market, and our network of 85+ invested-advisors including founders and executives from YouTube, Instagram, Twitter, Adobe, and many more that help support our portfolio companies. Those value-adds are why 85% of our portfolio founders rank us as their most helpful investor. SignalFire can help creator-led startups skill up as entrepreneurs with our programs to assist with fundraising and board construction, while assisting experience founders building creator tools to hire swiftly to seize these new opportunities.
Author’s note: I’m YY and I hoped you learned a thing or two from this post. If you appreciate my sense of humor (sorry, I’m Canadian) or are building something special, please reach out to me at [email protected], or pitch us at SignalFire here. If you want more of SignalFire’s info on the creator economy, market maps, and tips for founders, subscribe to our newsletter!
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