Last summer, Tucker Schreiber, a 28-year-old co-founder of a start-up called Combo that was building a video editing platform, noticed a lot more emails in his inbox. Though his company had no employees and no products, and hadn’t even said it was looking for money, investors were sending him a stream of messages.
“I started getting five to 10 inbound emails daily for a couple weeks straight from investors,” he said.
Mr. Schreiber’s start-up was riding a boom in investors targeting the so-called creator or influencer economy. The boom in the creator economy itself has renewed interest in social media among venture capitalists, who for years thought there was little point to looking for social upstarts with the likes of Facebook and Snap (which owns Snapchat) sucking all the air out of the market.
Creators are people who build audiences online and find a way to make money from those audiences. They are usually young, digital natives who are trying to make a living from their social media work. And big Silicon Valley investors increasingly see them as the next financial vein to be tapped on the internet.
The creator economy, which provides digital tools to influencers and helps them run their businesses, is a huge, largely unexplored market. The venture capital firm SignalFire estimates that 50 million people around the world consider themselves content creators, while the technology news site The Information estimates that venture capital firms have invested $2 billion into 50 creator-focused start-ups so far this year.
The heightened interest from traditional venture capitalists could offer legitimacy to what some may still think is a fringe business. It could also add to the notion that this growing world of dance, chat and comedy is more than ephemeral youth culture.
But as the saying goes, don’t invest in the gold miners — sell them their tools. Silicon Valley appears far more interested in the digital tools and platforms used by the content creators than investing directly in the creators themselves.
Last month, for example, the venture firm Founders Fund took the lead in a $15 million investment round for Pietra, a start-up aimed at helping influencers launch product lines. In April, Seven Seven Six, a venture firm run by Alexis Ohanian, a Reddit co-founder, and Bessemer Venture Partners announced a $16 million investment in PearPop, a platform that helps creators monetize their collaborations and social media interactions.
The list goes on. In February, the high-profile venture firm Andreessen Horowitz led an investment in Stir, a platform that helps creators manage how they make money, valuing the company at $100 million.
Dispo, a photo sharing app that mimics the experience of digital cameras, received $4 million in a funding round led by Seven Seven Six and an additional $20 million investment round led by Spark Capital. The venture stalwart Benchmark led an investment round reportedly worth up $20 million in Poparazzi, an app that allows users’ friends to post photos to their profiles, effectively turning their cohorts into their “paparazzi.”
And then there is Clubhouse, the heavyweight of this young market, generating plenty of buzz from Silicon Valley and the media and entertainment world. Clubhouse, which requires an invitation to join, is a social network built around audio-only chat rooms. In April, it raised $200 million in a funding round led by Andreessen Horowitz, putting its valuation at roughly $4 billion.
“When I first started in venture capital in 2016, there was this pervasive belief that” it would be really difficult for another major social network to come along, said Li Jin, founder of Atelier, a venture firm focused on the online creator world.
TikTok upended all of that. By focusing on influencers, the app forced changes from traditional social networks like Instagram and Twitter that had shied away from catering to the people who were creating the popular content on their platforms.
TikTok allowed up-and-coming social media personalities to be discovered more easily, and gave them a clearer direct path to making money through the company’s Creator Fund, which pays creators a certain amount based on views.
“Older social platforms, those were all about interacting with your friends online,” said Linus Walton, vice president at the Chernin Group, an investment firm. Now “it’s all about becoming that influencer, or becoming that new TikTok star that all your friends are watching.”
Subscription services like OnlyFans and Patreon, where fans pay creators for access to premium content, also helped investors realize there was a strong business case for building tools for creators. Now the word “creator” has become a buzzword, appended to all types of businesses to attract investors. So much so that Alexander Finden, a tech entrepreneur, coined the term “creator washing.”
“There are more creator economy start-ups than creators,” Turner Novak, founder of Banana Capital, which invests in early-stage tech start-ups, joked on Twitter in April.
Rex Woodbury, a 27-year-old principal at the San Francisco investment firm Index Ventures, represents a bit of both worlds. He started out as an influencer, building an audience of more than 237,000 followers on Instagram by posting lifestyle content. After he graduated from college, he went full time into investment, where he has carved a niche as an authority in the creator economy.
“I’ve seen a few posts from V.C.s saying, ‘Eight of the 10 companies I met with today are creator companies,’” Mr. Woodbury said. “It really is en vogue now.”
He joined Index Ventures in December, just as venture capitalists were starting to get interested in creators and were looking for help from people who understood the landscape.
“A lot of young investors feel credible in this because we are digital natives,” Mr. Woodbury said. “This is the world we grew up in.”
Now, major platforms like Spotify, Twitter and Facebook are rushing to catch up to start-ups, particularly Clubhouse. Spotify recently announced its new live audio app, Greenroom, a Clubhouse competitor that Spotify built after acquiring the live audio start-up Locker Room. Twitter has already added its own Clubhouse rival, Twitter Spaces, and both Twitter and Facebook are starting newsletter services to compete with the success of Substack, which allows users to easily set up subscriptions for their writing.
With the lines between venture capital and the creator world blurring, many traditional venture capitalists are also seeking to become creators themselves. Firms like Andreessen Horowitz have leveraged their investment in Clubhouse to promote their staff through the app’s suggested user list. Nait Jones, a partner with Andreessen Horowitz, has amassed over four million followers on Clubhouse and recently signed with the talent agency WME.
Still, while investors are racing to put their money in social media start-ups, it’s less clear whether some of the apps on the market will last. Dispo, February’s buzziest social media start-up, faced backlash a month later after one of its co-founders, the YouTube star David Dobrik, was ensnared in controversy over sexual assault claims against a member of his “Vlog Squad.” Soon after, Spark Capital said it had severed all ties with the company. Seven Seven Six did not sever ties but said it would donate profits to an organization working with assault survivors.
Poparazzi, which captured the top spot among free iPhone apps in the last week of May, had dropped to No. 156 by mid-June, according to the app research firm Sensor Tower. And while Sensor Tower data reports that Clubhouse had 5.3 million downloads in the first two weeks of June, 4.8 million were of its Android app, which was introduced in late May.
“For years, no one cared or recognized this space as a space with real money,” said Bobby Thakkar, 21, co-founder of Ampersand, a product studio that builds tools for creators. “Now, with money pouring into the industry, we’re only going to see more companies, more competition and more start-ups involving creators as a part of their businesses.”
