New! Investment Opportunity on Main Street

Representing well over 30 per cent of Australia’s GDP, small business is often justifiably cited as the engine room of the economy. But while we think of trades and local retail when we think of small business, we overlook the fact that small business is where real innovation happens.

Today, the fastest growing sector in small business is actually what has become known as the ‘Creator Economy’, comprised of an estimated 50 million original content creators.

The Creator Economy is the various forms of original content development made possible by the open platforms of the digital era. The 50 million creators create content independent of a corporation or a third-party brand. Of that number, more than 2 million regard themselves as professional full-time content creators. Many earn a significant living.

The goal of any creator worth their salt is to monetise their audience. If big tech has proved anything, it is that attention is the most valuable asset in an omni-connected society. Compared with the influencer market, the Creator Economy creates genuine entertainment and knowledge – and investors are increasingly paying attention to it. It turns out that most innovation happens on Main Street long before it reaches Wall Street.

In many ways, creators are the latest iteration of an earlier generation which wanted to find fame and fortune by being in a rock band or becoming a film star. These days teenagers seek fame on You Tube or TikTok. It shouldn’t be all that surprising given that their attention is affixed to these sites today as much as teenagers a generation ago would have been glued to MTV and the latest episode of Friends. Ralph Waldo Emerson was right when he said: ‘You become what you think about all day long’. While the channel and content has changed, the desire to become one of the cohort we pay our attention to hasn’t.

Venture capitalists are increasingly moving in on the space. In many ways it’s a form of backwards vertical integration of the platforms they helped invent. The numbers are astoundingly large. So far, this year VC firms have funded start-ups in the Creator Support Space to the tune of more than $US700 million. In 2021 the total was $US939 million, which was double the funding in received in 2020.

These creator focused start-ups are begging to build out a legitimate eco-system to grow and support the industry. The key areas getting the cash are specialised credit cards to assist audience monetisation, and business management tools which assist back office operations with API integrations. While it might sound like a small market to focus on it’s worth remembering that every small business now needs to be in the content business. It’s become the default form of brand promotion at a local level. And while they may not be trying to monetise their ‘eyeballs’, they’ll need tools to manage the promotional process within their small business operations. The potential for creator support scale is as big as the small business economy is. 

Some of the VC’s entering the space claim that the creator economy is becoming an emergent middle class. It’s not just the ‘Super Creators’ that need infrastructure to work the platforms which host their content, but the ‘Main Street creators’ who earn $50,000-$100,000 a year from content. Let’s call them the ‘Wedding Singers’ of content. I personally fit into this category with the video content side of my output. I generate a few million views a year across Youtube, Linkedin and TikTok. It makes me some good money, but the primary purpose is to promote my keynote speaking and consulting services. I currently subscribe to a number of software services which help me do things like video animations and creative subtitling. The market is more than a side show.

As you’d expect, the modern-day equivalent of record companies and representative agencies have also arrived. One of the most interesting to emerge is financial network Creative Juice’s – Juice Fund. Rather than being a VC firm who take an equity stake in a business and looks for an exit, they underwrite quickly growing Creator Businesses. It’s a bit like a record deal, where Juice funds the creator in exchange for a cut of their revenue over a certain period of time, usually between 6 months and 3 years. It’s not venture-funding because there is no equity stake, and it isn’t a loan either because Creative Juice isn’t a bank – they also wear the loss if the creator fails to deliver. But as you’d expect, they are selective on who they fund. (Speaking of which their current fund started with $US50 million – which included $US2 million from MrBeast himself.)

The comparison to the music industry doesn’t stop there. In recent times many artists including Bob Dylan, Stevie Nicks and Paul Simon have made headlines by selling the rights to their back catalogues of music for hundreds of millions. Likewise, Youtubers’ back catalogues of content are increasingly valuable assets. Los Angeles-based start-up Spotter recently raised $US200 million as part of a plan to invest $US1 billion into back catalogues of video. Spotter claims to help creators scale their channels faster by offering them large sums of upfront cash in exchange for the future advertising and licensing revenue from their existing uploads. This business model of Spotter enables them to aggregate content, assess its value, and extract more revenue than an individual creator would be capable of. Since its launch in 2019, Spotter has licensed content from some of YouTube’s biggest creators – like MrBeast, Dude Perfect, Aphmau and others —generating over 40 billion monthly watch-time minutes.

While the influencer market always seemed contrived and temporary, the Creator Economy of original content seems to be replacing the Mainstream Media Industrial Complex. What we need to do as investors is pay attention to it during its formative stage so we can see the emerging investment opportunities we may have missed when big tech was little tech.