Creators Started Their Own Economy, Now They Need FinTech

ZHC uses a Karat card in “I Surprised MrBeast With a Custom House,” it has almost 52M views.

Trend Highlights

  1. Social > Traditional: Averaging over 2 hours of usage per day, social media outpaces traditional media sources (television viewership decline since 2014) in gaining daily consumer attention. Social channels have become the place for targeting customers.
  2. Creators Boom: As social media usage grows across the board, so does the number of users creating content on them. This new population of creators has audiences ranging from the hundreds to the millions, and they are often the most sought after individuals for impactful marketing. According to research by Signalfire, there are approximately 50M creators today.
  3. Creators Become SMBs: We’ve begun to recognize emerging creators as de facto SMBs, which require a whole new set of tools across commerce and financial services, since few of today’s legacy platforms and providers are tuned to their needs. Creators make money in a variety of ways, which are different from traditional ‘SMBs’, including ads, brand deals, and even creating/promoting their own products.
  4. Creators, Meet FinTech: Existing financial institutions simply don’t know how to underwrite or serve a customer base like creators, with the new distinct set of needs. As such, we think there is an exciting and enormous opportunity to deliver what we call the creator financial stack.
  5. Investing in Karat for Creators: We’re excited to announce our new investment in Karat, a start-up empowering creators to grow their business by unlocking access to credit and bookkeeping.
Figure 1

Understanding Creators

Influencers? Creators? While there are many terms being used to describe people who share content with audiences on social media, the term creator is the most broadly accepted. Creators are individuals who generate content on social media platforms (video, photo, audio, etc) and share it with an audience. While the audience can be as small as hundreds or as large as millions, creators have limited opportunities to monetize their content despite their increasing influence.

Creators historically have made money through ads and brand deals, but the sad reality is that platforms capture much of that revenue. This means creators can’t rely solely on income from any one platform without risking loss of income, so they must diversify their revenue streams.

Figure 2

As a growing segment with unprecedented influence over purchasing behaviors, creators need tools to help them make more money. They also need working capital to invest time and resources in content creation — the faster they can produce high quality content, the faster they can grow their following, complete partnerships, and earn income.

Figure 3

Creators Need FinTech

Many players have attempted to address creator needs in loyalty and payment acceptance (see Figure 3), but few are solving their important financial needs. Underwriting creators requires a different approach to risk management and a facility with nontraditional data that most traditional institutions simply don’t have.

Creators have historically been rejected by the existing financial system because of their limited business and credit history, coupled with inconsistent income across various platforms. Many creators are also relatively young, which means they lack personal access to credit that could partially solve this problem. Few providers have materialized to meet unique creator capital needs, which present an entirely new challenge to banks: how should they determine the risk of these ‘businesses’ when they don’t behave like other SMBs these institutions have served in the past.

Today, only 20–30% of creators have business bank accounts and are even incorporated. Today’s creators primarily cobble together a mixture of legacy and FinTech capabilities like personal debit cards (which doesn’t provide creators the benefit of building credit), credit cards, and P2P payment methods (Venmo/PayPal). Areas like engagement and payments are filled with at-scale solutions, but when it comes to personal banking/financing and operational systems creators struggle to find tools that address their needs as they operate like untraditional SMBs. This presents an exciting opportunity for a focused provider of financial services to creators.

Top Creator Solutions Needed

  • Commercial DDA
  • Lending/Financing
  • Payroll and Benefits
  • Payables (A/P)
  • Billing, (A/R)
  • Accounting/tax

Without personal financial tools, creators can’t take advantage of their full commercial potential. Enter Karat…

Welcoming Karat

Our first investment in the creator space is in Karat. From our analysis, we believe Karat has established itself as the leading provider of commercial credit card capabilities to the creator community. We see this capability as increasingly important to these non-traditional SMBs, which continue to be overlooked and underserved by traditional financial institutions.

Eric Wei and Will Kim, the co-founders of Karat, immediately impressed us when we were introduced by our friend and portfolio founder, Matt Harris. Eric previously built new experiences for creators as a product manager at Instagram and Will previously ran his own VC firm, called Lucky Capital. Their experiences helped them identify this emerging opportunity early, quickly launch a solution, and capture leadership in this exciting new area of commercial FinTech.

Existing institutions fail to serve creators, especially emerging creators who are limited by lack of working capital and don’t have traditionally underwrite-able W-2 income. Karat, on the other hand, can determine creditworthiness based on metrics uniquely relevant to creators. We see them as the financial tool that will help creators unlock growth in their audiences and revenues — by investing in better content. As a first point of contact solution for credit, Karat also has the opportunity to become the go-to solution for broader creator financial services, such as bookkeeping, payroll, benefits and other credit products.

Please join us in celebrating the Karat team; the future for creators is brighter because of you!



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