Above the Influence

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Goldman Sachs predicts the creator economy will grow to half a trillion dollars by 2027

The 2023 report values creator economy TAM at $250B in its current state

In today’s memo we’ll cover a startup providing financing for creators, a VC leveraging the influence of creators, and a related investment offering

pure gold

After Eric Wei graduated from Harvard with an Econ degree, he spent the next 6 years hopping from one elite corporation to the next:

Blackstone → McKinsey & Co. → Facebook / Instagram

At some point along the road, Eric wanted more.

His close friend and Stanford Master’s dropout, Will Kim, was also looking for the next move.

The duo came up with Karat, a company providing business capital to creators.

Eric’s time working as a Product Manager focused on Instagram Live informed him of the untapped potential of financial products for creators/influencers.

Karat participated in Y Combinator’s Winter Batch in 2020, and launched their first product shortly after: a black, metal credit card for creators.

Why do professional creators need a different credit card than everyone else?

  • Banks don’t view professional creators (creators that make $100K+) as small businesses, so it is very difficult to access capital on reasonable terms

  • Karat developed a proprietary underwriting model for creator credit lines, which focuses on the size of the creator’s following, current revenue, and business expertise

I found it interesting how Karat values the size of an influencer’s following:

  • YouTubers should have 100,000+ subscribers

  • Instagrammers should have 125,000+ followers

  • TikTokers should have 2,500,000+ followers

  • Wei estimates the average income of cardholders to be $500K+

Their business model is also interesting.

With the Karat card as an initial product, they only made money on transaction fees. Which meant they were losing money with each credit card sold.

The idea here is that the credit card would be a wedge for more lucrative products down the line

A wedge is a popular term used in go-to-market (GTM) strategy.

  • refers to the initial product focus that is used to gain access to a larger market over time

  • ex1. Robinhood’s wedge is free stock trading for young investors while its larger market is consumer finance

  • ex2. Kawhi Leonard’s wedge was defensive disruption under Coach Pop before becoming the most elite two way player of the past decade

After raising a $40M Series B round last year, the company unveiled plans to increase product offerings, including a bank card to help creators understand their personal credit and a bookkeeping product.

bookkeeping can be lucrative, ask intuit

Karat has raised $100M+ in equity and debt financing from:

  • Union Square Ventures

  • Y-Combinator

  • GGV Capital

  • SignalFire

  • TriplePoint Capital

  • Twitch co-founder Kevin Lin

  • Dreamers VC / Will Smith

  • Jared Leto

clout capital

A couple of months ago, MrBeast split from his long time management company, Night Media.

The YouTube star has been working with Night Media founder, Reed Duchscher since 2018, and together they’ve scaled MrBeast’s social following and built an empire doing $600M in annual revenue.

rich paul for youtubers

While Night’s original focus was on MrBeast, Duchscher was adept at leveraging his success in creator management into creating a much larger platform

  • 2021: launches Night Ventures, a VC powered by elite creators. Deploys capital and influence, started with $20M in capital.

  • 2022: launches Night Capital with TCG, a $100M fund focused on acquiring majority stakes in consumer facing companies with the intention of partnering said companies with talent.

  • 2023: acquires LFM Management, a NYC based creator management firm. The deal brought Kai Cenat and the AMP brand under the Night umbrella

  • 2024: acquires Rooster Teeth Podcasting Network, bringing podcast star Theo Von under the Night umbrella

Night took a remarkable hit by losing MrBeast, but the past few years has been an exercise in de-risking the platform to prepare for a scenario like this

Also makes sense for MrBeast to understand the value of bringing management in-house as Night’s growth trajectory meant less of a focus on his interests

Some highlights from the Night Ventures portfolio:

  • MoonPay: PayPal for crypto. Raised $650M+ to date with a post money Series A valuation of $3.4B. Investors include Tiger Global, Coatue, and more

  • lolli: Bitcoin / cashback rewards for online shopping. Raised $28M to date and investors include Bain Capital Ventures, Seven Seven Six, Serena Williams, Logan Paul and more

  • Nucleus: genome testing, claims to test 1,000x more DNA than 23andMe. Raised $17.5M to date and investors include Seven Seven Six, Founder’s Fund, Pareto Holdings, and more

Headlines

  • Shamrock buys a portfolio of music, television, and film rights from Vine Alternative Investments - including 150+ Calvin Harris songs. MBW article here

  • Blackstone posts modest Q2 profit jump on private equity, credit gains. Reuters article here

  • WNBA season ticket holders hit with enormous price hikes. FOS article here

  • Meta is seeking a stake in RayBan parent co, EssilorLuxottica. NYT article here

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