How Startups Can Survive the Creator Economy Winter

TL;DR Because 99% of creator revenue accumulates at the top .01% of creators, creator economy startups have to find a way to justify taking a % of revenue. This is not an easy task and only a select few will succeed in the coming bear market. 

From 2020-2022, it was relatively easy to raise a seed round for your startup. All you had to do was cryptically tweet out the password, “I’m building something new in the creator economy,” and $5M would magically appear in your bank account. Even the A round would generally be that easy with crossover funds vomiting capital everywhere. 

That was then, this is now. Interest rates are up! Digital monkeys now only sell for 100K instead of the millions they are worth! Founders are looking at 20x revenue multiples and shaking, crying, throwing up. Venture capitalists are learning what the phrase “cash flow” means. It’s terrible out there! I’m being more than a smidge facetious, but in all seriousness: private market capital is going to be in short supply for sometime.

My friends, a creator economy winter is coming. The result will be a thinning of the creator economy herd. In the short run, many of the buzzier startups will fold. In the long-term, the gritty teams will pull through this period with superlative companies serving this emerging class of digital entrepreneurs. The difference between the two will come down to how well these startups are able to answer one question: what are you doing to earn revenue share?

In researching this piece, I’ve talked with dozens of management teams, over a hundred creators, and the most prominent investors in the creator space. Thanks to all those who were so generous with their time.. 

Now, to business: to understand why revenue share is so important, we must go in depth of what creators are like as customers.

Small customers, smaller wallets

The good news for the creator economy is that there is a strong positive tailwind. More and more individuals are pursuing a life of creativity online. A report from Linktree pegs the total number of creators at ~200M. Another report by Kajabi puts it at 50M+. (Much of the difference is determined by how you determine the split between social media user and “creator”). Regardless, this is a huge number! And on an emotional level, there is something deeply satisfying about helping individuals build their own businesses and pursue their passions.