The Creator Seed Round

Would you take $1.7MN for 5% of your income for the next 30 years?

Hey intersectional thinkers 👋

Greetings from Vancouver where I’m going down the Future of the Creator Economy rabbit hole:

"Like when I see a channel that I think will blow up, I wish I could just like buy shares in it or something lol"

- MrBeast aka Jimmy Donaldson, 90M subscribers on YouTube (so far)

Well now he can.

Invest in people, not products.

This Silicon Valley investment philosophy took a literal turn in the Creator Economy. The money is piling up, and investors are taking notice.

In 2020, the K-Pop group BTS essentially went public via their management company Big Hit Entertainment. At the time, 97% of Bit Hit's revenue came from BTS, making each Big Hit stock an investment in the worldwide K-phenomenon.

Big Hit’s stock price since IPO

But this is no longer the only way to invest in creators.

VC firms and investors are now boosting Creators cashflow in return for future earnings.

As a small Creator experimenting on YouTube myself, I’m keeping a close eye on the developments 👀

Here's how the Creator Seed Round works:

1/ Investor pays cash upfront to Creator with recurring revenue (think YouTube ad revenue, newsletter subscriptions, etc.)

2/ Investor receives % of Creator's future earnings for an agreed amount of time

3/ Creator takes cash to "grow and professionalize" their business

Example:

VC firm Slow Ventures invested $1.7M in Marina Mogilko - YouTuber with 3 channels totalling 7M+ subscribers. In return, Slow Ventures receive 5% of Marina's total future earnings as a creator in the next 30 years.

Is it a good deal?

We can't be sure, but let's do some back of the envelope calculations to get a sense of the numbers.

Take Google AdSense revenue on YouTube videos:

• Average Creator Google adSense income: $3-$5 / 1,000 views

• Marina's channel views in the last 30 days: 5M + 31M + 1M = 37M / 30 days

  

  

  

  *Assuming Marina's channels will NOT see huge changes in views this year:

• Marina's estimated annual AdSense revenue = $1.3M - $2.2M

• A 5% cut: $67K-$111K.

• An overly simplistic multiplication of the above 5% for 30 years: $2M - $3.3M

Without making any growth assumptions for the next 30 years, and not taking any other monetization strategies (like her existing $475 YouTube course with ~5,000 students and two language learning companies LinguaTrip and Fluent.express) into consideration, it's hard to know if this deal is a good one.

But, at the very least, the deal isn’t so bad for the Creator.

Sam Lessin from Slow Ventures says the 5% payout only happens when Creators make a certain amount of money. Any lower than that threshold, Slow Ventures won't take a cut. And even if the Creator decided to stop creating, the VC firm can only say "I see. Good luck".

Creators, at least for now, seem to have some bargaining power.

Without any glaring downsides, this financing option gives Creators with recurring revenue (not too different from a subscription SaaS start up) more leverage to build their businesses.

Here's how Marina is thinking about the deal:

"It's an opportunity for me to scale down on the number of partnerships I do and focus on creating instead – and thinking about ideas and different companies I can build for other creators."

Marina didn't have any concrete plan in place for the funds at the time, which again speaks to how passive the role Slow Ventures plays (no pitch or business plan necessary). The Creator Seed Round really is in its early stages. Money is given out just like that.

MrBeast is also in the game, partnering with a $2MN fund to help promising YouTubers grow in exchange for future earnings.

The economics are still taking form, so why not pick your role and get amongst it!

Have a great week,

Vicky

PS. Did a quick sense check on the $3-$5 / 1,000 views with Ali’s YouTube income. The math checks out. Ali made $5.26 / 1,000 views in 2020.

No wonder 1 in 3 kids want to be a YouTuber these days.