The creator economy’s explosive growth has largely outstripped the means to support the creators fueling it.
The market size of the creator economy is estimated to be more than $104 billion, yet 78% of creators who consider themselves full-time only make $23,500 annually, according to Influencer Marketing Hub. It’s not just that creators are struggling to patch together a livable wage from ad revenue, merch sales, creator funds, tips, and so forth. They’re also challenged by not having sufficient capital on hand to grow their businesses.
Historically, traditional banks have been wary of lending to creators, which has paved a path from venture capitalists and fintech startups to close the gap.
One of the latest companies aiming to support creators financially is Spotter.
Spotter, which soft-launched in 2019, provides YouTube creators with lump-sum capital in exchange for acquiring the rights to their back catalog of videos for a limited time. (Creators retain control and monetization of future uploads.)
Using a proprietary prediction engine, Spotter is able to value and underwrite video content for anywhere from $50,000 to more than $30 million. The company reports to have pumped more than $200 million into the creator economy, striking deals with the likes of Dude Perfect, MrBeast, Donut Media, and more.
“Creators really don’t have access to capital. They’re not going to take on equity partners and give up their business, nor do they want to take on loans or debt,” says Nic Paul, Spotter’s chief operating officer. “That’s really where fueling the growth of creators while allowing them to remain independent and in control of their destiny was really a huge part of the company.”
Spotting potential in market
Spotter is the brainchild of Aaron DeBevoise, cofounder and the former executive vice president of network programming of the YouTube multichannel network Machinima. One of DeBevoise’s primary tasks was researching if YouTube creators’ revenue could be predictable enough to provide them financing to grow their businesses. That idea started to become a reality when YouTube made engagement the primary metric for driving viewership.
“We started to see that the creators who were hyper-focused on specific categories—not all gaming, but Minecraft, and not all of cooking, but baking cupcakes—those creators were being rewarded by consistently creating the same type of content on a high-volume basis,” says DeBevoise, who serves as Spotter’s CEO.
DeBevoise says Spotter is meant for YouTube creators in all content categories with the only caveat being consistent performance and proof of monetization for at least a year. Once the value of a creator’s back catalog is assessed, they’re offered what Paul calls “life-altering capital.”
“This is not capital like they would get from a brand deal or anywhere else,” Paul says. “The reason why we wanted the back catalog is because it doesn’t interfere with any of their initiatives, strategies, or growth. They can have new uploads that are generating more revenue than the back catalog, and we can still allow them to unlock a lot of meaningful capital.”
Reed Duchscher, founder and CEO of the digital talent management company Night, was one of the first people DeBevoise called, because Duchscher works with such YouTube powerhouses as Jimmy Donaldson (aka MrBeast), and Preston Arsement (aka PrestonPlayz).
“Initially it was something we were a little hesitant on not knowing the numbers. It’s hard to project future earnings for YouTube,” Duchscher says. “There’s just so many unknowns: What’s an RPM [revenue per mille, i.e., total revenue per 1,000 video views] going to be? Is there going to be a new adpocalypse?”
Duchscher worked with Spotter’s team to crunch the numbers around a back catalog’s worth, and eventually felt comfortable enough to broker deals with several of his clients, most notably MrBeast, who has more than 124 million subscribers across his YouTube channels.
While an exact figure wasn’t disclosed, Duchscher says Spotter’s deal for some of MrBeast’s old videos is for three years. The capital they raised is going toward building infrastructure around MrBeast’s higher-budget video ideas and expanding his team.
“When I met [Donaldson], it was just him and an editor. Now it’s a massive team around multiple channels. It’s just incredibly expensive,” says Duchscher of MrBeast, who’s also known to have massive cash giveaways. “There actually aren’t a lot of places for creators to go get capital to fund their business right now. Almost every bank that we’ve spoken with over the last two years has not been willing to give creator loans.”
Duchscher also underscores that Spotter’s appeal lies in part with the fact that it doesn’t ask more of a creator in exchange for being a source of capital. “The business model was not for them to get intertwined in these businesses,” Duchscher says. “There’s no hand-holding. They’re not trying to change someone’s content style. They’re not giving feedback on videos. It’s a pretty straightforward deal.”
Cody Jones, one-fifth of the group Dude Perfect, says their Spotter deal has allowed them to invest in several businesses, as well as expand their own, with plans to create a headquarters in Texas that would double as an experiential location for fans.
“It’s been one of those deals where we’d love to have the cash on hand now to get our money working,” Jones says, “versus in the past, we were like, ‘let’s just wait until the ad revenue rolls in and keep running the business that way.'”
A spot for all?
It’s fair to wonder why top creators such as MrBeast and Dude Perfect would need capital in the first place. These are some of the highest earners across AdSense, brand deals, merch, and other successful ventures that generate considerable revenue that they could pump back into their businesses.
Influencer Marketing Hub’s report found that only 46% of creators who’ve been building an audience for four or more years earn a little over $20,000 annually across their channels. “It’s not really a living wage. That is just the reality of it right now,” says Werner Geyser, founder of Influencer Marketing Hub. “It’s really the influencers at the top and then everyone else.”
DeBevoise and Paul note that they went after YouTube’s bigger names at first in hopes to have a trickle-down effect with other creators. “We have been focusing on the highest viewership creators on the platform so that we can deploy as much capital as possible to prove out the model,” DeBevoise says. “But now that the model has been proven, because we’ve been doing this for two years, we’re going out to as many creators as possible.”
“We need to go out and educate the marketplace, meaning creators, that this is an opportunity for them, but more importantly, we need to educate them on why this is a good opportunity for them,” Paul adds. “If we can do those larger deals, it allows the market to get educated.”
DeBevoise argues that Spotter’s predictive engine actually keeps their human intuition in check. “One of our first deals was a channel that was all about travel in Las Vegas. That was not something that we would, from a high level, [have chosen]. But it ended up being a great channel for us to work with from a predictive perspective and from a data-centric perspective,” DeBevoise says. “We really value our predictive engine in helping us source the entire ecosystem rather than just do what’s in plain sight.”
Markian Benhamou, creator of the YouTube comedy group Smile Squad, is one of the more up-and-coming creators that Spotter has worked with.
The company acquired the back catalog of Smile Squad’s main channel (1.6 million subscribers) for $1 million for five years.
“The main thing was understanding what’s in it for [Spotter]. Like, what am I missing that they know that they’re willing to pay this much? It sounds too good to be true,” Benhamou says. “But once I understood that they’ll pay for 80% of what they expect us to make and that they seem like they’re taking a fair guess based on math and algorithms, I decided to take it.”
DeBevoise’s ultimate goal with Spotter is to create a robust portfolio of YouTube talent. “We’re not a venture capital firm saying, ‘hey, let’s go out and make a 10x on one deal,'” he says. “The more deals we do, the more we can pay, because the more likely we are to hit singles and doubles. We’ve already spent $200 million investing in these types of deals across over 115 channels, and, ultimately, we want to grow that by two times or more over the coming years.”