As the creator economy continues to expand, growing at an extraordinarily rapid pace, blood-sucking venture capitalists look forward to sinking their teeth into this new opportunity to profit off others. Unfortunately, while promising to provide that initial funding, many venture capitalists have ulterior motives, potentially taking advantage of new and experienced creators looking to make money from their content. So, what does this mean for those looking to dive head-first into the creator economy? Be careful of companies reaching out to offer venture capital because things aren’t always what they appear to be.
The Rise of the Creator Economy and Sudden Surge of Venture Capitalists
When most people think of venture capital, they don’t assume the worst, and why would they? For the most part, venture capitalists have played a vital role in helping businesses access the funding needed to take their ventures to new, exciting levels with limitless earning potential. In many cases, venture capitalists provide financing in exchange for a small stake in the company, enabling entrepreneurs to earn a decent profit and succeed. However, there are always a few bad apples in the bunch – the kinds of people offering venture capital with the idea of profiting heavily from others, providing some of the most undesirable deals to those desperate enough for the funding to go for them. Because these venture capitalists would typically offer capital for equity to entrepreneurs and business owners, there isn’t as much buzz surrounding what they’re doing with creators within the creator economy. However, as the creator economy continues to grow, there is a sudden influx of venture capitalists ready to get their hands on any possible influencer they can. Not all have the best intentions.
The creator economy doubled between 2019 and 2022 and is only expected to grow and explode over the next several years. And what does that tell us? Millions of people are diving into the world of content creation. We live in a technologically advanced world that keeps us connected through various social media platforms, such as Instagram, TikTok, YouTube, and Facebook. Some people are starting to realize that they don’t HAVE to work that standard 9-5 job if they don’t want to and that it’s possible to turn content creation into a career. While some will make it happen for themselves, others will get excited about the opportunity, potentially looking into venture capital to help them transform their careers. But is venture capital an absolute necessity for anyone diving into content creation? Not necessarily.
The truth is that some businesses NEED venture capital. It helps them cover the cost of running a business, whether they need to invest in marketing, inventory, or anything else required to keep their doors open and the business operating as usual. However, this isn’t necessarily the case for a content creator. Rather than selling a product like most businesses, you’re essentially selling yourself as the creator who curates the content and posts it, whether you’re creating short-form content on TikTok, vlogging on YouTube, or even posting reels to Instagram. Therefore, it’s important to ask yourself, “Do I really need funding?” Because while a venture capital company can promise the world to you, that doesn’t mean they have your best interest at heart. Instead, they may expect you to “sign a deal with the devil” in exchange for that initial funding you could’ve done without receiving in the first place.
Why Receiving Venture Capital is Similar to Making a Deal with the Devil for Creators
You may ask, “How could receiving money for content creation be similar to signing a deal with the devil?” It’s all within the fine print of any contract you’d be expected to sign with a venture capital company before receiving the funds they’re willing to offer you. Does this mean every venture capitalist has bad intentions? Absolutely not. However, some expect content creators to sign off a large portion of their earnings, meaning these companies are earning a significant profit from the creators and owning much of their content. It comes to a point where you would need to ask yourself, “Do I want to have full ownership and rights to my content or allow a company to own it and control it?” For most people, the answer to that question is relatively simple. After all, who wouldn’t want to own the rights to the content they’ve taken the time to create?
The implications of venture capital aren’t as evident as most would assume. It’s easy to fall for the idea of making money. Most people get involved in the creator economy for that reason – they want to make good money and have an opportunity to make a living from home instead of working that typical 9-5 job. But receiving venture capital doesn’t guarantee success. If we’ve learned anything from businesses who’ve received this form of funding, it’s that not all of them will be successful. One study that followed thousands of companies receiving venture capital between 1987 and 2008 showed that 34% were dead – a done deal, no longer in existence. It’s just one of many studies that prove just because you receive venture capital doesn’t mean you’re going to succeed.
Of course, this isn’t to discourage you from pursuing your dreams of becoming a content creator. It’s simply meant as valuable insight for you to use when deciding whether you want to work with a venture capitalist. If there are businesses that couldn’t survive despite receiving venture capital, there is no surefire guarantee that getting this funding will help you succeed. Everything you want to achieve as a content creator can happen WITHOUT the help of a venture capital company.
If you’ve already started creating content and have amassed a following, venture capitalists may be reaching out to you, making promises that seem almost too good to be true. There is a reason they’re reaching out to you. They see the potential. But they don’t just see that potential you have to build a massive following and get dozens of brand deals to build wealth; they see some major dollar signs. You’ve already built a following for yourself, so what could a venture capitalist do for you that you can’t do for yourself? And if you’ve already started earning from your content creation, why put yourself in a position to make less from your content by receiving initial funding from a venture capitalist? You’d sell yourself short in the long run when you didn’t have to do that.
Predatory Venture Capitalists Want to Make Money Off You
When venture capitalists make incredible offers, it’s not uncommon to feel motivated to sign with them. However, when signing an agreement, you also sign away some of your ownership stake. Even if you create content with your face in your home with your phone or camera, the venture capitalists would still own a portion of that and a portion of the earnings that come with it. Why let a company earn money from you when you can make 100% of everything you create instead of sharing a stake with them? Why should a company profit from your innovation, talent, and hard work? Rather than looking at this opportunity from a short-term lens, think of the bigger picture and how working with a venture capitalist could affect you in the long run. Would you still earn decent money from your content? Most likely. But would that amount be reduced because the venture capital company owns a stake in your company? Yes.
VCs aren’t stupid. They know that content creators are making millions of dollars. You can open any of your favorite social media apps, scroll through a bit, and discover all kinds of people who make a living from social media. If you’re aware of it, so are these companies, which makes them so predatory in the first place. They know people make money from content creation and want to get their hands on some of it. When someone can make millions from posting reviews of products, doing dances, or even uploading grocery hauls, VCs see that as the perfect opportunity to make easy money. Do they want to do the work that comes along with it? No, but are they willing to make deals that sound amazing and are really designed to help them get a piece of that pie? Yes! It’s all about the money for them.
Most people involved in the creator economy consider themselves influencers – they post all kinds of content for their followers to see. Some like to post about finance or true crime, while others are beauty gurus or people who love to show their shopping hauls. These influencers are amassing such large followings that brands notice them and reach out directly. Some of the most recognizable brands in the country and worldwide work with social media influencers quite frequently, such as Lululemon, La Croix, Glossier, and Bloom Nutrition.
When you have influencers gaining a lot of traction and getting noticed by brands, VCs start to see what’s going on and decide they want to reach out to these influencers. They know that the influencers are likely making a pretty penny, so they might as well reach out and attempt to work with them, offering funding to gain some ownership of their content and profit from it. But this is where influencers tend to get tricked into losing out on money in the future. Even as they’re blowing up, if these individuals have signed an agreement with a venture capital company because they wanted to get some upfront funding, they’d have to abide by the agreement they signed.
VCs are currently brainstorming all the different ways to profit from these new types of businesses, the content creator businesses where people are the product. They recognize that the creator economy is booming with no plans of dying down anytime soon, and they’re trying to figure out ways to offer their assistance in exchange for a portion of those earnings. While some of these companies may have slightly good intentions, with plans to help monetize social media influencers to help them appeal to a larger group of people and grow as content creators that continue to earn, there are always financial motives behind everything they do.
Stay the F*** Away from Venture Capital – You’re Better Off Without It
When you look at the idea of venture capital from the perspective of a new content creator who may have struggled to make ends meet in the past, the promise of funding may seem too good to pass up. But agreeing to work with VCs could cause you to lose out on money in the future. It’s not the kind of decision to take lightly, nor should you make it based on desperation to have quick cash laid out in front of you. It’s not worth the headache, frustration, and potential loss of income you would experience when working with a venture capitalist.
So, what is the alternative? Sacrifice the upfront cash and keep pushing out high-quality content. The content creator economy is only improving with time, opening the doors to new and exciting opportunities for all kinds of people. It doesn’t matter if you have ten followers or 10,000 followers – you can become a successful content creator who makes money from your posts and gets brand deals by being consistent and putting effort into your uploads. The consistency will pay off, and you will begin seeing the fruits of your labor grow.
If you need help figuring out where to get started, TikTok is an excellent platform for beginner content creators. The algorithm on TikTok makes it easy for everyday people to get noticed and gain a following, like Auntie Amanda, who gained millions of followers for eating chicken cutlets doused with mustard and BBQ sauce, or Vanessa Amaro, who has amassed a following of millions for sharing insightful cleaning tips, tricks, and hacks. You don’t need a venture capitalist to help you become a successful content creator who excels within the creator economy. And if you do it on your own without the help of these predatory funding companies, you won’t have to worry about sharing your earnings with anyone other than Uncle Sam!