Not every creator economy startup is built for creators

Ten years ago, if you were a scrappy kid somehow making a living off of YouTube ad revenue and brand deals, you were probably told you didn’t have a real job. Now, if monetizing your creative output is how you pay your rent, you’re part of the creator economy, a buzzy new industry.

An often-cited landmark report from the venture capital firm SignalFire says that creators are the fastest-growing type of small business. Despite the creator economy only really forming a decade ago, there are now 50 million people who consider themselves “creators,” and more American children want to be YouTube stars (29%) than astronauts (11%), per SignalFire. So it makes sense that more and more startups are cropping up to provide tools for creators — it’s an opportunity to cash in on a growing market, and savvy entrepreneurs want to make money.

As this market has expanded, I’ve written about credit card companies for creators, community-building tools and companies that help you design a product to sell, among other ventures. But as my inbox teems with too many creator-focused startup pitches, products and opportunities to ever even consider, I’ve noticed a troubling trend — not all of these businesses are actually good for the creators they intend to serve. Some might actually be pretty predatory.

For example, if an all-in-one creator platform folds, what does that mean for creators who put all their eggs in that basket? How do major tech acquisitions impact the people who monetize on those platforms? As venture capitalists invest in creators as though they’re startups, how can those creators protect themselves from exploitative terms and conditions?

Startups need to have a backup plan to make sure that if they don’t become the next Patreon, the creators who trusted them won’t be doomed. I’ve started asking these questions to any startup that purports to be a “one-stop shop” or an “all-in-one solution” to the creator economy. Fourthwall had a good answer.

The company said that it has three months of emergency operating expenses set aside to ensure that if they were to fail, they could help transition creators to other platforms. Fourthwall also said it would make its platform open source if this were to happen. But regardless, this friction isn’t exactly helpful.

The inherent tension within the creator economy lies between the promise of financial freedom and the realization this freedom comes at a cost. As more startups aim to connect talent with brand deals, build monetization tools and develop new social platforms, creators need to know what to look out for to avoid a bad situation — and startups themselves need to think as though they’re in a creator’s shoes, understanding that if a creator trusts them with their business, then they have a moral and financial obligation not to screw it up.

“A platform is not your friend”

When Spotify bought the popular podcast creation service Anchor in 2019, podcasters panicked. But Amanda McLoughlin, CEO of the independent podcast collective Multitude Productions, had seen massive acquisitions like this happen before. Since the early days of YouTube, McLoughlin has been a creator herself, so she’s seen the industry change from both creative and business perspectives. One defining moment in her early life as an internet creator was when Google bought YouTube in 2006.

“Before 9 a.m., I got a dozen messages from friends and colleagues worried about what such a large and unexpected consolidation means for those of us trying to make a living in podcasting,” McLoughlin wrote at the time. So she rehashed the lessons she learned from the YouTube acquisition: Diversify your income streams, don’t trust individual platforms too much and believe in your own value.

Before she founded an independent podcasting studio, McLoughlin worked in finance. But as her shows “Spirits” (a queer, feminist analysis of folklore and myths) and “Join the Party” (a Dungeons & Dragons show) grew, she leveraged her business experience to start a podcasting collective that aimed to help creators make a living.

“It was a time of great uncertainty,” she remembered of the YouTube acquisition. “It was a real surprise to us all, because these kinds of acquisitions hadn’t happened yet. The only real parallel I can think of is LiveJournal — it was bought by a Russian holding company several years before YouTube got acquired, and there were a lot of changes right away. And so when the YouTube news came out, people were saying, ‘YouTube is over.’”

At the time, creators weren’t thinking about how to retain their audience in the event of a platform shutdown or overhaul. To this day, creators rely on social platforms to give them access to their audience — if you have 50,000 followers and post something that’s arbitrarily flagged as violating guidelines, you can be set back to zero in an instant.

“My advice for other creatives at the time was, hey, if this tool is useful for you, use it. But you need to start planning right now for having your audience off of YouTube,” she told TechCrunch.

Since then, McLoughlin has advised creators to pursue multiple different modes of income. That means if you’re a YouTube creator, for example, ad revenue cannot be your only way to make money — you can set up a fan membership program, make a newsletter (this also helps you contact fans if a platform shuts down like Vine), sell merch and establish followings on other platforms to expand your audience.

“Ultimately, [the acquisition] brought a lot of money to the space, but it should teach you that a platform is not your friend. They don’t owe you,” McLoughlin said. “They only care about you to the extent that they can talk about like the number of hours uploaded per minute to YouTube in their investor deck.”

For McLoughlin, the creator-audience relationship is key. Without an audience, creators can’t do what they do. Fans support Multitude in part because they enjoy the collective’s podcasts, but also because they want to support businesses that share their values (this is a common trend among Gen Z consumers).

Multitude is a firmly pro-union collective — for example, they chose only to work with union labor when producing the audio sitcom “Next Stop.” But in business, sticking to your morals means that you need to make some difficult decisions. This year alone, Multitude has terminated sponsorships with HelloFresh due to union-busting and StitchFix due to its toxic working conditions. Ultimately, continuing to accept ad dollars from companies that proved not to share Multitude’s values might sour the collective’s relationship with its audience.

“Once you break your audience’s trust, it is very, very hard to recover from that, and [your audience’s trust] is the most financially valuable asset that you have,” she said.

“The devil is really in the details”

Many young internet creators are not experienced businesspeople — but once your content is your lifeblood, you need to know how to navigate contractual agreements, file taxes … all that fun stuff. Luckily, there are professionals who can help with that.

Quinn Heraty of Heraty Law advises businesses and entrepreneurs in the entertainment, media and tech industries — some of her firm’s clients include best-selling authors like Roxane Gay and N.K. Jemisin, podcasts like “Call Your Girlfriend” and “Sleep With Me,” as well as many other independent media professionals. She helps creatives navigate publishing agreements, trademark and copyright matters, podcast, television and film contracts, incorporate their companies, and more.

Heraty warns creators to be careful about whom they collaborate with — she says that she sees a lot of talent managers seek to work with creators, but these managers don’t actually have the qualifications necessary to do this kind of work.

“You have people who are young and talented and good at this stuff, whether it’s TikTok, or Instagram, or long-form YouTube videos,” Heraty told TechCrunch. “And then they get hooked up with people who don’t have real experience in business.”

Getting paid to post on Instagram about a specific clothing brand might seem par for the course. But what if your contract says that you can’t post about any other clothing brands for the next year? Exclusive brand deals are not uncommon — think about Tiger Woods and Nike — but creators need to be aware of what they’re agreeing to. Depending on the terms of the contract, that enticing deal might actually be mutually beneficial, but that also might not be the case.

“What a lot of these young creators don’t realize at the beginning is that when you receive a contract, that contract is 100% written for the benefit of the company who’s giving it to you, and not to your benefit,” Heraty said. “The young creative person is expected to ask for things, but a lot of times, what young person knows how to negotiate a contract? Not many, right?”

Sometimes, managers and agents might help negotiate contracts, but Heraty thinks that a lawyer is necessary, especially when discussing long-term or exclusive contracts.