This story was initially published in The Creators — a newsletter about the people powering the creator economy. Get it sent to your inbox.
Aaron DeBevoise wants to pay YouTubers for their old videos.
DeBevoise is the founder of Spotter, a company which identifies YouTube creators who have strong growth potential. It makes deals that gives them cash upfront to help expand their brands, in exchange for the licenses to their backlog of content. Los Angeles-based Spotter earns the advertising revenue from their previously released videos, and the creators retain all money made from videos uploaded after the deal. It is not a loan, and creators retain ownership of their content. They can do whatever they want with the money—whether that be hire an assistant, buy a new camera or build a whole production studio. Thus far Spotter has struck about 1,100 deals.
DeBevoise founded Spotter in 2019 after building businesses on YouTube starting in 2006. He co-founded Machinima, a production company, and StyleHaul, a fashion and beauty marketing company.
Spotter’s fund is made up of investments from groups including Access Industries, CoVenture and GPS Investment Partners, as well as a loan from SoftBank. It says SoftBank gave it a valuation of $1.7 billion after being founded only three years ago.
The Observer’s Rachyl Jones recently interviewed DeBevoise. This interview has been lightly edited.
How did Spotter begin?
Creators were struggling to figure out how to make enough money to survive and not have a second job. Over time, YouTube had solved that by sharing revenue from their ads and creating a recommendation engine so creators were incentivized to create a lot of consistent content. But the thing YouTube didn’t solve was how a creator takes advantage of the audience’s that they’ve generated. There was this gap in the market where creators could use a lot more capital and actually accelerate their growth—become enterprises rather than just making a living.
What did Spotter look like when it first started?
There were seven of us. We’re a data driven company, so our decisions are not emotional decisions. I actually don’t even have to look at the content until the end of the process. We identify content that has a lot of engagement, and that is what drives predictable behavior. Now we have 125 [employees].
Our capital was actually one of the most complicated things for us, because you couldn’t deploy enough capital just by raising equity. You had to raise debt and equity. So we had to raise a lot of money in the beginning.
Can you explain why you needed debt and equity?
We don’t know that any one creator will work out the way we expect it to, so if you’re investing in one creator, it’s really risky. If you’re investing in 10, it’s less risky. The more we invest, the safer we are, and the more we can pay.
To do that, if you were to raise equity early on—let’s say you needed $50 million—to get to the right size portfolio, your company is not valued enough to actually go out and raise $50 million of equity upfront. So you have to add in debt and prove the asset—that the videos themselves—could support debt payments.That debt and equity mixture allowed us to get where we got to today. We’ve deployed a little over $600 million to creators. Our goal is $1 billion by the end of Q1 next year. And I think we’re gonna hit that.
Can you walk me through the data side of your business?
We have 10 years of historical data on YouTube. We built machine learning models that allow us to identify key parameters for predictability. It’s mostly around metrics, like watch time, likes, favorites, comments, the things that hint people are actually watching and engaging with you rather than just clicking and bouncing. The data can also be used by creators to better their performance. We don’t charge for it. It’s so that we can do a deal No. 2 and No. 3 with them and keep on this partnership route.
How do you make money?
We make money from the advertising on the videos that we license. We collect AdSense revenue but also through direct advertising. We think it’s a unique value proposition to provide premium content that’s brand safe and happens to be sitting in a library. Isn’t not the newest content, but new doesn’t really matter on YouTube. After YouTube’s cut, we receive 100 percent of the revenue from the licensed videos. Creators receive 100 percent of every video they upload after the deal.
How many creators are interested in this?
We’re talking to thousands of creators. The time period by which creators decide to move forward shifts based on where they are in their career. For some creators, it’s taken us six months or almost a year to show them the evidence and then they agree.
This finance talk doesn’t come naturally to a lot of people. In the beginning, how much are you guys trying to explain it all to creators?
That’s why we decided to hyper-focus on YouTube—because we have the data around YouTube that allows us to educate. We can say, “Look. Here’s how your videos have performed over time. Here’s how your new videos are performing. This is what we think you’ll make over the next 12 months.” And it’s okay that it takes six months for us to close the transaction. We need them to trust us. We need them to hear from their peers.
How did you begin working with some of the biggest names in YouTube like MrBeast and Dude Perfect?
When we did the MrBeast deal, it started as myself talking to Jimmy (Donaldson, aka MrBeast) about data and YouTube and the excitement of YouTube. And then the financing part came down to us working with his manager, figuring out what he needed and proving out the model. With Dude Perfect, it was like, “Hey, what are your needs?” And I think for a while with Dude Perfect, they weren’t quite sure yet. But it put them in the mindset of “What could we do?” Both of those deals have ended up being multiple transactions over time.
This interview was originally published in The Creators, a newsletter about the people powering the creator economy. Get it in your inbox before it’s online.