This story was initially published in The Creators — a newsletter about the people powering the creator economy. Get it sent to your inbox.
Venture capitalists have been big financial backers of the creator economy since the pandemic began. In 2021, VCs invested more than $5.07 billion in creator economy companies, according to the Information. But those numbers have started to decline. Last year, VCs invested $2.5 billion in creator economy startups, down 50 percent from the year prior. With less VC money floating towards creator-focused companies, some are predicting many of the startups funded during the pandemic won’t survive.
Andreessen Horowitz, a Silicon Valley-based VC firm, has been a huge supporter of companies that service the creator economy. It has invested in Substack, Pietra, Clubhouse and Teespring, among others. Connie Chan is one of its most active creator economy investors.
Chan, 39, joined the firm in 2011 and leads investments in consumer technology, which means anything that can make the lives of consumers better, she said. She grew up in the San Francisco Bay Area and lives there now. A general partner, Chan has worked on deals with companies like NewNew, Beacons and Run The World.
How do you decide what companies get funding?
The difficulty in consumer investing is there are things that go up and then right down. And that down can be over a couple months, over a year, over a few weeks, you never know. So it’s really trying to figure out—is this a true problem? And is this (product) an actual long term solution or a distraction that won’t last?
You mentioned how demand can fluctuate. Some analysts are saying the creator economy as a whole may be seeing a drop in interest. What are your thoughts on the future of the creator economy?
I think the creator economies are really a wide range, so we have to break that phrase down more. There are full-time creators, and there are part-time creators. There are creators that deliver entertainment, and there are creators that deliver very valuable information. That information could be around styling, your diet, health tips, exercise—you name it. But information that people would pay money for and find strong value in. When people think about, “Can a creator make money?” it really depends on what kind of creator you are and what target market you’re going after. Honestly, is the market for the OnlyFans audience going away? No, not at all. But you know, is the market for other types of creators going away? It might have more competition, as more creators are coming into this space.
The question about how you monetize that is a different thing. I think the idea that people are just going to pay you monthly for your content is great if the platforms better enable it, but most of the platforms have not done a great job of making it easy—making it possible to donate 50 cents or $1 per month. I think platforms need to do more. That can include microtransactions, better subscription programs, VIP memberships, private chat rooms, enabling commerce or even giving (creators) a catalog of products they can be ambassadors for. They’re slowly doing it, but very slowly.
What about for creator economy companies, rather than creators themselves? Venture capital funding for these companies is decreasing. Are we going to see the funding further decrease or see new startups emerge?
Do I see companies that are getting funded that are helping creators create better thumbnails, better short videos, edit their photos—yeah, those are getting funded. There’s a huge craze around anything AI-driven right now. And a lot of those (companies) are creating tools that the end customers are actually creators. Where certain creator economy companies might not do as well this year—it’s really dependent on their business model and target market.
What are some of the different challenges that startups face now that they might not have faced a few years ago?
When there’s more competition, there’s more noise, for sure. One of the biggest issues a lot of creator economy companies—the ones that build tools for creators—face is that they have to figure out their go-to-market strategy and whether they’re targeting large creators, (medium-sized) creators or (small) creators, and how to find them in a cost effective way.
What do you think the creator economy will look like in three to five years?
I think we’ll continue to have lots of people who want to be creators who do it on the side. As you also know, creator burnout is real. There will be creators that are big today that will not be posting five years from now. Burnout is a whole separate issue and something else that needs to get solved.
What I’m hopeful of is that creators will have new modes of monetization, whether it’s creating their own product lines, curating other people’s product lines, being able to monetize the very valuable information that they’re sharing. The number of diet coaches or people giving you tips on how to treat whatever disease or skin ailment that you have—there’s really valuable advice right now that people are just disseminating for free, and they’re not able to monetize it at all. What are you going to do? Get an affiliate code for a prescription drug? No. There’s a whole category of creators that don’t have clear paths to monetization yet. My hope is platforms invest more in helping creators monetize, and not just the ones providing entertainment value.
Is it up to these platforms or third party startups to help creators monetize?
It makes more sense for a platform to do it. If I put a (payment) balance on TikTok or Instagram, and every time I click a button I give 50 cents to a creator—that works. But if I have to run a transaction every time I want to give money to a creator (through a third party), there’s a minimum where that credit card fee even makes sense. In many ways, a platform that has a stored balance has a huge advantage if you want to do something like tipping or subscriptions. When it comes to physical commerce, platforms will likely have to work with third parties.
Do you think consumers should be the ones financially supporting creators, or should it be advertisers that sponsor them?
I think it depends on the type of creator. If the creator is delivering entertainment value, you’re up against Netflix, the Avengers, some really big-budget things. Can you really charge $10 for a YouTube video when that’s the cost to watch a movie that cost a billion dollars to make? But you might be a creator that’s a well-known doctor. And maybe you have tips. That’s information I think a lot of people are willing to pay for. And right now, the platforms just don’t give a good way of letting viewers tell creators, “This is actually very valuable to me.”
Another thing platforms could easily do is harvest the comments better so creators can create a real relationship with fans.
What might “harvesting the comments” look like?
Everything from sentiment analysis, common questions that people have, links and recommendations you could blast to multiple commenters at once, being able to block the toxic and racist comments, figuring out who your top viewers are. And when they comment something, (the platform could) flag it so you can comment back. If someone is actually giving you money or bought your merchandise, wouldn’t it be great to know if that person commented on your video? Even little insights like that—the platforms have the information. They could do it if they really wanted to.
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.