What Happened to the Creator Economy?

I called it. While I usually love saying that, this time doesn’t feel as good. 

In May of 2022, I argued that we were about to enter into a creator economy winter. The startups serving the digital entrepreneurs creating online content would struggle. Specifically, I forecasted that because only the top 1% of creators make any real money, a startup would have to either 1) capture a percentage of their biggest customer’s revenue or 2) find a way to sell to the long tail of part-time creators. Because of this struggle, funding would dry up and we would see most startups fail. 

The response to that original post was pretty heated—I got some angry DMs from founders and investors. “Creators are the future!” “You don’t get the trends!” “Look at Mr. Beast!” (For whatever reason, VCs love to trot out Mr. Beast for any topic even tangentially related to online content). These defenders were wrong.

First, creator economy funding crashed. Dollars invested are down 86% to $123M. In comparison, funding for the broader market is down ~50% year over year. 

Next came the layoffs. The giants of the space have had issues: Patreon laid off 17% of staff, Linktree first sacked 17% of staff, then a few months later another 27%, Cameo has laid off 160 (probably 33%+ of staff), Substack laid off 14%, on and on. While many startups had layoffs, it is unusual that all the stalwarts of an industry, the so-called ‘safe bets' are the ones who were making such big cuts. 

Now, I have heard whispers of multiple creator economy startups quietly shutting down. This isn’t a newspaper and I’m not a journalist so I’m not going to publish a list. This is a moment of heartache for founders, so I’ll leave it to other publications to spill secrets. Most are smaller players, but there may be a few surprises in there. 

In my opinion, the creator economy thesis fell apart because investors had a fundamental misunderstanding of what risks they were underwriting. They didn’t understand the media industry, they didn’t understand creators’ needs, and they totally missed that this was a vertical SaaS bet.

To understand why creator economy bets were bad, you have to understand why creators themselves are a bad business. 

What is a creator? 

A small business in general is a shitty business. 65% fail in the first 10 years in the U.S. 

A media company is also a shitty investment. Media stocks had their worst decline in 30 years in 2022.