- Global VC funding fell 23% from Q1 to Q2 in 2022, indicating a slowdown in transaction activity.
- But many creator economy startups are still looking for investment despite the economic downturn.
- 4 founders shared their experiences of fundraising and running businesses in a challenging environment.
In recent years, some of the liveliest new ventures have been startups from the creator economy, fueling a boom in funding for the industry. According to Crunchbase, venture capital pumped $939 million into creator economy startups in the past year alone.
But the funding environment is proving to be more difficult this year: Between the first two quarters of 2022, global venture funding fell 23%, the second largest funding decline in a decade, according to CBInsights.
It has become more difficult to sell an idea, which presents early-stage startup founders with a more challenging path than a year ago.
“Last year you could raise a Series A and raise $20 million and take that $20 million and figure things out and do a lot of experiments,” Saaya Nath, vice president of venture firm Jump Capital, told Insider in August. “We’re definitely seeing more founders coming to the table with a prepared plan of action.”
However, there are some venture capital firms funding creator economy startups.
As of July 2022, funding for VC-backed creator-focused startups had reached $637 million, Crunchbase reported, signaling there’s still bandwidth to support the space.
To understand the current landscape, Insider spoke to four creator economy startup founders about their experiences raising money and running businesses in 2022. One of them, Handsdown founder Jenna Sereni, closed a pre-seed in June round and is currently entering the seed fundraising phase. The other three have closed groups of friends and family and are actively collecting money.
Ishan Goel, founder of Hyperfan.
Ishan Goel
The environment is tough, but it’s not impossible to raise it
The founders that Insider spoke to all agreed that they were preparing for a tougher fundraising environment.
“We’re definitely in for a storm,” said Sereni, co-founder of referral trading platform HandsDown.
Ishan Goel, founder of social community platform Hyperfan, compared today’s fundraising environment to climbing a mountain, but acknowledged that he believes there are opportunities for startups built on good ideas and technical talent.
A third founder, who spoke to Insider on condition of anonymity to protect his future fundraising efforts, said he believes many investors have taken bets on the creator economy space without realizing it.
“I don’t think it’s necessarily that we don’t need more startups in the creator economy or that it’s saturated,” the founder said. “I think too many people have come in who don’t understand the market.”
Investors, the founder said, didn’t realize that marketing can be challenging for creators because every creator is different.
“Put yourself in your user’s shoes,” they said. “Seeing what it’s actually like to be behind the scenes. Dive into them instead of just looking at them as an opportunistic market.”
However, there are certain companies that will have an easier time going forward, such as startups, that cannot easily be copied from a platform like Meta or YouTube, a fourth founder shared.
“Instagram will copy it if it works,” said the fourth founder, nodding to Instagram, which is internally testing a feature similar to lively app BeReal.
Seed-stage companies are less affected than growth-stage companies, Sereni said. While finding the right — and first — investor can be challenging, once someone is on board, the process becomes easier.
“All you need is a domino that falls when you raise,” said the third founder. “Literally just one investor who needs to invest, and then others will come.”
Getting there takes networking and building connections.
Talk to other founders, meet with local venture capitalists and get involved with the service-oriented organizations that need help from business leaders, Sereni said.
“Patience is something you don’t know you really need,” said the third founder. “You think things are going much faster, but you have to have a lot of patience. It’s such a long game.”
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