By David Akinfenwa
June 19, 2022 | 6:00 am
When startups seek external funding, their options are often limited to debt financing from the bank or equity financing from an investor. While this may be difficult in the early stages of business for startups, it is more difficult for creators since their line of work is less established than the regular startup…
When startups seek external funding, their options are often limited to debt financing from the bank or equity financing from an investor.
While this can be difficult in the early stages of business for startups, it’s more difficult for creators because their craft is less established than typical startups.
The global creator economy is worth over $100 billion, and Africans are mostly excluded from it. African creators – independent writers, artists, videographers, gamers and podcasters – struggle to secure funds to fund their projects and content. From building a talented team to setting up jaw-dropping backdrops and promoting content, every step of content creation requires a lot of money.
“There doesn’t feel like there are suitable funding opportunities for creators like me in Africa.” Most of the funding opportunities here are equity or debt funding for tech or impact startups.
“So instead, I had to get started, using funds from my salary or other income to fund my content creation journey, from gear to team,” the YouTuber said and writer Peace Itimi.
Dolapo Amusat, Creator and Head of Product Marketing at Google, also mentioned that financing creators is almost a daunting task, especially if you are an emerging creator.
He said: “It’s hard to get people to invest in you as a creator or give you access to their resources, and that’s a challenge that most of us who have tried to build in this space have faced over the years.
Founder and CEO Selar also noted that “with fundraising in any industry or sector, getting money for anything is always about risk.”
Creditors always want to give money to people who are least likely to pay it back. “With the creator or the creative industry, it has always been associated with high risk and no return, which today is very wrong.”
“There just aren’t many public or shared data points that could help creditors make better decisions about funding creators. It’s unfortunate because it’s a chicken and egg situation. “We would need to see more success from creators big and small, and that validates the market for new creators to come, and creators need funds to do good work that can grow the ecosystem,” said he added.
According to Lumi Mustapha in her article published on lumia mustapha.substack.com, like any business, companies in the creative sector (in the absence of profits to reinvest), need access to both equity and loan capital to grow. Investments in equities (mainly from foreign investors) are increasing, but not investments in debt.
The creator economy has remained a rapidly changing economy that has grown in response to the growing popularity of the digital economy and has had a broad impact on individuals and the digital economy. People who started out as internet users have become savvy in using social media as well as software and financial tools to monetize their online content, knowledge and skills.
“With the sporadic rise of the creator economy, more and more creators are coming out every day.” However, more creators aren’t being treated like businesses, and they should be because today’s creators are a powerhouse for tomorrow’s million-dollar businesses,” said the founder of Selar.co, Douglas Kendyson.
The creators’ economy contributes just over 6.1% of the world’s gross domestic product (GDP), or on average between 2% and 7% of national GDPs worldwide. According to the International Monetary Fund (IMF),
Sustainable mode of financing creators
Recent surveys show that the creator economy grew by more than 550% between 2016 and 2020. It has been predicted that by the end of 2021, the industry will have grown into a $13.8 billion industry. While e-commerce platforms like Selar.co, Paystack Storefront and flutterwave stores are designed to help creators make money selling their products and services using appropriate digital tools, the most challenging important remains to obtain funds to create content.
Social media platforms are trying to entice creators with a slew of new money-making tools, including dedicated funds and subscriptions. Meta recently released Reels, its short-form video platform, globally, and with it other ways for users to earn money, such as overlay ads. Mark Zuckerberg has said he wants Reels to be a place where creators can create a sequel and “earn a living”.
In May 2021, YouTube announced a $100 million creative fund for YouTube Shorts, its rival Tik Tok feature. The funds were designed to compensate YouTube Shorts creators for their most viewed and engaging content in 2021 and 2022.
TikTok is a B2C (Business to Consumer) app that was initially not designed to collect revenue. However, it has built a marketplace that connects advertisers to creators and launched a $200 million fund to invest in its top creators.
However, this could be tricky as creators cannot apply for the fund to help with content production. Instead, these platforms will reach out to creators whose videos exceed certain milestones each month, rewarding them for their contributions. Creators only rely on money from external sources such as brand deals or merchandise sales.
Creative Juice, a banking app for creators, recently unveiled its $50 million revenue-based funding structure to support creator businesses. Creators can apply for a cash advance to help them grow their business in exchange for a percentage of their revenue over a set period, usually six months to three years.
Revenue-based financing (RBF), also known as royalty-based financing, is a method of raising capital in which investors agree to provide capital to a creator in return for a certain percentage of revenue company total gross.
In other words, a creator today “sells” a percentage of their future earnings for a cash advance, and this has proven to be the most sustainable and ethical funding option for creators.
“With RBF, creators can repay their funding based on their growth, which seems the most ethical,” Douglas said.
In Africa, platforms like Selar.co are strategically positioning themselves for the creator economy, exploring revenue-based financing and building the infrastructure for creditors to offer RBF to creators, providing historical creator sales data and ways to charge creators as they make new sales.
In Nigeria, the creative industry is gradually becoming one of the biggest employers of labour. From movies and music to podcasts and fashion, young Nigerians have transformed what was once considered “informal labor” into a viable industry, creating jobs and largely responsible for exporting Nigerian culture to across the continent to the world.
At the just-concluded eighth edition of the Africa Magic Viewers’ Choice Awards, organizers have launched a call for entries, recognizing the work of content creators in shaping the film industry.
In recognition and appreciation of the growing popularity and caliber of social media material across the continent, organizers have announced the addition of a new category for “Best Online Social Content Producer”. This category includes short form content produced and posted on social media platforms.
Digital media is gradually replacing traditional media as the industry evolves. There has been an increase in innovative and compelling social media content across the continent in recent months, particularly in light of the COVID-19 outbreak and global quarantine. This category is crucial because these content providers have gradually created a niche around their skills.
The Executive Director of West Africa Content and Channels at MultiChoice Nigeria, Dr. Busola Tejumola said on this, “We are very excited about the Best Online Social Content Creator category as we believe this will further underscore our commitment to representing all content creators and inspiring new talent. There’s no better time than now to recognize and celebrate this growing digital community as we host the eighth annual awards.
According to research by Jobberman, the creative sector currently employs around 4.2 million Nigerians, making it the second largest employer in the country, and has the potential to create an additional 2.7 million jobs by 2025.
While taking all of these elements into consideration, it is important that the government creates an environment conducive to the growth of creators through the creation of supportive policies and tax breaks. Taking a quick look at the Copyright Act, which would for all intents and purposes be considered the most important legislation in Nigeria as far as creators are concerned due to its impact on the treatment of intellectual property , it is still considered by many to be quite outdated and out of step with global trends.
“The government’s contribution to this issue is very clear; providing grants/access to creators at different levels. This can be done through trusted organizations that work closely with creators to ensure funds are used wisely and are tracked to ensure success.
The creator economy should not be overlooked as it is a thriving source of income for many people, especially young people. A recent survey showed that in the future, more and more young people would rather be content creators or social media influencers than traditional professions such as medicine.
Globally, creators are leveraging their creative skills and making money from their content. The creator economy has evolved and holds the key to current and future marketing. This manifests itself in the progressive dominance of creators on social media and in media organizations.