how to securitize clout
The rise of content creators and community builders has led to a net new asset in our world — clout.
As it can’t be bought, clout is one of the most sought-after assets a creator has. When your level of influence could bring in millions of dollars a year, it’s frustrating that the traditional capital markets don’t recognize it.
That’s where new fintech companies have an interesting angle — by deeply understanding how content creators make their money, these companies can leverage tech to provide liquidity to creators. This is all with the underpinning that those who invest in these creators or communities will do so to gain some sort of return, whether financial or social.
So how can we synthetically create equity in these creators?
When we’re looking at the options available to creators, it’s easiest to compare them to the capital markets available for startups and divide it into public and private. So compare the options in this section to any stock in the public markets. You don’t need to be accredited to invest and are often doing so because you strongly believe in the company. You’re able to invest any amount and expect a high degree of liquidity.
Social Money/Creator Tokens
A creator’s community is the crux of their business and ultimately what they are selling. The strength of a community is a predictive indicator of a creator’s success and their incentives are naturally aligned with the creator’s.
Social tokens are trying to tackle this by allowing anyone to “own” a portion of a community or creator’s business. They don’t need to be collateralized by anything (ex. redeemable for digital content, tokenized decision making, or a tokenized discord group) but can be if the creator wants. Often built on ethereum, these tokens can be highly liquid and are truly owned by the end-user. The issuer has full flexibility in what they choose to do with them as well.
Even if the tokens aren’t collateralized by anything, similar to holding a baseball card of your favorite player, you are still showing your support for that player and the card’s value rises as the player’s status rises. Eventually, you can choose to sell your stake or use it as a status symbol.
Since these tokens operate on the assumption of digital scarcity, they will always hold some degree of value.
So, who’s doing this?
Creators varying in scale and type from musicians to content creators are on their way to issuing their own social tokens. Grammy award-winning artist, RAC has issued his token (appropriately named, RAC) which has achieved great success and has fluctuated around $1m in market cap.
There’s also several new companies are forming around solving the on-ramp to create social tokens including:
- Roll — has a variety of issuers from ASMR creators to Akon
- Rally — has mostly crypto influencers, entrepreneurs and gaming creators.
- Fyooz — celebrities + musicians (notably signing Lil Yachty recently)
The beauty of social tokens for creators is their customizability, high degree of liquidity and ability to showcase who their “super-fans” are.
Novel investment vehicles
Some fascinating investment vehicles are likely to emerge as well- collateralizing some aspect of the creator’s persona, identity, or humanity. So far, I’ve come across Human IPO which is attempting to securitize a person’s future time. The underlying premise is that while some people may need the cash now, their time will be worth 10x in the future. By investing in them now, you can generate either pure alpha or redeem your stake for said person’s time. This seems to be geared most towards entrepreneurs and executives at the moment but would be curious to see where this leads.
Interesting areas of future exploration
- index funds for creator tokens — a basket of all small-cap twitch streamers
- derivatives for creator tokens — can you “short” a problematic creator
- bonds/debt instruments — direct-to-creator lending
Creators are the next source of abnormal returns because they have network effects baked in. These next-gen media businesses will need sources of capital beyond debt in both their early and late careers.
These vehicles are best suited for creators about to embark on a large project to hit an inflection point, have an up-front capital intensive business, or those that are seeing early signs of breakout success. What I’ve seen to date are traditional venture investments either in an individual creator in the case of PodFund or several creators in the case of content houses + MCN’s.
If we compare these vehicles to traditional venture markets it can be argued that:
- PodFund = Pre-seed funding
- Content Houses = Accelerators
These vehicles (or in some cases, traditional VC) may not be the best in the long term for creators. To create the returns that these VC’s are looking for, the creator must achieve hyper-growth in both their audience and revenue sources. For many creators, it is just not feasible to achieve exponential revenue growth without being branded a “sell-out”. This is because unless each new piece of ad-supported content goes viral, the creator must diversify their revenue streams and take on as many as possible to achieve exponential returns.
When it’s so easy to produce content, there’s a ton of it out there and attention spans are limited. Once the distribution algorithms stop pushing certain pieces of content out, it’s dead. Videos that have been up for years are collecting pennies on the dollar.
Spotter is tackling the problem of rolling up the long tail of content on the internet in ways similar to traditional PE firms. By predicting stable cash flows from this “dead” content, they’re able to offer value to the creator by giving them capital upfront and receive steady cash flows.
Places to expand
- activists — is there a world where a creator could get a PR turnaround in exchange for a % of their business?
Where does this go?
While I adore thinking about the ways we can expand access to capital beyond Wall Street- these solutions are facing an uphill battle. With social tokens, teaching consumers about Ethereum and on-ramping them to crypto will be a feat in-and-of-itself, let alone convincing them to put their money in this unknown asset class. Novel asset classes like the Human IPO leads to a bevy of tax questions and implications.
However, there’s something to be said about the increased attention to the space. With more creative minds put to the task, I believe we’ll see an abundance of novel financing solutions develop that are unpredictable today. Over time, we’ll likely see traditional capital markets fully mirrored + tailored for creators as there’s an expansion of the “creator economy” as a whole.
Edit: Somehow I completely neglected to mention the Pullman bonds which were one of the first attempts at securitizing creatives! Additionally, I just finished Free Agent Nation by Daniel Pink which briefly touches on historical attempts at creator securitization- 10/10 recommend.
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