Co-authored by Hannah Murdoch

Ten years ago, USV wrote about how technology was changing the way people funded their ideas and earned a living. Investing in Kickstarter, we noted:

“Creative people will continue to produce amazing works. We do not think technology and the Internet will change that, other than possibly to accelerate the rate of creativity. But how will these creators get the funding to produce the work and put food on their tables and roofs over their heads? That is an open question and one we are very interested in helping to answer.”

What we didn’t expect is how slowly the financial tools available to fund and compensate these creators would evolve alongside the platforms that made them household names.

Algorithmic-driven discovery has necessitated a narrow playbook for those monetizing their fan base as a primary source of income.  To succeed, a content entrepreneur must be multi-platform and multi-partnership.

This presents a few challenges –

  • Personal and professional lives, and finances, are often one and the same
  • Sources of income are hyper-fragmented – often across sponsorships, streams, and payments shared among other co-collaborators
  • Hit-driven discovery encourages “go big or go home” production.  Income is often fueled by launches, member enrollments, or course promotions.  It means cash flow is lumpy and content is expensive to produce.

Even category-defining influencers face these hurdles.  Many lack access to credit, loans, and a business bank account.  Some float five-figure sums for production costs on PayPal.  Others are unable to prove income requirements to secure a lease.  What’s more, the metrics that define a sustainable digital business – subscription growth, audience engagement, longevity of brand deals, platform diversification – exist in the public eye, but are left on the table by traditional financial institutions.

Karat unlocks a digital entrepreneur’s most persistent and critical need – access to capital.  The team’s first product is a charge card for influencers.  The Karat card provides liquidity for expenses like travel, tech, and props.  Karat sits in the flow of payments to understand an entrepreneur’s business holistically, whether they have five thousand subscribers or five million.  

This data is used to underwrite customers based on how well their digital business resonates with their audience.  In other words, have they achieved content/ market fit?   Entrepreneurs with a Karat card are running diversified, profitable businesses and are experts in their domain.  Every card-holder’s content business is their primary source of income.  

Karat launched in 2020 with category-defining influencers in gaming, vlogging, music, fashion, and personal finance.  The average cardholder has more than one million followers.  Some signed up by DM’ing Karat directly while others have been referred by a cardholder in the network.  Since registering, Twitch streamers who have been rejected for business cards twice have accessed lines of credit.  A Vlogger with more than 8M followers can now purchase a car and receive financing.  And a festival headlining musician who previously needed a parental co-sign is now building their own Karat credit file.  Overtime, Karat will become the financial backbone for the content economy and help creators access bank accounts, incorporation, tax support, and more.

As Karat expands their underwriting model, the team may also expand to business owners who have professionalized their content outside of platforms like YouTube, Patreon, Twitch, Instagram, and TikTok.  A Karat card might sit in the wallet of a teacher on Outschool, an artist on Skillshare, or a host on ShopShops. 

Co-founders Eric Wei and Will Kim have spent many years understanding their customer base.  Eric witnessed entrepreneurs’ liquidity constraints first-hand while working on influencer products at Instagram and Facebook.  Will knows the power of providing cash solutions to business owners from his time at Kiva, the world’s first online lending platform connecting lenders to entrepreneurs.

Thesis 3.0 centers on broadening access through technology-driven networks and trusted brands.  Karat is doing just that – building the trusted financial services platform for the independent content economy,  starting with a community of cardholders who trust Karat to develop a deep understanding of their business.  They believe digital content businesses require the same financial backbone as any other entrepreneur – and we couldn’t agree more.  USV is leading Karat’s Series A financing, which includes nearly twenty of Karat’s early cardholders.

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