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Karat: A financial solution for the creator economy, $70m Series B

🚀 Weekly Startup Deep Dive: Karat

The financial partner for content creators.

🤝 Content creators, meet your new payment method.

Karat is a provider of digital banking cards. Rather than solely focusing on income and debt, Karat uses an algorithm that provides you with personalized credit limits based on financial and social metrics like reach, engagement and more. Karat is providing access to capital for individuals in the creator economy to realize their goals.

💰️ Who’s funding this?

Karat raised $70 million for its Series B round. This money was received through equity ($40m) and debt ($30m). The round was led by Signal Fire with 12 other investors and TriplePoint Private Venture Credit BDC who funded the debt financing. The startup’s total raise to date sits at $144.18 million.

The equity fundraising saw 3 Follow-On Investors: Commerce Ventures, GGV Capital and CRV.

🤹 Let’s meet the brains behind Karat

From left to right: Will Kim & Eric Wei

  1. Eric Wei (Co-Founder & Co-CEO): ex-Product Manager at Instagram

  2. Will Kim (Co-Founder & Co-CEO): ex- Echo (cybersecurity) at Palantir Technologies

📈 Analysis

Content creators who are building their brand online have difficulties when getting capital. Valuing an online platform, say, a YouTube channel, can become difficult when dealing with loan prequalifications. A product like Karat’s could be an answer for the creator’s economy financial system. Here’s why we believe in it.

🌍️ What’s the market like?

Let’s first take a look at who makes up the content creator economy.

There are already 4 million users above 100K followers on various social media platforms. These “Experts” and “Experts+” are most likely generating revenue from these channels and would benefit from a startup like Karat which bases its credit limits based on social metrics. That being said, we believe Karat is a winner because of the fast growing, incoming Pro and Semi-Pro demographics.

According to Influencer Marketing Hub, users in the Pro demographic are experiencing a 1.9% monthly growth rate in followers on Instagram. This translates to a 25.7% yearly growth rate. Assuming an average follower count of 50,000 in the Pro demographic, it would take ~4.1 years for these to enter the Expert category. This means - 4 years for a potential 39 million additional creators who will likely want a service like Karat’s.

🤼 Who are the competitor(s)?

Apart from traditional banks, there are few who offer credit specifically for content creators. A notable startup undertaking the same problem is Creative Juice, which launched 2 years after Karat in 2021.

Creative Juice is a $50 million fund to underwrite creator businesses. Instead of credit limits, Creative Juice provides upfront cash in exchange for a share of revenue on a given period of time. For some, this may seem as a safer alternative but if successful, it’ll likely be a more costly option.

In terms of web traffic and search trends, interest over time on Google is slightly better for Creative Juice vs Karat. That being said, month-on-month growth of website web traffic is much better for Karat (60.37%) than Creative Juice (28.40%).

Karat (Blue) vs Creative Juice (Red): Google search in the last 90 days

💭 Concluding thoughts.

Karat has a unique and innovative approach to determining credit limits. In our view, this represents their most substantial and compelling value proposition, which, when coupled with strong marketing efforts, has the potential to be extremely efficient in acquiring new creators to join.

That being said, Creative Juice’s profit sharing structure may put a big dent in Karat’s growth as the content creation market gets tougher to infiltrate as the industry gets more saturated. But, looking at the exponential increase of our consumption of online content and the growing internet penetration in less developped countries, we don’t see this market becoming saturated any time soon.

Karat is placing itself in front of a market that, we think, will become a considerable portion of the small to medium businesses of the world. This category makes up for 44% of ALL economic activity in the US. That’s some scale.

💻️ Careers at Karat: Click here.
Accounting Lead (Remote)
Senior Tax Accountant (Remote)
Head of Growth Marketing (LA, SF, NYC)
Marketing Lead (LA, SF, NYC)
Content & Scriptwriting Associate (Contract - Remote)
General Application (Remote)

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