The CQ: Surviving the "Creator Economy Winter"
A tough, but necessary slowdown in funding will allow for the best businesses to shine long-term.
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Buzzing at the Forerunner Office…
How Companies Can Survive a “Creator Economy Winter”
By Brian O’Malley, Partner
Q: What is Forerunner's perspective on the creator economy’s current situation? (i.e. Web3 ownership, "creator economy winter,” etc.)
A: At Forerunner, we’re big believers in the power of solopreneurs and the importance of the empowerment economy. However, during the prolific funding environment of 2021, too many creator companies got started and funded, many of which didn’t fill a sustainable business need. For example, we were excited about the idea of creators launching their own NFTs with the associated benefits of a membership or exclusive access to new experiences; however, when talking with creators, the onboarding process was too complicated and many fans had no interest in learning about a whole new economy. While intellectually compelling in nature, there wasn’t enough differentiation from existing options to drive perpetual benefits for their end users.
Creator economy businesses share much in common with small businesses—because, well, they are small businesses. Last year, we researched and analyzed what it took to build tech for SMBs and concluded companies should serve one (ideally more) of three core needs:
Are you generating customers?
Are you financing growth?
Are you simplifying operations?
Too many companies serving SMBs and creators, including many of those building in Web3, don't check these boxes. If they do, they frequently miss another question that we should have posed, but came as an inherent assumption: Are you reducing friction?
Many online creators are still in the early days of turning a hobby into a business. When someone is converting their audience into customers, and they are still figuring out what it takes to create a lasting business, introducing friction is a non-starter. Creator businesses are grinds that rely on tapping into a real entrepreneurial spirit; this is what separates the hobbyists posting about their passions from the entrepreneurs with commercial intent to build businesses. Tools to monetize are mere tools; the creator still needs to do the work to be top-of-mind, relevant, and trusted. For the long-term endurance of the creator economy, it is not enough to just show up and get paid. You need to build with commercial intent while having the grit to see it through.
The silver lining here is that the definition of the “creator economy” is typically reserved for online businesses. However, when one looks beyond social media and Web3, opportunity is everywhere. Just walk down the street and look around. Appreciate the beautifully decorated store windows, the chalk menu at your local coffee shop, and the witty slogan on the local guitar teacher’s pamphlet stapled to a telephone pole. Those are creator-made—and they are already running operational businesses.
Serving these businesses isn't easy. Just last week, Brex decided to pull their support of SMBs—one of the foundational audiences that helped build them into a household name in the world of startups. As the economy gets more difficult, the value prop of customer acquisition (which is different from lead generation) shoots to the forefront in priority. This is the one tenant that Brex doesn’t address, and it is the most important for founders to focus on in this new market environment. So, while this moment is painful, it’s also necessary. Businesses that solve genuine needs for these entrepreneurs will rise to the top, emerging into a less-crowded field and better able to stand out to the creators they serve.
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This Week’s Top Consumer Insights
By Jenna Birch, Head of Content & Communications
Is it still a worker’s job market? The tech industry has been rocked by layoffs recently—this week alone, Substack, Unity, Niantic, Qumulo, and HomeLight joined the ranks of companies cutting a significant portion of their workforce. Despite this, recruiters say tech enterprises are still hiring, most of the industry is unaffected, and workers still control their futures; more than half of tech employees are contemplating a job move imminently.
There’s a rapidly ticking clock beckoning the world to get the climate crisis under control—but The Supreme Court didn’t hear it this week. The Justices ruled to limit the EPA’s ability to regulate carbon emissions coming from power plants, making it much harder for the Biden administration to reach its climate goals.
Americans are spending less in the face of a struggling economy. Consumer spend increased just 0.2% during May, the smallest gain this year, as U.S. households continue to tighten their belts.
YouTube is still the biggest home for creators to build businesses. The social media company paid creators over $30 billion in the last 3 years, more than any other platform, according to a presentation at Cannes Lions.
Nearly two-thirds of consumers say they’re excited to shop in the metaverse, browsing digital goods via an immersive experience. McKinsey predicts the metaverse may carry over $2 trillion in e-commerce value by 2030, according to a new report.
Women may be more inclined to support ESG initiatives with their dollars. According to new data, 52% of women say they’d prefer to invest in companies with a social impact vs. 44% of men.
Though 72% of four-year colleges have admissions that are now SAT/ACT-optional or blind—a practice that swiftly expanded during the pandemic, causing more students to apply to competitive schools—an increasing number of high-school seniors are choosing to take the test to give them a leg up.
Deals and discounts are fading in the face of inflation: McDonald’s any-size-beverage-for-$1 deal is no longer. In Chicago, consumers report paying $1 for a small, $1.39 for a medium, and $1.69 for a large soda.
Is Prime Day losing its luster? Consumer spend on Amazon Prime Day is expected to increase 17% compared to last year’s event—but it is a far cry from the 65% increase YOY that Amazon has seen in the past.
If you hate getting gas, Apple will be making it a little easier. Soon, consumers will be able to pay for gas using CarPlay.
“Brand trust is so important because the data shows that the No. 1 reason that people avoid plant-based dairy today is taste. Some people don’t really trust plant-based dairy products. What Thomas and I set out to do, and I think we’ve achieved it, is to create ice cream that is one of the best ice creams that someone has had, plant-based or not. That way, they are going to trust us next for their cheese or yogurt.”
—Aylon Steinhart, Co-Founder & CEO of Eclipse Foods, explaining the company’s trust-driven strategy to get consumers hooked on plant-based dairy.
Nicole talks to BoF about the fashion tech that Forerunner has been eyeing, including Canal and Swyft.
On July 12th, Eurie will be joining ŌURA CEO Tom Hale onstage at Fortune Brainstorm Tech in Aspen to talk about the power of health tracking. Register here.
On July 13th, Eurie will sitting down with Attabotics Founder & CEO Scott Gravelle on TechCrunch Live to discuss how the company is using novel robotics to reinvent supply chain at a critical moment. Register here.
Jason will be speaking at the Fast Company Innovation Festival in September, discussing the evolution of DTC brands and the consumer relationships that power them. Get tickets here.
TechCrunch covers Eclipse Foods’ $40M Series B led by Sozo Ventures, with participation from Forerunner, Initialized Capital, and Gaingels.
Malique Morris of The Information highlights Canal’s cross-selling technology as a way for brands to circumvent Facebook ads.
Work at a Portfolio Company
Senior Visual Designer, Dutch | Dutch is delivering relief to both pets and their pet parents by connecting them virtually with vets across the county. This role will lead design initiatives, both internally and externally ensuring visual consistency, while also elevating the brand in a way that resonates with our consumers.
Internal Marketing Coordinator, Attabotics | Attabotics is the world’s first 3D robotics supply chain system for modern commerce. This role will manage all marketing-related tasks, including joining in calls with vendors/partners to record project scope and timelines and ensuring all project stakeholders are kept aware of progression while holding deadlines.
Director of User Experience & Design, DUOS | DUOS seeks to reimagine freedom at any age, building trusted relationships with older adults using technology and community to support fulfilling lives at home. This role will lead UX for DUOS’ products and services, including design, research, writing, and strategy.
There are ~1,209 other openings on our jobs site. Check ‘em out.