Created in 2019, Playa Vista-based Spotter counts YouTube superstars like MrBeast, Dude Perfect, and Like Nastya among its clients. The fintech startup advances cash to these creators against their future advertising revenue on existing content. Ad revenue makes up a significant portion of YouTubers’ income, effectively turning their back catalogs into financial assets with reasonably predictable revenue streams.
Spotter Targets $1 Billion Investment by 2023
To date, the company has licensed content with 40 billion monthly watch-time minutes through about 200 deals involving five-year licensing contracts. Its target is to reach a $1 billion cumulative investment in creators by the end of its fourth year in business, which is the middle of 2023. For 2022 alone, this will mean a spend of $500 million.
A recent $200 million Series D fundraise from SoftBank Vision Fund 2 sets Spotter’s value at $1.7 billion. Earlier, undisclosed rounds generated a total of $555 million from several institutions, including HighPost Capital and Crossbeam Venture Partners. Spotter is the second YouTube licensing startup that SoftBank has funded; the other is Jellysmack, which also works on a five-year license period.
This latest funding will enable Spotter to deploy capital to more creators and proceed with a new offering that provides upfront funding for new video production. The startup will also improve its analytic offerings to clients to maximize video performance with production and publishing recommendations.
Analytics Drive the Business Model
Spotter utilizes proprietary predictive technology that looks at engagement metrics to evaluate the future worth of creators’ material. For example, the amount of time viewers watch videos before dropping off and the number of likes, shares, and comments. Ongoing analytics are shared with the creators, who are also advised on the most profitable content decisions. This ultimately benefits Spotter, too, as viewers inevitably look for past content once their attention is drawn to a YouTuber they like.
Plus, contracts are not a one-time thing—many creators have signed on for subsequent deals, making enduring relationships beneficial to both parties. According to CEO Aaron DeBevoise, creators who reinvest in themselves quickly realize the benefits and come back with more content to license. For example, MrBeast has grown his viewership by a multiple of three since he started working with Spotter.
At the moment, Spotter excludes certain content like news and politics and only selects creator partners with the potential to reach 1 million views per month with its help. The company’s average deal size is $1.5 million, and creators are paid upfront for licensing their content to Spotter for the contract period. The cash isn’t a loan, so they don’t have to pay it back, nor do they lose their copyright or intellectual property. In return, Spotter gets the ad revenue from their content for five years. If things go according to plan, the startup recovers its money in about four years.
When Should Creators Consider Spotter?
Kristin Bannon, investment director at SoftBank Investment Advisers, believes Spotter is accelerating the YouTube ecosystem by giving YouTubers the tools and capital to turn their hobbies into genuine enterprises. But it’s not for all types of creators—only those that can use the upfront capital to grow their business should consider sacrificing future ad revenue.
Dude Perfect, a multi-deal partner of Spotter’s, used its invested capital to grow its production team. And Jimmy Donaldson, a.k.a. MrBeast, who makes extravagant stunt videos that require significant investment to set up, has been able to produce more content than if he’d had to wait for the cash to come from the organic growth of his channel. He has also used the funding to have his videos dubbed into Spanish, which is expensive but vastly increases his potential audience.
Spotter Only Succeeds if Its Creators Succeed
DeBevoise, who formerly co-founded Machinima and StyleHaul, multi-channel networks (MCN) that aggregate content, says his experience has taught him the value of creator independence, both in content generation and in taking their businesses to enterprise level.
At the start of the industry, many young, naïve YouTubers were locked into long-term contracts that shackled them to one-sided partnerships. DeBevoise says Spotter is a next-generation MCN that prides itself on valuing people above profits, believing Spotter “only succeeds as a company if our creators succeed.” And that’s why it’s prepared to work with unique structures designed around specific creator goals.
The creator economy is attracting increasingly more venture investment. Fintech platforms can help creators build on their new capital by automating investments, insurance, and trading cryptocurrencies. Together, fintech and the creator economy can mutually accelerate demand with innovative new income streams and analytic tools to enhance and sustain that income.