The creator economy is booming: Goldman Sachs estimates its total addressable market to be $250 billion today. But despite its scale many creators have trouble getting a mortgage, building personal credit and managing their finances as banks typically view freelance work as inconsistent income. Cofounders Eric Wei and Will Kim are betting their company Karat Financial can help social media stars get their finances in check.
“You could be a YouTuber literally making millions of dollars, walk into a bank and get treated like trash,” says Wei, who first noticed the issue while working with creators as a product manager at Instagram.
On July 19, Karat—which offers credit card and banking to folks who sell via social media —announced $70 million in fresh funding including a $40 million Series B equity round led by SignalFire and $30 million in debt financing from TriplePoint Capital. Investing too, celebrities including Will Smith’s Dreamers VC, video game streamer Ludwig Ahgren and YouTube chef Nick DiGiovanni. The round brings Karat’s total funding to more than $100 million. Previous investors have included creator Josh Richards and tech vets YouTube cofounder Steve Chen and Twitch cofounder Kevin Lin.
Wei and Kim have also announced a new bank card in partnership with Visa that will help creators better establish personal credit history, versus its current product that is a business credit card.
Founded in 2019, Los Angeles-based Karat pays for popularity. In place of traditional credit scores, Karat offers lines of credit based on a creator’s social clout—with credit lines based on a customer’s following on apps like Instagram, YouTube and Twitch. “Big banks and card companies haven’t moved into the creator space yet because they still see it as something really niche and small—not worth developing this new underwriting model,” Wei says.
Wei and Kim say they will use the new round of capital to increase Karat’s size and product offerings to make Karat become the one-stop-shop for creators’ financial needs.
“We live in a Frankenstein world of using one bank for storing money, another card for spending money, an expense management system to track receipts—it’s a complete mess, and we have the opportunity to build it right from the ground up,” says Kim, who is also a Forbes 30 Under 30 2022 lister.
The new card lets users build personal credit, and get access to entertainment events and brand collaborations, plus purchase protection and tax support. The new fundraise will also help the company fund a lending product that gives creators advanced credit for sponsorship payments.
While Wei and Kim won’t share their user base, the pair say their customers have increased fivefold since its 2021 $4.6 million Series A, and that their creator cardholders have more than a combined 1 billion social media followers. Says Wei: “We're at a point where every single person we meet knows one of our clients.”
The long-term goal? Scale Karat beyond the creator economy to become the financial partner of artists, creatives and freelancers on and off social media.
“We've seen over the past 10 years, this whole creator piece develop from a niche to an industry that's the creator economy,” Wei says. “It’s just going to be the economy, period.”
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July 19, 2023 at 11:00PM
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Karat Financial Raises $70 Million From Celebs Like Will Smith And Top VCs To Build A Bank For Creators And Artists - Forbes
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