Funding A Booming Creator Economy in Africa
When startups seek external finances, their options are often restricted to debt funding from the bank or equity funding from an investor.
While getting this can be challenging in the early stages of the business for startups, it is more difficult for creators since their line of work is less established than the regular startup businesses.
The global creator economy is worth over $100 billion, and Africans are shut out of most of it. African creators—independent writers, artists, videographers, gamers, and podcasters—struggle to get funds to finance their projects and content. From building a talented team to setting up breathtaking sets and promoting the content, every content creation step requires big bucks.
“It doesn’t feel like there are funding opportunities tailored to creators such as myself in Africa.” Most of the funding opportunities here are equity or debt financing for tech or impact startups.
“So instead, I have had to bootstrap, using funds from my salary or other earnings to fund my content creation journey-from equipment to crew, “youtuber and writer, Peace Itimi, said.
Dolapo Amusat, Creator and Product Marketing Manager at Google, also mentioned that funding creators is almost a mountainous task, especially if you are an emerging creator.
He said, “It’s hard to get people to invest in you as a creator or give you access to their resources, and that’s a challenge most of us who have tried to build in this space have faced over the years.
Founder and CEO Selar also noted that “with raising funds in any industry or sector, getting money for anything is always about risk.”
Creditors always want to give money to people that have the least risk of repaying it. “With the creator or creative industry, it’s always been associated with high risk and no return, which today is very false.”
“There’s just not a lot of public or shared data points that could help creditors make better decisions on funding creators. It’s unfortunate because it’s a chicken and egg situation. “We’d need to see more creator successes, both big and small, and that validates the market for new creators coming, and creators need funds to do good work that can grow the ecosystem,” he added.
According to Lumi Mustapha in his article published on lumia mustapha.substack.com, like any business, creative sector businesses (in the absence of profits to reinvest), require access to both equity and debt capital to grow. Equity investment (mostly from foreign investors) is growing, but debt investment is not.
The Creator economy has continued to be a fast-paced economy that has developed in response to the growing popularity of the digital economy and has had a broad impact on individuals and the digital economy. Individuals who started as internet users became internet savvy using social media alongside software and financial tools to monetise their content, knowledge and skills online.
“With the sporadic rise of the creator economy, more creators are coming out daily.” However, more creators are not treated like businesses, and they should be because creators today are a powerhouse for tomorrow’s million dollar businesses,” “founder of Selar.co, Douglas Kendyson, said.
The creator economy contributes just over 6.1% to global gross domestic product (GDP), averaging between 2% and 7% of national GDPs worldwide. According to the International Monetary Fund (IMF),
Sustainable way of Funding Creators
Recent surveys show that the creator economy grew by more than 550% between 2016 and 2020. It has been predicted that by the end of 2021, the industry will have grown to be a $13.8 billion industry. While e-commerce platforms like Selar.co, Paystack Storefront, and flutterwave stores are designed to help creators earn money by selling their products and services using appropriate digital tools, the most significant challenge remains getting funds to create content.
Social media platforms are trying to attract creators with a slew of new money-making tools, including dedicated funds and subscriptions. Meta recently released Reels, its short-form video platform, globally, and with it, more ways for users to make money, like overlay ads. Mark Zuckerberg said he wants Reels to be a place where creators can build a following and “make a living.”
In May 2021, YouTube announced a $100 million creator fund for YouTube Shorts, its Tik Tok rival feature. The funds were designed to pay YouTube Shorts creators for their most viewed and engaging content in 2021 and 2022.
TikTok is a B2C (Business to Consumer) app that was initially not designed to collect revenue. However, it has built a marketplace that connects advertisers to creators and has launched a $200 million fund to invest in its top creators.
However, this could be tricky as creators can’t apply for the fund to help with content production. Instead, these platforms will reach out to creators each month whose videos exceed certain milestones, rewarding them for their contributions. Creators only rely on the money that comes from external sources such as brand deals or merchandise sales.
Creative Juice, a banking app for creators, recently unveiled its revenue-based funding structure of $50 million to support creator businesses. Creators can apply for cash upfront to help them expand their businesses in exchange for a percentage of their revenue over a set period, usually six months to three years.
Revenue-based financing (RBF), also known as royalty-based financing, is a capital-raising method in which investors agree to provide capital to a creator in exchange for a certain percentage of the company’s ongoing total gross revenues.
In other words, a creator is “selling” a percentage of their future revenue for a cash advance today, and this has proven to be the most sustainable and ethical funding option for creators.
“With RBF, creators get to repay their financing based on their growth, which feels most ethical,” Douglas mentioned.
In Africa, platforms like Selar.co are positioning themselves strategically for the creator economy, exploring revenue-based financing and building the infrastructure for creditors to offer RBF to creators, providing the historical data of creator sales and the means to debit the creators as they make new sales.
In Nigeria, the creative industry is gradually becoming one of the biggest employers of labour. From film to music to podcasts and fashion, young Nigerians have turned what was once considered “informal work” into a viable industry, creating employment and largely responsible for exporting Nigeria’s culture across the continent to the world.
In the just concluded eighth edition of the Africa Magic Viewers’ Choice Awards, the organisers called for entries, recognising the works of content creators in shaping the film industry.
In acknowledgement and appreciation of the rising popularity and caliber of social media material throughout the continent, organizers announced the addition of a new category for “Best online social content producer.” This category includes short-form content produced for and displayed on social media platforms.
Digital media is gradually replacing traditional media as the industry changes. There has been an increase in innovative and compelling social media content across the continent in recent months, particularly in light of the COVID-19 outbreak and the global quarantine. This category is crucial since these content providers have steadily established a niche for themselves around their skills.
The executive Head of Content and West Africa Channels at MultiChoice Nigeria, Dr. Busola Tejumola, said of this: “We are very excited about the Best Online Social Content Creator category as we believe this will further underscore our commitment to represent all content creators and inspire new talent.” There is no better time than now to recognise and celebrate this growing digital community as we stage the eight edition of the awards.”
According to Jobberman research, the creative sector currently employs an estimated 4.2 million Nigerians, making it the second-largest employer in the country, and has the potential to create an additional 2.7 million jobs by 2025.
While taking all of these into consideration, it is important for the government to create an enabling environment for creators to thrive through the creation of favourable policies and tax breaks. Taking a quick glance at the Copyrights Act, which would be for all intents and purposes considered the most important legislation in Nigeria where creatives are concerned because of its impact on the treatment of intellectual property, it is still considered by many to be quite outdated and not in tune with global trends.
“The government’s input in this is very clear cut; provide grants/access for creators on different levels. This can be done via trusted bodies that work closely with creators to ensure that the funds are put to good use and are followed up with to ensure there is success”
The creator economy must not be overlooked as it is a thriving source of income for many people, especially young people. A recent survey showed that more young people prefer to be content creators or social media influencers in the future rather than the traditional professions such as medicine.
Globally, creators are leveraging their creative skills and making money out of their content. The creator economy has evolved and holds the key to present and future marketing. It is evident in the gradual domination of creators on social media and in media organisations.