Spotter raises $200M to invest $1B in YouTubers’ back catalogs – TechCrunch

How do YouTubers make a living? Usually through a mix of merchandising sales, membership programs, or maybe even a custom product. But YouTube’s ad revenue is a big chunk of the pie chart.

A YouTuber’s back catalog becomes a financial asset. Each month, he knows he will benefit from ever-increasing engagement on his past content. Now, Los Angeles-based startup Spotter wants to help creators scale their channels faster by offering large sums of money up front in exchange for future ad revenue from their existing uploads. .

Since its launch in 2019, some of YouTube’s biggest creators like MrBeast and Like Nastya have struck deals with Spotter. The company says that among its client roster – which also includes Dude Perfect, Aphmau, Smokin’ & Grillin’ wit AB and others – Spotter has licensed content that generates more than 40 billion watch minutes per month.

Today, the company announced that it has raised an additional $200 million in Series D funding from SoftBank Vision Fund 2, valuing the startup at $1.7 billion. Prior to that, Spotter raised $555 million across three undisclosed funding rounds. The backers of these three rounds include Access Industries, HighPost Capital, CoVenture, GPS Partners and Crossbeam Venture Partners.

Spotter’s business model is a contemporary interpretation of the “Bowie Bond”, which is becoming increasingly popular among startups in the creator economy. It’s no different from venture capital investments – you give a promising business (or person) the money it needs to grow, assuming that eventually you’ll recoup your investment and make a profit. considerable. Another creator-focused startup funded by Softbank Vision Fund 2, Jellysmack has also just allocated $500 million to license YouTube back catalogs. Jellysmack’s license for back catalogs expires after five years, the same length as Spotter’s contracts, and uses an algorithm to determine whether or not to invest in a creator.

Spotter claims to be on track to reach a cumulative total of $1 billion invested in creators by mid-2023, four years after the company was founded. In 2022 alone, COO Nic Paul told TechCrunch that Spotter plans to spend $500 million to license creator back catalogs. So far, Spotter has struck around 200 deals of this nature – some creators, like YouTube’s Top American Creator, MrBeast, have struck several deals with Spotter over the years.

“The creators have entered into second and third deals with us, so it’s not a unique situation,” said Spotter Founder and CEO Aaron DeBevoise. “Six months later, they [do another deal] because they see success reinvesting in themselves.

According to Spotter, MrBeast used his seed money to fund a Spanish-language channel, where his viral videos are dubbed to reach Spanish-speaking audiences. Spotter said that since they started working with MrBeast a few years ago, he has grown his viewership by over 300% to 1.35 billion monthly views across all of his channels.

If a creator wants to work with Spotter, the company will analyze their channel metrics to make them an offer for their back catalog. DeBevoise said engagement metrics are most important to Spotter, including the amount of time viewers spend watching a creator’s content and the percentage of a video’s viewers who actually watch before opting out. Spotter also takes into account metrics that the YouTube algorithm rewards directly, such as the number of likes, shares, and comments. Another consideration is the type of content – Spotter won’t invest in YouTubers who make videos about news and politics, for example.

Then, once a creator signs a deal with Spotter, the company will use that analytics to advise them on growing their channel. This also benefits Spotter, as increased traffic to a creator’s channel could lead to increased ad revenue from the company’s licensed back catalog. Even better, the creator might want to concede even more content to Spotter, which might perform even better. than their past downloads.

“So it could be, ‘Hey, let’s focus on what’s your retention rate on videos,’ right? And if you were to improve the retention rate, what would that mean? for the value of these videos and the amount of money you make?” DeBevoise told TechCrunch. “So we’re helping them grow the business and reinvesting capital is really key.”

The average Spotter deal size is around $1.5 million, but some deals with smaller channels can be as low as $15,000. These payments are not loans – Spotter provides upfront money, which creators don’t have to repay. But in exchange for that quick capital, creators must be willing to license their content to Spotter for five years. While Spotter doesn’t take copyrights or intellectual property – that would be a huge red flag for creators – the company buys ownership of all future ad revenue generated from the videos.

“Our return goal, in terms of money back, is about four years,” DeBevoise said.

So Spotter customers are faced with a tough business question: do you want to earn about four years of ad revenue up front, but never see another penny of those videos again, or would you rather bet on earning more money over a longer period of time, but sacrificing growth potential?

The answer to this question is different from one creator to another. MrBeast needs exorbitant sums of money to make his stunt videos, where he often gives six figures in cash, so this initial capital helps him produce content faster, because he doesn’t have to wait for his old ones. videos bring enough advertising money. But not all YouTubers run a business like MrBeast. While cash advances can help any creator grow their resources quickly and grow their channel, it’s hard to bet on whether or not you’d be better off growing your business more slowly while retaining all your future advertising revenue.

Prior to founding Spotter, DeBevoise was an executive at Machinima, where he worked between 2006 and 2014, per LinkedIn. Once a powerhouse among YouTube gamers, Machinima shut down in 2019 and removed more than a decade of content from its channel, which hosted thousands of videos. Machinima operated as a multi-channel network, meaning creators would partner with the channel in exchange for their network’s exposure. Several former Machinima creators claim their contracts often had unclear end dates, locking naïve young YouTubers into long-term contracts.

“The outcome of Machinima’s closure showed me how important it is to provide creators with the resources and capital to grow and remain independent at all stages of the creator’s journey,” DeBevoise said. “I’ve seen with my own eyes how providing creators with enough capital has allowed them to go from creating as a hobby to creating full-time and it got me excited to accelerate even further. more of this movement. I also learned how important it is for creators to remain independent, both in their creative process and in business-level transformation.”

In a recent conversation about the creator economy as a whole, attorney Quinn Heraty told TechCrunch, “What a lot of these young creators don’t realize at first is that when you get a contract, this contract is written 100% for the benefit of the company giving it to you, not for your benefit.

DeBevoise’s new venture, Spotter, bills itself as a company that chooses “people over profits,” acting in the best interests of partners. But as more venture capitalists and VC-backed startups invest in the creator economy, it’s always a good idea for creators to make sure they understand what they’re into. undertake when they enter into an agreement.

Currently, Spotter only makes deals with creators it deems important enough to grow from their capital injection – right now, they want to see potential partners get around a million views per month.

“I don’t think we would ever make a deal that wasn’t mutually beneficial for everyone,” DeBevoise said.