The booming creator economy has caught the attention of Goldman Sachs, which estimates its total addressable market to be a staggering $250 billion today. Despite its scale and success, many creators face challenges when it comes to managing their finances, obtaining mortgages, and building personal credit. Banks often view freelance work as inconsistent income, leaving social media stars struggling to access financial services. This is where Karat Financial comes in, aiming to help creators gain control of their finances.
Co-founders Eric Wei and Will Kim identified the problem while working with creators during Wei’s tenure as a product manager at Instagram. They observed how even creators making millions of dollars on platforms like YouTube could be treated poorly by traditional banks when seeking financial assistance.
Karat Financial Raises $70 Million to Empower Social Media Creators Financially
On July 19, Karat Financial announced securing $70 million in fresh funding, with a $40 million Series B equity round led by SignalFire and $30 million in debt financing from TriplePoint Capital. The funding also included investments from celebrities and influencers like Will Smith’s Dreamers VC, Ludwig Ahgren (video game streamer), and Nick DiGiovanni (YouTube chef). The total funding raised by Karat now exceeds $100 million, with previous investors including creator Josh Richards, YouTube co-founder Steve Chen, and Twitch co-founder Kevin Lin.
Karat Financial, based in Los Angeles and founded in 2019, offers credit card and banking services tailored to creators who sell products or services through social media. Instead of relying on traditional credit scores, Karat evaluates a creator’s social clout by considering factors like their following on platforms like Instagram, YouTube, and Twitch. This unique approach allows them to offer lines of credit that traditional banks often overlook.
The company has announced a new bank card in partnership with Visa, designed to help creators establish a personal credit history, in addition to its current product, a business credit card. With the new round of funding, Karat plans to expand its team and product offerings, positioning itself as the go-to financial solution for creators.
Karat envisions a future where it caters not only to creators but also to artists, freelancers, and creatives beyond the confines of the social media world. Their goal is to streamline financial services, offering a comprehensive solution to the scattered financial landscape these individuals often face.
The company has witnessed impressive growth since its $4.6 million Series A funding in 2021, with its customer base increasing fivefold. The creator cardholders alone boast a combined following of over 1 billion social media users. The founders are confident that Karat is on the path to becoming an integral player in the evolving creator economy, eventually expanding its influence beyond this niche to cater to a broader spectrum of artists and freelancers in various industries. As Wei states, “It’s just going to be the economy, period.”