Two years ago, startups were really the bread and butter of the so-called “creator economy.” You could barely move between all the bright, innovative new businesses — and they were worth a lot of money, too.
In 2022, for instance, eight U.S. startups alone raised a combined total of over $1.38 billion. But it’s fair to say that they’ve had something of a fall from grace since, as data from The Information’s Creator Economy database, which tracks funding for over 525 global creator economy startups, suggests that funding for those startups experienced a downturn in 2023.
The Information reported that funding fell in value by 58% compared to the preceding year to about $1.7 billion total, while funding for U.S. startups alone fell by even more, by 62%. The number of mergers for start-ups has also doubled compared to the year prior, while twice the number of startups shut down in 2023 in comparison to 2022.
The reason why this is happening is threefold, according to The Information’s Kaya Yurieff. First off, the venture capital that funds these types of start-ups is starting to “dry up” because of the “high-rate environment,” aka high-interest rate environment in 2023. Secondly, these businesses are simply struggling to find enough paying customers. Thirdly, investors fell out of love with creator economy startups and started paying attention to a shiny new toy: artificial intelligence.
Despite all our complaints about AI, investors couldn’t get enough of it this year. AI creator economy startups ended up raising more than $324 million, according to The Information, which was the largest share of funding among all the startups.
The Information is not the only outlet to track this downward spiral. According to data compiled by Pitchbook, the funding for North American creator economy startups in the first three quarters of 2023 fell 48% percent compared to the same financial period in 2022.
It’s worth noting that overall, funding for startups by venture capitalists this year decreased dramatically, even outside of the creator economy. Business analytics company CB Insights, for example, reported that total venture funding was at its lowest level since 2020 in 2023.
And overall, the creator economic ecosystem still appears to be doing fairly well, with Insider Intelligence reporting that influencer marketing budgets are currently growing at a double-digit pace, expected to approach over $7 billion by 2024.
As we approach 2024, the creator economy, and in particular its obsession with AI, shows no signs of slowing down. But as time has shown, venture capitalist hype and interest are never for keeps.