Spotter raises $200M to invest $1 billion into YouTubers’ back catalogs

How do YouTubers make a living? Usually, through a mixture of merch sales, membership programs or maybe even a custom product. But YouTube ad revenue makes up a sizable chunk of the pie chart.

A YouTuber’s back catalog becomes a financial asset — every month, they know they’ll get a payout from ever-increasing engagement on their past content. Now, the Los Angeles-based startup Spotter wants to help creators scale their channels faster by offering them large sums of upfront cash in exchange for the 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 across its roster of clients — which also includes Dude Perfect, Aphmau, Smokin’ & Grillin’ wit AB and others — Spotter has licensed content that generates over 40 billion monthly watch-time minutes.

Today, the company announced that it raised another $200 million in Series D funding from SoftBank Vision Fund 2, valuing the startup at $1.7 billion. Before that, Spotter raised $555 million across three undisclosed funding rounds. Funders across 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 more popular among creator economy startups. It’s not dissimilar to venture capital investments — you give a promising company (or person) the money that they need to grow, assuming that eventually, you’ll recoup your investment and turn a sizable profit. Another creator-focused startup funded by Softbank Vision Fund 2, Jellysmack also just earmarked $500 million to license back catalogs on YouTube. Jellysmack’s licensing of back catalogs expires after five years, the same length of 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 creators’ back catalogs. So far, Spotter has done about 200 deals of this nature — some creators, like YouTube’s top U.S.-based creator MrBeast, have done multiple deals with Spotter over the years.

“Creators have done second and third deals with us, so it’s not a one-and-done type of situation,” Spotter founder and CEO Aaron DeBevoise said. “Six months later, they [do another deal] because they see the success of reinvesting in themselves.”

According to Spotter, MrBeast used his upfront cash to finance a Spanish-language channel, where his viral videos are dubbed to reach a Spanish-speaking audience. Spotter said that since they started working with MrBeast a few years ago, he has grown his viewership by over 300%, amounting 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’s metrics to make them an offer for their back catalog. DeBevoise said that engagement metrics are most important to Spotter, including how much time viewers spend watching a creator’s content and what percentage of a video viewers actually watch before dropping off. Spotter also considers metrics that the YouTube algorithm directly rewards, like the number of likes, shares and comments. Another consideration is the kind of content — Spotter won’t invest in YouTubers that make videos about news and politics, for example. 

Then, once a creator inks a deal with Spotter, the company will use those analytics to give them advice about growing their channel. This benefits Spotter as well, since more traffic on a creator’s channel could lead to more ad revenue from the back catalog that the company licensed — even better, the creator might want to license even more of their content to Spotter, which might perform even better than their past uploads.

“So that 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 those videos and the amount of money you make?” DeBevoise told TechCrunch. “So us helping them build the business and reinvest the capital is really critical.”

Spotter’s average size of a deal is around $1.5 million, yet some deals with smaller channels can be as low as $15,000. These payouts are not loans — Spotter provides upfront cash, which the creators don’t have to pay back. But in exchange for this fast capital, creators have to be willing to license their content to Spotter for five years. While Spotter won’t take copyright or intellectual property — that would be a huge red flag for creators — the company is buying ownership of any future ad revenue that the videos generate.

Spotter seems to be an interesting startup with spurring new development on online media. I’m certain this startup would keep on flourishing in its excursion ahead. My best wishes to the entire team of Spotter. This will give them a tremendous achievement in future.

Shishir Gupta, Founder and CEO, StartupLanes

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