Greetings fellow theorists — this one’s an exploratory take on a new creator economy model — the creator-operator partnership — that I expect to be one of the next big things.
The creator economy has created more value than it has captured. Many creators have figured out how to make compelling content, build a loyal audience, and build a strong brand. They’ve converted some of this value into growth on more attention-building platforms, earning ad revenue and short-term partnerships.
But few have capitalized on this to build a sustainable, scalable business. To do this, creators have to commercialize themselves, to create products and services that embody their spirit yet also have standalone value to users. Creators might be a few steps ahead, but to really capture value, they have to start a startup too.
They can go it alone, as some have, or they can partner with people who’ve been in and around the world of startups, maybe even built successful ones themselves. I’m bullish on these kinds of partnerships — creator-operator partnerships — but the playbook for them is still being written. In this essay I explore these emerging partnerships through one lens — the creator-operator partnership.
The search
How do people find valuable people or assets to invest in — with time, money, or both?
A business builder with experience may be able to leverage skills to recruit creators to work either them. They could also run a more structured process. One historical model is the “search fund.” The point of a search fund is to find, buy, run, and grow an existing business.
Traditionally, “searchers” raise funds from investors to pay their salaries while they search and to help finance a target company’s acquisition; they can also be self-funded. It’s a semi-entrepreneurial path that originated at Stanford in the 1980s and is still pursued dominantly by MBA-types today.
The model isn’t prescriptive on the type or size of business, but as a single searcher with limited funds, “small” businesses are the natural target. The biggest appeal is getting to be an entrepreneur without starting from scratch. The “search” and “deal” phases tend to last a few months to 2-3 years.
I’ll preface the rest of this piece by saying that I’m a search fund novice; I’ve never done one myself, though I have seen former classmates do it. I’m thinking about this more from the lens of early-stage startups and creator worlds and what the next wave of unique models might be. (P.S. If you’re not familiar with search funds, I simply recommend starting with wikipedia and this recent post by Adam Keesling.)
The creator search
I see a potentially new kind of search model — akin to a creator search fund. In this model, the “searcher” is searching for a creator to invest in working with. Unlike an investor, they want to be a day-to-day operating partner. The creator has done the early work of building distribution and a brand; you want to help build out a commerce strategy — to develop, launch, and grow a line of products or services.
Why and why now?
I see opportunity on two sides. For one, there are an increasing number of skilled creators who have succeeded at the attention and distribution game, but aren’t yet skilled at turning that into successful product and services businesses.
At the same time, there are skilled business operators with a mix of startup, product, and go-to-market experience that may struggle to cross the zero-to-one hurdle without an existing brand or audience.
Is this even a “search fund?”
There are two main differences between a traditional search fund and the creator search fund. The goal of the first is to buy a company outright and the goal of the second is to commercialize a creator, i.e. partner to bring new products to market.
The traditional search fund aims to buy 100% of an existing, self-sustaining business, i.e. one that has a stable operation with revenue and profit. The creator search fund is aimed at joining the mission and team of an existing entity too, but then building out a new product or services business to run. So in a sense, the creator search fund sits in between traditional entrepreneurship and search funds.
The other difference is in the “fund” part. The portion of funds used for salary or expenses during “search” can be the same in both models. However, the funding to invest in the business itself will differ. In a traditional search fund model, money is raised to buy the existing company. In a creator search fund, money may be raised to invest in the new product or services line, i.e. more like raising a financing round for a startup.
Do we really need more “business guys?”
It’s easy to squint and see this model as another way for a “business co-founder” to find a kind of “technical co-founder.” Generally when we talk of the technical person, it’s a software engineer, the person who will build the software product.
Investors seem to tell technical founders that they don’t need a business co-founder far more often than the other way around. There’s likely a pattern that informs this advice, and surely it’s smart not to work with people that might extract more value than they add, as is often the implication.
One observation I’ll throw out about the aspiring creator-operator partnership: it’s less clear who the “technical” co-founder is. Is the creator who’s learned the skill of audience and brand building the technical one, or is it the person who knows how to build a business around a new product or service? The more experienced the business operator is, the more their value will be a no-brainer for creators.
The five phases of the creator search (fund)
Now getting into the tactical stuff — from the perspective of the “searcher” I see essentially five phases:
1) Fund the search
How much do you need to complete the search? If you’re looking to self-fund, this is an optional first step. Either way, you may only need $100K - $250K. If you want to raise, the best bet is to pitch angel investors that care about the relevant sector or early-stage VC funds & niche LP bases with an appetite for experimenting with new investment types. Investors see the value of creator and content businesses, but they’re not sure how to break into the ecosystem; you can offer them a way.
2) Search for a creator partner
Who do you want to work with? The closest analogy to building a startup from scratch is finding your co-founder. In this case, the “searcher” is looking for a creator as a co-founder, one with some traction and in a niche that resonates.
The creator ideally has 1) a clear niche for which they would build relevant products and services 2) an engaged audience that is the would-be buyer or user and 3) a deep interest in building a non-content business.
The more experienced or high-profile the creator, the more experienced and connected the searcher should ideally be too (the less aligned this is, the less favorable the partnership and ownership split is likely to be).
3) Align on a commercial strategy
What do you want to build? The startup analogy here is finding founder-market fit. What products and or services would align most with the creator’s niche, audience, and brand? What would the searcher, i.e. future operating partner, be equally excited to focus on and able to execute on well? Focus on relevance to the creator’s audience, collective team skills, and the available market opportunity.
4) Define roles & ownership
What’s the deal? What roles will each person play and what responsibilities will they have? How do you assess fit before formalizing a relationship (e.g. a work trial or conditional agreement)? What is the ownership split, and what is included in this (e.g. one product versus all future products in a given category)?
In practice, each partnership will be unique based on relative skillset, experience level, and negotiating power of the creator and operating partner.
With that said, this is how I’d define the expected “final role” of the searcher:
The role: I see the operating partner role as a mix of a co-founder, COO (chief operating officer), and GM (general manager) that’s responsible for the creator’s commercial portfolio (i.e. products and services, not content).
Tactically, this will include duties like raising money / figuring out financing, hiring a team, overseeing production of the product or service, leading go-to-market efforts, and managing and growing the portfolio of products once launched. In essence, the operating partner is the CEO of the product portfolio, but akin to a COO for the creator as an overarching entity.
The role is not one of an agent, talent manager, or business manager for the creative side (e.g. creator’s youtube channel, brand partnerships, media opportunities). It’s also not that of a financing partner (e.g. helping raise money for their projects without co-owning or operating) or investing partner either (e.g. helping the creator invest in others’ products and companies).
The ownership split: The greater the asymmetry in the perceived value-add, the more ownership the creator will negotiate to retain. I’d expect them to want majority control and to give their team a minority share too. Hence I’d expect the equity opportunity for the operating partner to be between 20% and 50%.
If the power, expertise, or distribution asymmetry is less pronounced (or the creator won’t be putting in all that much time or resources) you could see this split flipped. This looks more like a minority equity partnership, where the creator is far more central than just a spokesperson, and carries the entire brand and distribution.
Another non-obvious asymmetry is that the operating partner will spend more time day-to-day on the commercial businesses than will the creator, though the creator’s other work adds value by maintaining and growing the brand and audience for the products in development.1
5) Build.
Once you co-found or jointly own an entity for these products, sign the owners’ agreement, maybe raise some money or decide to bootstrap, it’s time to build. This is arguably the hardest part, and there’s no doubt lots to learn on how best to navigate this (but I’ll reserve this for a potential future post).
The relevant examples
We already see some of this behavior happening in niches of each attention industry and in finance, both in early-stage with VCs and later stage too. Importantly, I’m focused on creator-operator partnerships that are closer to equal partnerships and building something new. This is in contrast to partnerships between creators and existing brands that are primarily marketing relationships.
The traditional search fund model
There are lots of examples of this that you can find online, so I’ll just mention one — the story of Sarah Moore buying Eggcartons.com, a specialty packaging business doing $20M in revenue at the time of her search. She spent one year evaluating over 20K businesses and ultimately bought it without utilizing debt (this story has been extensively hailed by Shaan Puri). It’s worth nothing that this isn’t the typical search fund financing process or outcome, but is aspirational.
While these next few examples aren’t formally rooted in a “search fund,” they have very similar motivations and ultimate outcomes.
The industry expert partnership
One example from within a consumer sector is Jens and Emma Grede’s relationship to the Kardashians’ commercial enterprises. They’re co-owners and operating partners of Khloe Kardashian’s denim brand, Good American, and Kim Kardashian’s shapewear brand, Skims. The Gredes started as successful marketers turned entrepreneurs, who then scaled their talent with celebrities.
This is unsurprisingly on the “higher end” in terms of celebrity and scale of business. It’s interesting to see the ownership splits too. From what’s publicly known: “Ms. Kardashian remains the company’s single biggest shareholder [at 35%], and together she and Mr. Grede still own a majority stake.” Emma Grede is CEO of Good American, owning 23%, and CPO of Skims, owning 8%.
For high-profile creators, there are often many kinds of people and organizations courting them for business partnerships. Sometimes an expert operator will be brought into a creator’s business full-time; other times specialized firms, holding companies, or agencies will offer to handle the entire product development and distribution process. We’ll see this more and more in all consumer industries.
The startup operator partnership
An example closer to Silicon Valley was David Dobrik’s photo-sharing app Dispo (now post a rise and fall related to Dobrik’s marred reputation). The product was conceived by Dobrik, who then hired on a founder CEO and operating partner in Daniel Liss to help run the software startup playbook — raise capital, hire a team, build out the product and launch it to the world.
There ownership structure isn’t publicly reported but from what I’ve gathered it was roughly a 60-30-10 split (60% for Dobrik, 30% for Liss, and 10% for Dobrik’s manager).2 I’d argue that at the time Liss was neither a beginner nor an expert in startups and social apps yet clearly savvy and capable. The split is a reflection of perceived value and real negotiating power on each side.
The brand ambassador partnership
Roger Federer’s partnership with On, a Swedish running shoe company, is another interesting case study. He reportedly owns ~3% of the company, an equity stake negotiated after the brand had already seen success. There’s a spectrum from creators simply creating sponsored content to being formal brand spokespersons or ambassadors to being “angel investors” to being more fully bought in with meaningful equity stakes.
The venture capital partnership
Another model from the startup finance side is Slow Ventures investing in creators. On average they try to take a 5-10% equity stake in effectively all of a creator’s future endeavors in exchange for $500K-$2M in funding (and offer non-financial support that VCs would give a traditional founder too).3
One deal they’ve struck looks like this: “In exchange for $1.7 million in capital, she will give the venture firm 5% of her earnings for 30 years — plus, they keep that 5% stake in any IP she develops within those three decades.” Another recent deal involves a “booktube” influencer interested in building a “Goodreads killer.”
This is of course a financing model and not an operating partnership. And putting aside any questions about the ethical merits of effectively buying the rights to a person’s future earnings rather than those of a business, I do think this model rightly so underscores the commercial potential of creators.
What happens next
The concept of the “creator search” is one way to think about the end-to-end process of forming these creator-operator partnerships.
Ultimately though the bet is on the potential for creators to commercialize themselves via smart products and services. In the Silicon Valley world, we’ve talked a lot about the creator economy as products for creators, but maybe the more interesting part is products by creators.
We’ve seen how creators create value, but the playbook for capturing some of that value for themselves financially is still nascent. I’m bullish on partnerships between startup operators and creators (both established and emerging), and I expect we’ll see many more in the coming years. That said, how exactly these partnerships will shape up, how they’ll standardize, and how many will succeed remains to be seen.
While many of the creator-focused examples I described above are in what I’d call the “high-end” of the creator market, I believe the principles can be scaled down to the “emerging markets” of creators too. In fact, the earlier in the lifecycle of a creator you go, the more arbitrage opportunity there is to spot future value that others may not — much like joining or investing in a startup in the early-stage.
If you enjoyed this essay consider sharing it with a friend or community that may too, or on socials. 🙏
Interestingly, there’s a parallel I could draw to how practicing medical doctors are often brought in as CMO (Chief Medical Officer) for healthtech startups, with their role ranging from an advisor to a part-time operator to a full-time operating partner, and the ownerships splits determined accordingly.
The equity split for the core team at Dispo isn’t publicly written about, so this was an estimate I gathered (with promised anonymity) from someone close to the team. I’m by no means a journalist so I welcome being corrected or redirected if it’s inaccurate.
If this is an interesting topic whether from the financing or operating side, I might recommend reading more about what Slow’s team is up to or just reaching out to them.
loved this, so intriguing ❤️
I like this model. It's more collaborative in nature than most.
I've been playing around with the idea of building economies around creator instead of businesses.
Basically, open up participation in a shared economy that everyone works to keep maintaining. Reduces the work load a ton vs focusing on competitive edge.
The networks need some small adjustments to fully allow these to occur, but I'll have a working model soon to demonstrate the principles.