The Exclusive Credit Card Made for Creators | Eric Wei

0:28All right, Marketing School listeners. ado, enjoy the episode. What is Carrot and where do you want to take it in the next 10 years? With my co-founder Will, we're building an entire financial system for creators. So everyone today makes money through content, including yourself. And it's not just, oh, I'm a YouTuber, I make videos. There are a lot of business people who realize the way to do marketing is by creating your own videos. Now, the issue is the whole financial ecosystem doesn't understand this business model. So we have a lot of creators, YouTubers who are making millions of dollars, they walk into a bank, they can't even get a business bank account or a business credit card.

1:05Or say that they do, but the limits are really low. We just talked a bit about Alexandra Botez, who's a top chess streamer and creator who makes over seven figures. She was rejected for a business credit card multiple times because they just had literally no idea what she's doing. So our vision is we build an ecosystem with bank accounts, credit, payments, everything around incorporating your business, running it, getting access to credit and mortgages. We make it easy for you because we understand what a normal bank doesn't. And you guys also, I mean, let's go with Alexandra Boutin. So when she was getting rejected, did she have millions and millions of subs already?

1:39Was she making good money already? Yeah, she already was doing really well financially. Another issue though, in the credit underwriting system today is you either have built up your FICO, your personal credit history, which doesn't actually care so much about how much money you're making or how much you've saved, or you have years of business history and the banks feel comfortable trusting you. If you don't have either one of those, which many creators and creative businesses don't have, you actually could be making seven figures and still not getting access to very basic credit cards. Got it.

2:12And so what are you hooking with? Because I remember reading about this. Maybe it was like TechCrunch or maybe it was something else, but it's like, yeah, one, the credit scores are broken. How are you guys redefining it? And what are you guys integrating with? The existing FICO credit scoring system, which, by the way, started off in the 1950s by these two dudes named Fair and Isaac. They made the Fair and Isaac's Corporation. That's what the acronym FICO actually came from initially. It's primarily based on how much debt have you taken out before and have you paid it back? Now, there are so many people who've never taken out debt.

2:48They've never taken credit out because they didn't know that they should. They were worried about it. If you're following Dave Ramsey, right? You're like, oh, I don't want to even touch that stuff. When in reality, having a little bit of leverage can actually really help your business. So a much smarter way to underwrite is by looking at, well, how is your business doing? How much are you making? How much are you spending? How much do you have on hand? And there's been a few different companies in addition to ourselves that are looking more at essentially cashflow-based underwriting. And then what we do is we add a layer on top of that where we also look at what's the leading indicator to your cash flow as a social media business, it's your socials.

3:22So we do look at, hey, if you're a YouTuber, how many subscribers do you have? What's your engagement? How many videos are you putting out and so forth? Got it. And so I want to come back to the business, but there's some interesting things you guys are doing from like a distribution standpoint. So you guys have a carrot podcast where you're bringing creators on. So what is the strategy right now beyond the podcast? What does the marketing stack look like? So whenever you're building a fintech business, which essentially is the business of storing or moving money around for somebody, there's always three things you have to think about.

3:54The first one is acquisition. How are you getting your customers? The second is underwriting. How well are you pricing them? And the third is what's your cost of capital? How cheaply can you get the money needed to lend out or float payments? Now, a lot of people tend to focus on the cost of capital or the underwriting model, but people often forget acquisition is still by far the most important thing. And you might have noticed over the past couple of years, there's been so many vertically focused financial technology plays. So for example, Brex and Ramp started with venture-backed startups, or Nova Credit started with immigrants.

4:27You also have Step started with teenagers. The realization is if you vertically focus on a specific market, you not only might win, for example, in underwriting, because you understand that population better than anyone else, you win from an acquisition POV because you become the default choice for them to, hey, maybe get their first bank account or get their first credit card. And then you cross sell them on all the other needs that they might have. Now for ourselves, we're focused on creators. So we're in a unique spot where if we do a good job serving our clients, they should share us naturally because that's their job.

4:59So we don't do paid influencer activations. We focus on what are the things we can do that make your life so delightful that you want to share it. Now, you've mentioned podcasts. That's one great example. We run a podcast where we talk to creators and have them highlight the personal sides of their journeys because business and personal go together. They want to reshare those clips because they're really good. We feature creators on billboards, which they'll go fly out and take a photo of it because it highlights them as legitimate people and celebrities, will go and send creators very custom cool cards because it, again, becomes something to flex and show off.

5:36So that's how we think about getting that organic marketing in place. And what kind of outcomes have you seen from doing this podcast, for example? I think the number one piece is trust, especially with helping build financial products for creators, we're not really focused on, hey, are we the best card or bank account for you relative to a competitor? We're focused on, are you aware why you need to care about these things in the first place? We work with so many creators who don't even know why they should have a credit card or that they should even be paying taxes. like i've met creators i have years of back taxes and they're like oh yeah like the irs is like freezing my bank accounts like is this an issue because they're so focused on the content side and so the main task there is actually just to bring them in the door and say hey from somebody you trust you should care about this so what's really good about the podcast is when you see me do a podcast for example with graham stefan who not only is a client of ours but also an angel investor you see in this very tangible visceral way oh like graham cares enough to come onto this pod with eric from carrot and if graham cares maybe i should care and maybe that becomes the first stepping stone to hey maybe as a creator i do need to care about my financials and i'm going to care about them maybe care is a good option got it and how i mean i think like i feel like the flywheel has been building for a while and then you know these larger creators are telling these other ones, but how did you get like the first big creator?

7:08I think you DM somebody, right? It was hard. Yeah. It was really hard. So my background, everyone assumes I used to work at Instagram. I helped build Instagram live. People think, oh, you used to work at Instagram. It's so easy for you to get on your initial creators because you must have known them already. They forget when you work at a corporation, we are all hogs in the machine. And even though I was a product manager, I was so many layers removed from actually talking to creators that's one of the reasons why i quit i was like my job is to help creators and businesses and if i want to just talk to one i have to go to my product marketing manager to my community person to my research person because everyone's so specialized and i'm like i just want to go to vidcon directly and talk with them one-on-one and i wasn't able to so when we started carrot we said okay we want to help creators with their finances and business and i didn't really have many contacts from my work at Instagram because it was so siloed out.

8:03So to your point, a lot of it was initially just cold DMing, cold messaging, cold hustling. For instance, one of our very first clients was ZHC, who is a top creator, focused on art, and he has, I think, over 20 million subscribers. When he joined Carrot, there were actually three different avenues that I was in contact with him. So the first one, I'd followed his content. I had been cold emailing him for a while. and the second was through a former colleague at McKinsey. She introduced me to an angel, who introduced me to another angel, who introduced me to a talent manager. So it's like three layers removed that five months from me meeting him, ended up becoming the talent manager for ZHC.

8:50So path number one, I was cold emailing ZHC. path number two i had gone to this talent manager that zhc ended up signing with and number three the ceo of the talent agency that the agent had just joined that the creator had just signed with i had met him at vid summit i didn't even have a badge this was like in 2019 i just walked in nobody noticed just found him approached him cold followed up and met him in texas a few months later and just got to know him and so through three different avenues i've been emailing the creator been emailing his agent had been emailing the ceo of the agency there's enough credibility where when he actually had the need because he didn't have high enough limits on his credit card just to support the working capital of his channel because everything he made from one video he'd put into the next and if you don't have high limits it actually slows down the rate of production it was like oh eric from carrot might be helpful and i jumped on a call and i personally walked him through all of it and they were like yeah this makes sense that they've been clients for years now kind of it's almost like you're building this i don't know what you guys call yourself but but it seems like a financial ecosystem for creators.

9:52Yeah, we want to be your first business credit card. We want to be the people who help you set up your bank account to incorporate, to do your taxes. And to your previous question, it all starts initially just by being a human being who's going out and meeting them. And that's how you start the flywheel, where then you work with them and naturally work with them produces content and referrals that bring in other people. How many creators do you have on your cap table? I think through the creators directly, or some of them have invested as part of the agencies they're in, like over 70. Wow. Okay.

10:22That's a lot. And it's across like every different type of creator, right? In the Twitch space, we have like Ludwig, Moist Critical, Alex Botez. In the finance space, we have Graham Stephan, Nate O 'Brien, Charlie Chang. In the travel space, we have Sam Colder. In the food space, we have Nick DiGiovanni. It's really kind of like a who's who of folks who we were very upfront with them. In building a venture-backed business, it is extremely risky. Like, yes, there's the chance that we become a multi-billion dollar company, but it's low. And we bring in creators who are like, look, if you're in a state where for you, the reward is more interesting than the risk, and you're aware that this might not turn out well for you financially, but you still want to come along for the journey and support us, brilliant.

11:04We'd love to have you come in with a very small check. Got it. Love that. And small check, I'm assuming like anywhere from 25 to 250. Ideally, even less. Okay. Because from our perspective, the majority of the round has already been filled by venture capitalists who have funds of millions, billions of dollars that they're deploying from their LPs. When we're bringing in angels, the money isn't actually valuable. It's the expertise, the relationship. And then especially with creators, we want to keep them out as small as possible because we know it's risky and we never want to imperil the relationship if it doesn't work out.

11:40So from my perspective, I'm trying to bring on people for the smallest check possible that still builds that relationship So I mean with your business you have a ton of data I guess i'm trying to figure out everything's pattern recognition, right? So what kind of patterns what kind of interesting data can you share in terms of creator behavior? Yeah, so first you're right. We're actually a data play A lot of people don't realize that they ask us. How do you make money? For example on our credit card? We don't charge fees and people are like well, what's the catch? The catch is number one I'm getting your financial and social data and using that to build an underwriting model and number two with that data and underwriting model I believe I'm going to be able to develop other financial products that I can cross sell to you because you're already using my first product so first like good insight a lot of people don't actually realize that second so there's like a few I'd say for instance the most trustworthy creators are the ones that are supported not by brand deals, which are very spiky, but by a direct connection to their community via things like Twitch, where there's like a monthly subscription or Patreon or like their own email list where they've set up their own paywalls.

12:51Those creators by far are the most stable and secure because you're not dependent on a platform, right? Like for AdSense where the algorithm could, oh, I don't know, maybe it helps you, maybe it doesn't. You're not dependent on, as I said, brand deals, which really some months you might be making like six figures and some months you might be making almost none. It's almost SaaS-like, where you have a constant base of essentially clients who are paying you every month on a recurring basis. By far, those are the easiest and most secure creators to underwrite. I think the second thing that we've learned is you have to learn to underwrite creators who you actually aren't necessarily sure are good for it.

13:31Because think about building an underwriting model. If you only underwrite the people who you assume are amazing, you're simply hard coding your own assumptions. You're not learning. You have to underwrite the people you're not certain about to get an advantage and get those learnings before anybody else on, look, maybe people might not think they're good for it, but they actually are. Right now you have everyone on Twitter is like, you got to create a newsletter. You got to create a newsletter. It's like what's old is new again, right? Are you seeing that? I mean, I think some creators are actually doing that now.

13:59What are you seeing? Yeah, 100%. that every creator is thinking, how do I build deeper engagement with my community that can eventually turn to monetization? For example, Shoreform, TikTok, YouTube shorts, Instagram reels have taken over a lot of creators focus over these past couple of years. And they're so hard to monetize because you don't even form a connection to the creator. You just form a connection to like, here's this like very fungible five second clip of media that I'm going swipe through and maybe if i see it 5 000 times i'll start to like give a shit about the creator who's making it but if you stay focused on that upper funnel it's like from business pov that's just leads you're not doing anything with it if you're able to get a creator to sign up for your newsletter or for your course that's like the nearest part of the that's the bottom part of the funnel where you can actually monetize and support yourself with it and so yeah we're seeing tons of people start newsletters what's really hard a lot of creators are realizing though that they've never really built the engagement they needed to do that i talked with a creator the other day who routinely gets over 10 20 million views per short posted and his business he said every time he goes out for a brand deal he doesn't feel like he has a business he feels like he's playing the lottery yeah like am i gonna find a brand who wants to come in are they gonna want to pay me enough are they gonna be happy with the creative i make and here's the scary part he wants to move away from that and figure out things more tied to him beyond the 15 second clips he's putting out.

15:29But if he experiments with anything new, it's going to hurt his average view rate, which is going to hurt him when he goes out to brand saying, sure, I'm going to charge you this much, but look at what I historically get. And so you have to almost be willing as a creator, if you're trapped in this, oh, I'm just dependent on brand deals, you have to be willing to experiment with new formats that in the short term might actually hurt your metrics, but long term might build some of that deeper engagement so you can monetize from your followers more directly. And what would be like an example of some of these new tests?

16:00I think a really great instance, I went to a workshop hosted by Sam and Colby, maybe six, seven months ago. That wasn't the Vegas one, was it? It was the Vegas one, actually. Oh, yeah, that's why you're on the plane. Oh, beautiful, yeah, when we were coming out from JSX. Yeah, and I remember one of the things they did. So for those of you who don't know, Sam and Colby, they're absolutely brilliant creators. They produce primarily long-form horror documentaries. It's like over an hour, you go onto YouTube, there's probably a haunted house, super deep engagement, a huge portion of their business is actually their merchandise, their apparel, because people care about them so much and they wear it.

16:30They started off as essentially pranksters on Vine. So the whole life cycle I just described on starting off with people not caring about you, how did they evolve? They said they followed, I remember this three to one rule, where when you're introducing new content, ideally if the type that builds a deeper connection, because it's more about you than just like, here's a prank. Initially, for every three pieces of old content you're putting out, introduce one new piece of new content. Because you have to make the shift really gradual. Because in the beginning, that new content, it's going to do worse.

17:01But it's worth it. Because metrics only matter as imperfect measures of what you're trying to really move. If you're trying to move your audience value, even if it's getting fewer views, those views might be more engaged, more deeply connected. And over time, you shift that ratio from three old pieces to one new piece to 50 50 to eventually one to three one old three new and eventually you've shifted over to just entirely new content and this can take years but if you do it right you'll see sam and colby people don't even necessarily remember they started off as vine pranksters because of how well they've done in making that transition this very deeply engaged content very strategic and how they it's almost like a also like a tactical evolution yeah over time you didn't just rip the band-aid off no because then people are going to be like this is entirely different than i was following you for you see a lot of tiktokers they'll make the mistake they'll have their tiktok clips and then they'll go and like start youtube and they're like well i get like millions of views on my clips and i'm getting like 100 views on my podcast or my long video because it's so different yeah never never occurred to me that that that is what happened yeah yeah when i first started my business the overwhelm was real i didn't have the tools to help me scale if only i had shopify from the start to handle all the behind the scenes work.

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20:00Ready to build a site that looks hand-coded without hiring a developer, launch your site for free at framer.com and use code MS to get your first month of pro on the house. That's framer.com, promo code MS, framer.com, promo code MS. Rules and restrictions may apply. Okay. Who do you think is doing it really well in the creator space? I was actually watching a little Emma Chamberlain piece with Colin and Samir. She seems like she's really evolved, right? Because the reason I'm asking this is it seems like most creators fall flat when it comes to making money. They just, not only do not pay taxes, they also don't really know how to monetize yeah i think there's actually two three interesting points when we dig into it so i think number one to what we just said around the evolution emma's a great example once upon a time she's putting videos out like gosh every week for years and it was the classic youtubey like all capital letters like somewhat clickbait and over the past year or two she drastically decreased the amount of videos she was putting out i think this year so far she's been like three or for and they started just to be really simple subjects and titles.

21:03It'd be like soup. Like that would be the whole title. And like you tune in on her and she's just making soup because from the evolution POV, you need to adapt and you want to avoid burnout, putting out the constant more clickbaity stuff. It wasn't fulfilling her anymore. And she had built up enough familiarity with the audience. She's able to do a much slower, more informal vibe. And it was totally OK. And this actually leads to another point. You mentioned a bit about a lot of creators aren't able to monetize. And I think the way you monetize has to be really different depending on the type of creator you are.

21:38Emma, for example, has said in an interview to the New York Times, she considers herself the opposite of Mr. Beast. Because Mr. Beast, when he's on YouTube, he's thinking about how do I build a business? Whereas Emma described herself as, I'm thinking through YouTube as an artistic canvas. There are creators who are like her who view it very much as art. maybe they want to go into Hollywood, maybe they purely want to express themselves. There are creators who are very much in that VidSummit mold of, I'm putting out these videos, let's optimize the heck out of these thumbnails and retention because I need to make money.

22:10How you make money really varies depending on your mindset. Those VidSummit creators, they are very adsense driven because they are so good at optimizing and just putting out content. They make so much money just from getting views. And yes, obviously, brand deals are clear natural follow-on but then you like go one further degree it's like oh i guess like they could do merch they could do their own courses like they should just focus on adsense you're so good at like putting this out like why try and stray just be really good at it someone like emma creators who want to follow that path like you you can't be adsense optimized because the whole point is you have this artistic impulse you want to follow that doesn't dictate let me put out x videos per x days you have to go really hard on building a super deep connection i can monetize through other ways.

22:58Like maybe it's brand deals, maybe it's launching your own things. And so I think a lot of creators, they're not thinking deeply through the ways I monetize have to be really different depending on the type of creator I am. And then whatever efforts they try, it doesn't work. Like I've seen TikTokers who try to launch merch lines and they can't sell anything because that's not a monetization format that's really conducive to how they've grown their following. And what do you think is like an underrated monetization channel for creators right now? Well, one thing I'm really excited about are when there's a blurring of lines between are you a creator who's now monetizing through your own products and merch?

23:39Or are you just a business that's advertising through content? So what I mean by that, I'll give you a couple examples. I'm good friends with this group that produces this drink called Nectar. It's like an Asian hard seltzer that competes with White Claw. And they also produce a podcast called Under the Influence that's hugely successful to the point where many people, they don't realize the podcast was started originally because the seltzer company couldn't run ads because it's alcoholic. And this is the kind of marketing they developed. People think the YouTube channel started first and I'll like, I guess here's the seltzer that they promote in conjunction with it.

24:18The founder, Jeremy, Jeremy Kim is not only CEO, he's also talent on camera. And they are one of the fastest growing brands in this space right now. And they've parlayed their online presence and distribution to getting in shelf distribution at all of these stores that normally would take years to decide whether to give this new seltzer brand space. And I think that's a great example of, well, are they a YouTube channel that promotes a seltzer? Are they a seltzer channel that promotes content? It's all the same. From the start, the new generation of entrepreneurs are going to be thinking about how can I build this in conjunction with content from day one?

24:55I think that's what I'm really, really excited about.