Content Creators: Should You Look for Investors?

Content Creators & Investors 

For content creators, whether on YouTube, social media, or other platforms, the question arises: should they look for investors? It’s important to understand that investors are essentially owners of the business. When someone invests in your company, they become stakeholders with a certain percentage of ownership. In the case of an LLC, they are considered members or owners, while in a corporation, they are shareholders.

Investors, by definition, hold an ownership interest in the business, which often comes with voting power, the right to veto decisions, and access to financial and operational information. Essentially, when a content creator brings on an investor, they are entering into a partnership where the investor has a say in the direction of the company.

However, many creators value their independence and the ability to pursue their creative ideas without second-guessing. In most cases, creators are better off bootstrapping their businesses, meaning they fund it themselves, unless there is an exceptional opportunity that requires an investor’s involvement.

Example

Let’s consider a scenario where a YouTube channel has gained significant success, and the creator wants to launch a product line. In such cases, it may be advisable for the creator to create a separate business for the product line while maintaining ownership of the YouTube channel. However, an investor might insist on including the YouTube channel as part of the deal, seeking intellectual property rights.

Impact to Consider

Creators need to carefully evaluate whether they are willing to give up intellectual property rights to their channels in exchange for financial support and opportunities. The arrangement can be structured in various ways, often delineating the creator’s established intellectual property rights separately from the investor’s focus.

Investor funding is often used to hire a manager and expand the business. An agreement is typically reached between the corporation and the creator, specifying the creator’s ongoing role in promoting the corporation’s merchandise, services, or products. Revenue generated from these activities flows into the corporation, covering its expenses. Any profits are then divided between the investor and the creator based on their ownership percentage or the agreed terms.

Conclusion

In conclusion, content creators should carefully consider whether seeking investors aligns with their goals and independence. While some situations may warrant investor involvement, preserving intellectual property and maintaining control over one’s creative endeavors should be a priority. If you’re interested in learning more about avoiding legal problems in business, consider subscribing to this channel for future educational videos.

Video Transcript

Introduction

Should creators look for investors? YouTube creators, content creators, social media creators, maybe you have a TikTok account. Whatever it is, if you are a creator online, or maybe even you’re creating some sort of products or clothing attire or something like that, should you look for investors?

What Are Investors?

When you have investors, they are owners. So, investors is just another word for owners. When somebody invests in your company, you need to figure out which category are they.

So, if you have an LLC, they’re going to be members or owners with a percentage of ownership. If investors are investing in a corporation, they’re shareholders. Now, I suppose you could say somebody’s investing in you if they’re lending you money, but if that’s the case, we would call them a lender, not an investor.

Investor usually means they have an ownership interest in the business. And what comes with that ownership interest? Usually, it’s voting power. It’s a right to veto things. It’s a person who now has a right to financial information about the company and other information about how the company’s doing.

So, essentially when you are bringing on an investor as a creator, you are bringing on a partner, a business partner. And that doesn’t mean somebody who’s going to contribute more than, say, money, but it does mean they’ll have all sorts of ownership rights in your company and will have a say in what you’re doing.

Often, creators are interested in their business because they built it by themselves, they like that independence, they love the creative independence, the ability to pursue the latest idea they have, and they’re not really interested in having some investor second guessing what they’re doing.

I generally think creators are best if they can bootstrap this, which means fund their business themselves, unless there is an extraordinary opportunity that is they are not able to leverage without an investor.

So say, for example, the creator’s YouTube channel is just doing great, and they now want to create a product line. Usually, what I would do in that scenario is I’d advise the creator to create a business around the product line but still preserve the YouTube channel as their own property. Now, the investor might say, “No, I want that YouTube channel in the company because I want to have intellectual property rights in the YouTube channel.” Then the creator needs to decide. Are you willing to give up the intellectual property rights to your channel in exchange for this money and opportunity? It can be done all different ways, but usually, we are parsing out the intellectual property rights that the creator has established, and that is separate from what the investor is coming in and focused on.

What Are Other Considerations?

Often the investor’s money will be used to hire a manager of the business and grow out a portion of the business, and there will be an agreement between that company, we’ll call it a corporation, and the creator, regarding what the creator is going to continue to do to support the corporation. Usually, what that means is bringing attention to the merch, the products, the services, the merchandise available at the corporation. And so it might say, for a period of time, there are going to be promotions and mentions by the creator about the merchandise available for sale at the corporation. And then what happens is all the revenue from the, the merchandise goes into that corporation. It covers the expense of the corporation, and then to the extent that corporation has profits, those profits are divided between the investor and the creator, depending on what the ownership percentage is, or what the agreement is between the creator and the investor.

So, the one thing I really caution creators about is giving away to an investor the intellectual property that you have spent years building. Because as a creator, you’ve taken a lot of risks, and if you’re at the point where an investor wants in, they want in after a lot of your risks are in the past, and they’ve worked out in your favor, but they’re buying in at a point where it’s much safer than when you were a startup.

Summary

My advice to creators is usually keep your intellectual property within your control because that’s usually what creators want. Carve out exactly what this company is doing, what the investor is bringing to the company, and be real intentional about your rights if things don’t go well with the investor.

Conclusion

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