In the ever-expanding digital content creation industry, a significant number of creators struggle to secure funding for their ventures despite earning impressive six- to seven-figure salaries. Traditional banks often turn them away due to limited business and credit records, as well as irregular income across platforms. Addressing this problem, Eric Wei and Will Kim, the founders of Karat Financial, have embarked on a mission to assist creators in managing payments, bank accounts, invoicing, and more.
Karat Financial's initial success came with its innovative company credit card, which granted creators higher spending limits based on a combination of social and financial information rather than relying solely on FICO scores. Now, the company aims to expand its offerings to include a credit-building card.
Wei, formerly a product manager at Meta (formerly Facebook), noted that conventional banks often fail to comprehend the nuances of the creator industry. Even high-earning innovators face loan denials as banks expect steady monthly income from more traditional revenue sources. Karat, however, takes a unique approach to risk through in-house underwriting, utilizing factors such as cross-platform success, social reach, audience engagement, and monetization to create a more accurate picture of a creator's business model.
Venture capital firm SignalFire has reported that nearly two million entrepreneurs earn over $100,000 annually in the creative economy, with over 46.7 million people making part-time income from their online content.
Karat Financial distinguishes itself in the market by offering exclusive benefits and higher spending limits through its business cards tailored to creators. The company has amassed a significant following, with over 1 billion people following its clients, including prominent figures such as real estate agent Graham Stephan, Linguatrip co-founder Marina Mogilko, and Arab-Israeli vlogger Nas Daily.
Having built a solid foundation with its base card business, Karat now seeks to partner with Visa for its credit-building card. Notably, this new card won't require a hard credit inquiry, enabling users to establish a credit history without any negative impact. The company plans to report on-time payments to major credit bureaus, similar to conventional credit card firms.
To further cater to its target audience, Karat offers customized bookkeeping and tax services to cardholders, enabling easy tracking of business write-offs using the card.
Karat Financial's recent funding success, with nearly $100 million raised in its Series B round, speaks to the growing demand for its services. The company secured investments from notable backers such as Union Square Ventures, CRV, GGV, Dreamers VC (co-founded by actor Will Smith), Twitter co-founder Biz Stone, and YouTube co-founder Steve Chen.
By leveraging both equity and loan financing, Karat Financial is well-positioned to scale its offerings and provide vital money management solutions for content creators. The company's strategic approach not only enables access to working capital but also facilitates flexible growth while benefiting from valuable insights and networks from esteemed investors like SignalFire.