Karat Financial, which offers a credit card tailored to digital creators, raises $26 million

Karat Financial, a one-year-old startup offering credit cards tailored specifically to digital creators, has raised $26 million. The company does not disclose its post-money valuation.

The subsidy round consists of two parts. The first is an $11 million Series A led by Union Square Ventures with the participation of GGV Capital and various Karat creator users, including real estate youtuber Graham Stephan, vlogger Carter Deler, DJ 3LAU, twitch chess streamer Alexandra Botezo, and an agency for creators Standard.

Karat says it will use these funds to hire multiple companies — including engineers, designers, insurers, capital market experts and community-side influencer partnership coordinators. Money will also be allocated to more audience-oriented events and marketing to attract new users and educate creators about finance.

In addition to $11 million in equity financing, Karat has also raised $15 million in debt financing, allocating this amount solely to cover the expenses of Karat cardholders. Previously, Karat used its own funds to fund these balances.

Karat Financial, which offers a credit card tailored to digital creators, raises $26 million

Karat founders Will Kim and Eric Wei.

Karat emerged from stealth last June with the aim of providing financial services expressly to successful players in the creative economy, whose financial situation can be unconventional and thus often rejected from different credit lines. Karat analyzes creators’ followers and engagement rates and then hands out cards at no cost that offer better credit limits with special benefits to creators.

That said, Karat’s ambitions extend far beyond a credit card, co-founder Eric Weiss, former product manager at Instagram Live, tells Tube filter.

“We developed a Series A to further expand the product and bring it to more makers,” Wei says. “Ultimately, our goal is to do much more than just a map. It is essentially buildable Square for creative companies, with all those other pieces of financial infrastructure. The goal is to pick up a Series B, build additional products, such as bank accounts and payments, and then bundle that back into the card.”

“Ultimately we see makers as a new class of companies”

Karat, founded by Wei and former venture capitalist Will Kim, raised a $4.6 million seed round in June 2020, including donors twitch co-founder Kevin Lin, Twitter co-founder Biz Stone, former TikTok Director Kevin Mayer, former YouTube Director Steven Chen, and CAA founder Michael Ovitz.

The company’s Series A arrives as Karat reports that it has seen the number of transactions grow by 50% each month over the past year, with an eight-figure total payment volume since launch.

Karat cards are currently available on a application-only basis, and the company does not disclose how many users it has. As for eligibility, Wei says most cardholders are established makers with more than $500,000 in annual income and $50,000 in savings. In terms of followers – although these numbers are not set in stone – they count either 100,000 YouTube subscribers, several hundred thousand Instagram followers, or a few million TikTok followers.

Creators who carry Karat cards include: Josh Richards and Griffin Johnson (who are also investors in the company), Lenny Rachitsky, TierZoo, Sam Kolder, Wendover Productions, Lizzy Capri, TheRussianBadger, Nas Daily, real technique, and the startup backers mentioned above.

Karat, for its part, currently makes money through interchange fees — or the processing fees that merchants share with card issuers. But, Wei says, there are more opportunities to monetize than the card itself.

“It’s the proven fintech playbook, where you start with the map and use it as a wedge to introduce people to other products,” he explains. To that end, future launches could include creator-centric bank accounts, accounting services, and tools to help creators get paid faster from their brand partners.

“Ultimately, we see makers as a new class of companies,” Kim adds. “And that means there’s a whole new class of business services that they might need because traditional financial institutions aren’t getting them.

“We’ve heard of all these pain points, where banks charge for wire transfers when creators have to pay their contractors, or creators who don’t know how to manage all the new money coming in. Ultimately, we think about how we can scale this kind of services to help these creators build their businesses.”

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