The Passion Economy: Monetizing Your Individual Creativity
Startups and creators can thrive in this new economic chapter
How many times over the past few months have you seen friends showing off their freshly baked sourdough bread? Decorating their hand-made pottery? Or launching their new yoga, podcast, or makeup series on Instagram?
More time at home means more time to practise the things we do in our downtime - our hobbies. But passion projects no longer need to be confined to evenings and weekends. Thanks to what many have dubbed the “passion economy”, people can now make money from their niches, deciding when and how they want to work.
How we got where we are today:
- The Widget Economy
Over the last century, the modern economy expanded by focusing on mass-producing goods as cheaply as possible. The 'Widget Economy' is largely responsible for the convenience we experience today. We know we can just walk to the local supermarket and grab a cold bottle of Coca-Cola. Businesses have also got better and better at producing the same thing countless times over. The result? Everyone consumes the same products.
We’ve standardized how a typical life should unfold too: get a degree, get a good job, make more money when we're 50 than when we were 25, and hopefully have kids richer than we ever were. We trade in who we are and what we’re passionate about for a sense of security and linear progress.
- The Gig Economy
In the 2010s, companies like Uber and Deliveroo built digital platforms to leverage the markets for freelancers carrying out menial tasks. This came to be known as the “Gig Economy”. Convenience went into overdrive. On-demand consumption is now the norm.
Behind the rides and deliveries are the gig workers, and these ‘gigs’ promise them more freedom and flexibility. The flipside? As gig workers fulfil requests for commoditized tasks and services, their individuality is flattened. Fortunately, a new economic trend - rooted in individuality - is now coming to the forefront.
- The Passion Economy
To paraphrase Li Jin, consumers today aspire to become businesses tomorrow. More and more people are using digital platforms and marketplaces to make money from their unique skills and interests. Patreon, a creator platform that’s monetized by fan subscriptions, just earned a $1.2b valuation for their Series E raise with NEA, Wellington, Thrive, DFJ and Index.
In the gig economy, workers perform commoditized tasks, but in the passion economy people can turn their passions into livelihoods and build audiences at scale. Anastasia Radzinskaya and Tyler Blevins are a couple of great and perhaps unexpected examples of this.
Anastasia (YouTube Channel "Like Nastya”) is a 6-year-old girl with cerebral palsy who has a children’s YouTube channel with 48m subscribers and $18m in earnings (click here for cute vids). Tyler, or “Ninja”, makes $6m per year broadcasting himself playing Fortnite on Twitch. There’s clearly money to be made in hobbies.
There are several reasons for the advent of the passion economy. TikTok and Instagram have given Gen Z and Millennials a platform to reach and grow niche communities. The influencer model and no-code/low-code tools (i.e. Budibase or Webflow) have gone mainstream and given people the opportunity to build at record speed. Now more than ever, you and I can easily spin up websites and apps, productize our original content, convert fans into paying customers and turn passions into self-employment.
WFH has also given people more time to take up their passions too - we’re already seeing more friends and family turning side hustles into viable businesses.
On the audience side, consumers are now more comfortable doing activities online that they previously only did in-person - like HIIT classes, tutoring or therapy. This is a shift that’s opened up even more opportunities for businesses to reach wider audiences and age groups.
- Marketplaces vs. SaaS platforms
Many companies are now making money from the passion economy through marketplaces and SaaS platforms.
Masterclass, a marketplace where instructors offer classes on niche topics, just earned an $800m valuation. Substack (backed by a16z and YC), a SaaS email newsletter platform where writers make money from their own audiences, has grown to over 100k paying subscribers.
Marketplace businesses usually make money by taking transaction fees on creator revenues. So business revenues are proportional to how engaged the creators’ paid fans are.
Like marketplaces, SaaS platforms can be monetized through fans’ paid content subscriptions, but they can also monetize creators by providing them with tools and services to help get them up and running. Some of these tools include: no-/low-code tools, scheduling tools, light marketing tools, CRMs, bookkeeping tools and payment portals.
SaaS products mean it’s never been easier for creators to turn their passions into a business. And unlike marketplaces, SaaS platforms can count on consistent monthly revenues that aren’t necessarily tied to fan engagement.
- Tools to empower tomorrow’s entrepreneurs
There’s a significant opportunity for a ‘pick-and-shovel’ tech company to provide self-hosted, platform-agnostic tools to help digital businesses grow and run.
We’re looking for businesses whose products will save entrepreneurs’ time so they can focus on making content they are passionate about. This could include helping with distribution, conversion or marketing.
We’re looking for startups with a strong business model and route-to-market strategy to help cut through the noise of an already content-overloaded internet.
If you run a startup or have a business idea in this space, I’d love to hear from you.
Please get in touch with me here.