What's New: Creators have a brand new bank

(from the latest issue of the Indie Hackers newsletter)

Creators are often unable to obtain traditional bank loans:

• Karat Financial has raised $26 million to build a banking system that specifically serves the creator economy. The company will use creators' social media following and engagement as a basis for lending.
• Trading cards have skyrocketed 3,500% in value over the past 3 years. Dust off your vintage Pokemon cards and get in on these new startup opportunities.
• Founder Danny Postma's 7-figure exit happened 8 months after launch. His best decision? Raising his prices by nearly 7 times.

Want to share something with over 80,000 indie hackers? Submit a section for us to include in a future newsletter. —Channing

🤑 Creators Have a Brand New Bank

from the Indie Economy newsletter by Bobby Burch

Karat Financial has raised $26M from a host of celebrities and tech founders to build a banking system that serves the creator economy. Founders should watch this space, as new opportunities are bound to arise.

Show me the money

Karat 101: Karat Financial is known for its Karat Black Card, a credit card for creators with a $50K credit line. Launched in 2019, the company initially raised $4.6M via crowdfunding. Karat was cofounded by former Instagram product manager Eric Wei and former venture capitalist Will Kim. In speaking on the company's mission, Eric said:

We recognize these high net worth creators as the successful businesses and brands of tomorrow, and our goal is to be the financial system that powers them.

Funded by creators: The latest funding comes from more than 20 famous artists and creators, including actor Jared Leto, Josh Richards (25M on TikTok), 3LAU (2.5M on Spotify), and YouTubers Graham Stephan and Carter Sharer. The $26M combined round included $15M in debt financing, and an $11M Series A led by Union Square Ventures.

Financing a movement: Karat is targeting the more than 50M people in the $100B creator economy. About 3.2M creators are earning more than $100K per year, and according to Signal Fire, about 46.7M creators are monetizing their content, skills, and influence as a part-time job.

The hurdles: Despite the industry’s promise, banks are still puzzled about how to lend to creators. Because they typically don't have a set monthly income, and because many earn from a variety of revenue streams, creators are frequently denied access to capital to grow their businesses. They are routinely denied loans for vehicles and housing by lenders and landlords that want to see paystubs. Alexandra Botez, a professional chess player who makes content on Twitch, had this to say:

I experienced a lot of the bias firsthand, and was denied a business credit card several times by banks just because the nature of my business isn’t what they are used to seeing. There are literally thousands just like me who aren’t valued or understood by legacy financial institutions.

Why it matters: Traditional banks may view creator businesses as hobbies, risky, or insignificant, but Karat is leveraging this to its advantage. By providing creators alternative financing and tools to grow their businesses, Karat is giving a boost to the broader creator economy.

The road ahead

The roadmap: The Karat Black Card is just one part of Karat’s vision. The company ultimately wants to build a financial ecosystem that will help creators launch products, obtain mortgages, incorporate their businesses, take out loans, and even file taxes.

Unique vetting: Instead of a typical credit card application, Karat will analyze creators' social media followings and fan engagement. To determine acceptance, Karat will scrutinize social media for such metrics as subscribers, followers, engagements, sponsorship deals, mentions, and likes. (Does this remind anyone else of Black Mirror's Nosedive episode?)

Karat customers: The average Karat Black Card member has an annual income of $500K, has 250K followers across their social media channels, and has amassed $50K in savings. Karat plans to widen its customer base to include more folks across the revenue spectrum. The company doesn't mention, however, what happens if an influencer loses their popularity, which isn't uncommon in the modern world of social media.

The Karat Black Card: Karat’s card doesn’t charge fees or interest, and its cashback rewards scale with its members' social media followings. Karat generates revenue from bank interchange fees. Another creator-specific perk is its instant revenue feature, which advances credit for sponsorship payments at zero cost. Also, its metal card can be engraved with any creators' logo, which is a pretty cool feature.

VC-backed creator economy: Startups in the creator economy have raised more than $1.3B so far in 2021, setting a new record. Investment in creator economy companies in just 2021 tops the previous five years combined.

Would you apply for a Karat Black Card? Share your experience below!

Discuss this story, or subscribe to Indie Economy for more.

📰 In the News

from the Volv newsletter by Priyanka Vazirani

👻 A man plans to sue an artist over an invisible sculpture that sold for $18K.

💰 Hackers behind a massive cyberattack have demanded $70M in Bitcoin as ransom.

💴 Japan's plans for digital Yen could start taking shape in 2022.

💸 TikTok's parent is selling its AI to other companies.

🧊 Iceland has conducted the largest-ever trial of a shorter work week.

Check out Volv for more 9-second news digests.

🎴 Trading Cards Aren't Playing Around

from the Signals newsletter by Timo Särkkä

Trading cards, including game cards and sports cards, have been booming lately. Their liquidity, simplicity, and a healthy dose of nostalgia makes them an attractive investment. Certain cards have skyrocketed over 3,500% in value over the past three years.

Collect 'em all

Earlier trading cards were simply printed on cardboard, but newer cards have incorporated higher quality material. Some also include player memorabilia, like parts of a bat or a jersey. Whether you're looking to jump into vintage cards or modern ones, here are some opportunities to get in the game:

• Start collecting trading cards. Treat it like any other investment and develop a strategy. Will you be in it for the long haul, or will you be flipping more quickly? Will you invest in rookie cards, vintage cards, unopened packs, or error cards?‍

• ‍Develop a digital tool for grading sports cards. PSA is the biggest grader in the field, but had to stop accepting new cards in April 2021 due to skyrocketing demand. The company charges $10-500 for grading a standard card. For more expensive cards, the cost increase to $1K-5K per card.

• ‍Start an index fund for trading cards. Compile a collection and sell a fractional ownership in it. Collections could be grouped by type (i.e., baseball vs. Pokemon) or by rarity (i.e., only cards worth $10K+).

How to launch

• Start by understanding the market. Start small in a specific niche (vintage Pokemon cards, anyone?) and build your collection up slowly while you learn the basics.‍

• Build an audience. The trading cards market is relatively small, as these are niche products. As a result, they'll be hard to reach at scale with paid advertising. Interested founders should start with grassroots marketing. Take pictures and videos of cards in person. People love pretty cards, and you can build an early audience by sharing to trading card forums and subreddits. Share knowledge by creating content and blog posts. This helps build long-term SEO and organic outreach towards enthusiasts to learn more.

Cases

• ‍Google Trends search data for sports cards has increased steadily in the last 24 months:

• 18 of the 41 most expensive sport cards sales have been made during 2021.

• ‍A Mickey Mantle baseball card from 1952 sold for $5.2M in January. It ties for the top spot with a LeBron James card of the exact same value, sold in April.

Platforms

• ‍eBay: Still one of the biggest platforms for sports cards peer-to-peer trading.

• DacardWorld: Shop for sports cards.

• ‍Collectable: Trade shares of iconic blue-chip sports cards and memorabilia.

• ‍NBA Top Shot: Digital moment collectibles for basketball fans.

Forecast

• eSports and UFC trading cards are the next emerging trading card niches.‍

• Fractional ownership of assets will become more common. Prices are split to shares lowering the point of access. See RallyRd, Collectable, and Dibbs.‍

Resources

• ‍Your Ultimate Guide to Selling and Investing in Sports Cards: How to learn buying strategies, types of cards to collect, places to buy, and tools for research.

• Sports Card Forum, r/baseballcards: Sports cards communities.‍

Would you enter the world of trading cards? Share in the comments.

Discuss this story, or subscribe to Signals for more.

📰 Title Tip: Hook Reptilian Brain

by Ivan Romanovich

Our "lizard brain" instincts make it nearly impossible to resist mentions of food, sex, or danger. People always notice these things, so use that to your advantage.

Discuss this story.

🗓 Founder Danny Postma's Seven-Figure Exit

by Danny Postma

Hey Indie Hackers! Danny Postma here. I'm mostly known for Headlime, which I built and sold in the open on Twitter. I went from zero to a seven-figure exit in eight months.

AMA!

Did you build Headlime with selling in mind?

I wasn't expecting to sell it, but I'd always built Headlime (code, documentation, helpdesk etc) with a potential acquisition in mind. Building this way makes onboarding new hires much easier because it forces you to document everything well.

I read a great book a few years ago called Agency: Starting a Creative Firm in the Age of Digital Marketing. It mentioned that, if you have a wish to be acquired, always build with one or two potential companies in your mind who would want to buy you.
Build something that fits perfectly with this bigger company and could be worth acquiring for them in the future.

For Headlime, I had two companies extending an offer. One of them was a company that I've always had in mind to be acquired by, but did not end up with in the end.

What's your method of learning?

I can't learn from books and courses. What works for me is building something, and learning in the process. I didn't know how to code over two years ago, but really wanted to.

So I set myself a challenge. I picked a framework and started to build. I chose to rebuild Landing Folio. I needed a server, a database, user authentication, image uploading, etc.

Every time I ran into something I didn't know yet, I started to learn it. This way, I really understand it. I learned design first by recreating other sites in Photoshop. Next, I learned HTML and CSS to try and build the designs. Finally, I learned Javascript.

Do you build first or talk to your audience first?

I talk to my audience by showing them a product. But I build fast: Two weeks, not two years. That way, I either stop working on it, or based on customer feedback, I iterate it.

Headlime went from a headline generator to a fully copywriting solution only because of the early customer feedback I got.

What was your customer acquisition journey?

Facebook Groups, Twitter, and word-of-mouth were my main acquisition channels. I'm shocked how powerful Facebook is in the MarTech world!

The acquisition journey that works the best for me is:

1. Free usage (no trial).
2. Run into a paid product feature that you want to use.
3. Upgrade to an entry-level paid plan.
4. Upgrade to a premium paid plan.

This way, you'll get a lot of emails that you can contact and reactivate at a later time. I also did limited-time deals quite often, which had a super high conversion rate.

How do you deal with copycats?

I was hugely frustrated with copycats for a month or two. But ultimately, it was totally not worth it.

The best thing you can do is to issue a DMCA if it's a 1:1 clone. Otherwise, if it's partly a copy, copy some smart stuff back yourself!

How do you come up with new ideas?

Built fast, ship fast. If a product doesn't take off, I start another one. I got lucky with my fourth startup being the big winner. For some, it takes more than 10 to find the perfect one.

As for coming up with ideas, I mostly build products that I need myself. I suck at copywriting. Headlime was literally built to help me. And luckily I wasn't the only one who needed it!

Your best and worst product decisions?

Best decision was raising my prices from $9 per month to $29, and again to $59.

Second best would be pivoting from a templates-based tool to an AI-based tool (although I was basically throwing away the thousands of dollars that I spent hiring someone to write the templates!).

Worst decision might have been to add so many different features. It made it way harder to market Headlime, or describe exactly what it did. It also made the onboarding harder, since there's so much to do in the app.

What is your favorite chicken burger in Canggu, Bali?

Definitely the Southern Fried Chicken Burger at Bench Burger in Batu Bolong!

Discuss this story.

🐦 The Tweetmaster's Pick

by Tweetmaster Flex

I post the tweets indie hackers share the most. Here's today's pick:

🏁 Enjoy This Newsletter?

Forward it to a friend, and let them know they can subscribe here.

Also, you can submit a section for us to include in a future newsletter.

Special thanks to Jay Avery for editing this issue, to Nathalie Zwimpfer for the illustrations, and to Bobby Burch, Priyanka Vazirani, Timo Särkkä, Ivan Romanovich, and Danny Postma for contributing posts. —Channing