Over the weekend, venture capitalist Jason Calacanis wrote a detailed post explaining why he, as the owner of several popular YouTube channels, turned down funding offered by YouTube during the second-phase of the original channel initiative.
The post has since been heralded as a no-nonsense, tell-all piece of writing by a veritable who’s who of industry insiders. Calacanis covers several interesting points, among them, a call for YouTube creators to branch out and not completely bank on Google’s ad-driven ecosystem.
In response to Calacanis’ post, founder of Know Your Meme and YouTube program Rocketboom, Andrew Baron has recently written a rebuttal which questions the practicality of looking beyond Google as a creator.
Chief among Baron’s critique is the realistic outcome of a YouTube creator leaving the platform and attempting to start an independent operation. Baron suggests that as a venture capitalist (read: someone with a hefty chunk of cash), Calacanis is in a wildly different position than your average YouTube partner.
For many creators who have shifted YouTube into a full-time job, breaking even is hard enough as is. It comes back down to Calacanis’ original point of Google taking 45 percent and the creator taking 55 percent — less if they are signed to a multi-channel network. With this, it would be incredibly difficult for a creator to focus their attention outside of YouTube’s ad-based revenue structure.
Making the choice to not bank on YouTube could for many creators prove to be incredibly difficult given the razor-thin margins they already operate on. Sure, it works for creators like Ray William Johnson (he recently branched off and began working with Blip), but the “=3” creator is the third-most subscribed partner on YouTube. He can afford to take a risk, not to mention outside parties are most likely coming to him offering funding in one form or another.
For the rest of creators outside of the top 50 most subbed channels, this kind of vertical movement would be a massive gamble without a standing investment from an angel investor or venture capitalist. This point specifically, is Baron’s most interesting piece of analysis. Baron analyzes this VC-backed option, writing:
“The second option, taking VC from someone like Jason who put a call out for YouTubers to join him, is probably the worst option for most YT creators.”
It is here where Baron and Calacanis seem to part ways as entrepreneurs. Baron backs up his argument for creators to avoid VC funding writing: “It’s hard to write and produce your best work while meeting over revenue numbers and assuring you meet the benchmarks laid out by your investors – or else!”
It’s a really beautiful conclusion Baron is drawing here, one that isn’t mentioned often when the subject of funding comes up — VCs are moneymen, they care for the bottom line and little else.
It’s a point that all YouTube creators, channels and networks should consider when putting out a creative product. Oftentimes, if you’ve worked in a creative field held up financially by a VC or investor, then you’ve felt the squeeze of the “when am I going to make my money back?” dilemma.
Finding your niche takes time, especially among the over-saturated shores of YouTube. Smosh, RWJ and iJustine didn’t become megastars overnight, it took years and years of failure to fine-tune their product. For VCs and investors, “years and years of failure” means a huge investment with no immediate promise of return. It’s a brutal cycle — one that doesn’t favor creativity, but instead favors squeezing out profit as quickly as possible.
It’s a strange new world for YouTube creators with generally little to no guarantee that their channel will ultimately be able to pay the bills. Sure, Google isn’t the greatest company to get in bed with, but as Baron explains, it could be worse: “Perhaps Jason is frustrated that YouTube is not giving him enough attention, but the reality is that most VC’s will give you much less attention and provide much less direct support.”
The debate is heating up, and we want to know what side of the fence you fall on. Should creators be looking for an alternative to YouTube? Or is YouTube actually a great platform for all creators? You can check out Baron’s post here and sound off in the comments below.
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