Next in our Why We Invested series is Kaveat.
💡 Kaveat empowers creatives with legal and financial tools to be independent operators. Kaveat uses NLP to simplify contracts for creators.
There are 50M creators (or influencers) in the world making $45k on average in the US, 20% below the national average. Furthermore, roughly 47% of social media marketing influencers are micro (5k-20k followers), who earn approximately a third of the next tier of influencers (30k-500k followers) and less than 10% of the following tier (500k+ followers). Therefore, it can take years before an influencer produces a level of income to support a sustainable quality of life.
In addition to the struggle to reach the top, there is a misaligned relationship between the brand and the influencer, starting with the contract and ending with the payment. Generally, influencers have no legal background, so navigating legalese is a headache. To begin with, some creators are hesitant to sign contracts when they don’t fully understand what it contains. On the other hand, when a creator blindly trusts the brand and later finds out that there were clauses that should have been tested (e.g., exclusivity clause, who owns the data, etc.), they risk getting burned by the contract. Hiring an attorney to solve the issue cuts their time and can cost a few hundred to thousands of dollars.
From a brand’s perspective, they have a reputation on the line for recruiting talent. Brands do not want to have an influencer posting how the brand is terrible to work with. Therefore, in some cases, the brand should educate the influencer on the important clauses within the contract. It often doesn’t happen due to the cost and time of hiring a legal counsel for each influencer engagement.
If a brand can use or provide Kaveat, they can create stronger and more meaningful relationships with their talent, leading to better engagement. — Dorthee Grant, CEO & Co-Founder of Kaveat
The misaligned relationship between brand and influencer doesn’t end with the contract; a recent survey of creators found that 87% are paid incorrectly or not at all. In addition to payment pains, it takes influencers years of hard work to get to the point of monetization. The monetization rates are even worse for minority influencers as there is a lofty pay gap between minority creators and their peers.
The overall market for creators is already $104B, and the market for social media marketing influencers grew 10x between 2016 and 2022. As the market continues to grow rapidly, there must be innovation within the operation stack for influencers and creators. Brands make $5.20 for every dollar they spend on influencer marketing, yet a small percentage of this ROI is allocated toward the influencer.
The micro-influencers have the least resources to represent their legal and financial needs. Brands make $5.20 for every dollar they spend on influencer marketing, yet a small percentage of this ROI is allocated toward the influencer. While this is true, brands are planning to increase influencer spending budgets and shift towards supporting micro-influencers because they have more engaged tight-knit audiences.
With recent advancements in natural language processing (NLP), particularly GPT 3.5, it’s possible to give creators expert legal advice at a fraction of the time and cost. From a payments perspective, the Fashion Workers Act was proposed in 2021 by the Model Alliance to force agencies to pay models within 45 days, which is a start to aligning the industry. In addition, new banking stacks unlock many creative capital sources, digital banks, and payment solutions.
Kaveat is leveraging NLP to analyze and provide contract insights for creators instantly. Kaveat’s tool offers benchmark data, simplified clause definitions, and insights into the rarity of specific clauses. Kaveat inputs complex legal contracts through its natural language processing platform that outputs clause-level interpretations that anyone can understand. In addition, the platform is collecting data around fees, timelines, etc., to offer benchmarks for influencers based on the scope of a contract.
The tool can save creators thousands of dollars throughout their careers while also helping them make more per job, saving millions of influencers time and disappointment. The team’s long-term vision is not just to alleviate the pain of executing engagements but to smoothen the journey from negotiating and signing to ending the engagement.
A demo video of Kaveat’s contract review tool is below:
The user gets their contract(s)
Uploads contract to Kaveat and receives simple explanations and statistics about the clause.
Negotiates non-equitable terms and gets paid according to deliverables
The team brings domain expertise and customer experience to build a product for creators. There is not a better founder market fit. The Kaveat team, Dorothee Grant (CEO), Elizabete Ludborza (COO), and Christine Shen (CTO), have experience building products, modeling, influencing, working as a legal officer, and reviewing contracts. It’s hard to beat their founder market fit as they’ve been in their customers' shoes and uniquely understand how their product will help creators represent themselves when negotiating with large agencies. Redbud is extremely bullish on the Kaveat team and is joined by Cornell Tech and The LegalTech Fund in supporting Kaveat.
Redbud VC is an early-stage venture capital fund and studio investing monetary and social capital in early-stage tech founders.