
Patreon raises big round at $450M valuation - doppp
https://techcrunch.com/2017/09/14/patreon-series-c/
======
clarkevans
This market segment might support a cooperative model, similar to Stocksy
United ([https://www.stocksy.com/](https://www.stocksy.com/)), where the
artists collectively own the monetization platform. Stocksy bootstrapped with
a 1M investment loan (not equity) which is now paid off. Now Stocksy is fully
owned by artist-members.

~~~
jasode
The viability of co-op depends on what content creators want from a
patronage/crowdfunding platform:

scenario 1: If artists just want a straight monetary passthrough, then
artists-owned entity like ASCAP (collects music royalties) may be workable.
ASCAP is "boring", but it does what it needs to do.

scenario 2: However, if artists want a payment platform that evolves towards a
combination of Facebook+Medium+Ticketmaster+Slack+Youtube+cdn+etc, a co-op
model will be underfunded. (In this scenario, you'd have to imagine that there
would be future features that artists don't even know they want.)

In the marketplace of ideas, it's possible for both business models to be
offered. E.g. artists sign up for co-op platform because it's 2% fee instead
of VC-backed Patreon for 5% fee. However, it's possible for artists en-masse
to abandon the co-op business for the VC-funded business because its enriched
platform gives them ability to earn more which overshadows the higher 5% fee.

~~~
clarkevans
Since venture subsidizes losses till critical mass is achieved, perhaps it is
more likely that a VC-funded platform will _initially_ be much less expensive
compared to a revenue financed cooperative.

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joelthelion
That means they're going to expect a lot of revenue. Which they plan to take
on money that people give freely. I don't see that ending well.

~~~
IshKebab
They have a fee of 5%. Let's assume they have a price/earnings ratio of 20,
that means they expect people to spend something like $450m/year on Patreon.

According to Wikipedia they are at around $150m/year already. I think it is
totally feasible that they could increase that to $450m/year and not have to
increase their 5% fee.

Seems like a reasonable valuation to me.

~~~
buro9
It is 5% on top of payment processing, and averages around 10% for content
publishers.

I keep telling people just to use a PayPal Donate button.

Unless you're in the top 1% of people on Patreon, you would do better just
ensuring that more of the donations that exist ends up in your pocket.

If Patreon isn't delivering more donors than your content and self-marketing
can attract... you are losing out.

~~~
wpietri
I'm a relatively heavy Patreon user; I donate ~$100/month to ~12 different
people. The PayPal donate button doesn't solve the problems that Patreon
solves for me. Those include: providing long-term support, managing my ongoing
support in one place, finding out what the people I support are up to, and
getting a notion of how much support they're receiving.

I still do an occasional one-off donation to somebody who doesn't use Patreon,
but as far as recurring billing for long-term support, this is all I use now.

------
sixdimensional
I remember the first time I saw a music video by Jack Conte on YouTube, way
before he started Patreon. He did a bunch of cool music videos (example
[https://youtu.be/lBUUOJpFg9Y](https://youtu.be/lBUUOJpFg9Y)) . Also, his work
with Pomplamoose was pretty awesome.

I remember hearing him talk about his idea for Patreon on some of those
YouTube videos. He seems like a pretty nice guy, so I am super excited for him
to hear that Patreon has been such a great success!!

Let's hope they can continue their mission and keep taking it to positive
places from here!

------
a-robinson
Why didn't they just set up a Patreon page for themselves?

~~~
elyrly
Even the fox knows when he's bested

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payne92
I'm still wondering why Youtube isn't ALL OVER this model.

Given that many are getting paid for publishing videos of what they do, it
would be a great feature.

~~~
grafporno
A vast part of Youtube's audience are minors who don't have credit cards and
couldn't pay for content. So they are shown ads.

~~~
payne92
Youtube would not replace the ad model with a patron model, they would ADD the
patron model. Patreon has shown there is clear demand for that feature.

~~~
krapp
One of the reasons Youtubers are moving to Patreon is a lack of trust in
Google to provide a platform that generates a stable income, due to their
demonetizing of accounts,arbitrary tweaks in the algorithm, refusal to defend
Fair Use, etc.

If I were a big successful Youtuber, which I'm not and will never be, I
wouldn't go near a patron service provided by the same company whose practices
were driving me away from them to begin with.

~~~
gwenzek
Or just because ads is not viable before reaching 5M views a month. While
convincing 1000 fans to give you 5$/month is easier. Patreon allow people with
small community of dedicated fans to make a living while YT allows people that
make crap watched by millions of people to make money. So they are
complementary.

------
arikr
Based on [https://patreonhq.com/creators-have-made-100m-on-patreon-
ddf...](https://patreonhq.com/creators-have-made-100m-on-patreon-
ddfcc9338662), seems like they are growing at about 2.4x/year.

They will do $7.5 million in net revenue in 2017.

Then assuming the growth rate doesn't slow (remember, growth rates usually get
slower over time), $18 million in net revenue in 2018, and $43 million in net
revenue in 2019.

Net revenue, not net income.

$450mm seems overvalued.

~~~
hobofan
I'd not be surprised if their growth this year is even bigger than last year.
2017 is the year of the Youtube Adpocalypse and more and more creators are
looking for alternate, more stable, revenue streams.

There is still a lot of potential of revenue coming in from existing big
content creators switching to the platform. When Philip DeFrance started his
Patreon a few months ago he became the #2 most sponsored creator in Patreon in
a few days, and his channel is "only" ranked ~350th by number of subscribers.

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robk
Is there a porn angle here? Seems like from Googling there's a decent amount
of sexual content. I wonder if this is like Tumblr with a seedy underside of
adult oriented growth.

~~~
j_s
I think it's reasonable to classify it as "don't ask, don't tell".

[https://news.ycombinator.com/item?id=14927517](https://news.ycombinator.com/item?id=14927517)

 _I 've never seen anything more effective at enabling content that is
routinely censored by credit card companies. [...] Patreon is a layer of
abstraction that has enabled a startling opening up of opportunity for
censored content, and that's shown in the NSFW side of Patreon._

------
raverbashing
Patreon is fighting the good fight so far, especially with YT promoting more
disposable content with every passing day

~~~
sschueller
Patreon is falling into the same problem, banning people who they don't agree
with.

People are moving all their eggs from Youtube to Patreon.

~~~
jerf
"People are moving all their eggs from Youtube to Patreon."

That's less of a concern though, because Patreon is easier to replace than
YouTube. The problem with YouTube is that, at least as long as the Internet
chatter I hear is still accurate, YouTube itself is still losing money, so
replacing YouTube involves being able to immediately hugely subsidize people
watching lots of video, and to be willing to do so when it is demonstrated
that even the market leader who gets all the good ad contracts is losing
money, so there's no payday if you win. That's a tough sell.

Patreon can't literally be replaced in the legendary "HN denizen claims to be
able to replace $X in a weekend", because dealing with taking payments takes
longer than that. But it's feasible down in that range, and said replacement
at least has a cash flow and a clear path to ramen profitability. It's gonna
be a competitive field and Patreon has all the name advantage right now, but
it's a feasible plan for a "true startup" of just a few people in a garage in
a way that "let's replace YouTube!" isn't.

In fact there's at least three competing services I've heard of that already
exist, and I have no reason to believe I've heard of them all.

~~~
toomuchtodo
> Patreon can't literally be replaced in the legendary "HN denizen claims to
> be able to replace $X in a weekend", because dealing with taking payments
> takes longer than that.

Stripe literally has an offering just for this use case:
[https://stripe.com/connect](https://stripe.com/connect)

Forum + Stripe Connect + CDN for Video (Cloudfront, Fastly, Whatevs) = Patreon
replacement.

You could literally replace it with a weekend Hackathon.

~~~
jerf
I observe that "Stripe Connect" does not have a "click here to purchase"
button but a "Contact Sales" button.

I think if you dedicated an entire weekend to the task of being ready to
accept credit cards through your website on a subscription basis that you
would not be accepting cash on Monday. I seriously doubt that this is just a
click-through exercise. I seriously _hope_ this is not just a click-through
exercise.

~~~
wonderwonder
I have used connect a number of years ago. I think it may take a week or so to
get approved. (relatively painless process) Once approved it took me maybe a
week to get the payment functionality working. I was a much lesser developer
then as it was essentially one of my first forays into api's and web
development.

After approval a skilled developer could absolutely bang out the core
functionality in a weekend.

Using regular stripe for direct payments is even easier and you can have a
fully functional payment system / shopping cart in a few hours.

My above statements though in no way reduces what Patreon has done, they
excelled at execution and driving traffic to their service as well as
excellent usability. No small feat and not easily reproducible. Much the same
as the way Facebook succeeded and myspace and friendster failed. Vision and
incredible execution.

------
balls187
So what happens when YouTube builds in Patreon like functionality?

~~~
RJIb8RBYxzAMX9u
My understanding is that many YouTubers use Patreon not only to supplement
their income, but also as insurance against their videos getting demonetized
over issues they may not have control over. Don't put all your eggs in one
basket, as the saying goes.

------
jhallenworld
Here is who is making money on Patreon:

[https://graphtreon.com/top-patreon-creators](https://graphtreon.com/top-
patreon-creators)

(AvE is #9? Wow.. also lots of NSFW..)

------
brian-armstrong
Patreon changed the really quirky but cool logo on the front of their building
to one that's considerably more boring. I wonder if it signals significant
internal changes. Why bother changing such a thing?

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mmargerum
That’s a lot of VC money. Ugh. I hope the folks I pay on patreon move to
another site because I’m not interested in paying VC vultures. 450m for god
sakes.

------
gourou
They probably have the biggest platform for paying creatives, I wonder when
they'll ditch YouTube to get more control over their user base and increase
their 5% margin.

~~~
wongarsu
I fail to see any advantage in ditching YouTube? On private videos for Patreon
subscribers Youtube supplies free video hosting with a decent and familiar
experience for the content creator. For public videos (or videos that become
public after a delay), Youtube offers free hosting and lots of
discoverability.

In both cases I only see Patreon having additional cost with little to no
upside by ditching Youtube (especially since Youtube policies are already very
lenient on non-monetized non-public videos).

Maybe I'm missing something obvious?

~~~
xemdetia
There are a lot of patreon people that don't have a strong youtube presence,
and a lot of that content ends up being cross hosted by youtube. You have
people that are working with a pre-payout budget of a few thousand a month-
it's possible that they are trying to build out more pay-to-use features that
increase the 5% slice they are taking.

Private video hosting for supporters that isn't rigged to youtube settings is
something that could actually be a boon. Just because youtube is easier
doesn't mean delivering on a non-youtube service couldn't help delivering the
rewards.

I can see how they can upsell a lot of other services though around delivering
rewards. If I have 10000 people who need stickers for that 5$ support level is
it worth the time to hand-stuff all those envelopes? Or is it worth an extra
20c a letter to have someone else stuff it for you?

The more I think about it the more I think that they can actually provide
legitimate services in the same frames as vistaprint, teespring and others for
these physical deliverables and just providing that fulfillment. Videos that I
can schedule to release on patreon might just be worth it to some people.

~~~
wongarsu
Something with merchandise will likely happen. Quote from the article:

>Deeper pockets could also allow Patreon to build out its suite of bonus tools
for creators, some of which it could charge extra for. “There’s going to be
new opportunities to build revenue streams into the product” Conte has
promised me. He suggested that could include selling event tickets or
merchandise, or better helping creators understand and communicate with fans.

With them having a partnership with a livestreaming platform, I wouldn't put
it past them to do something to replace private YouTube videos. But I think
shipping postcards or stickers or art prints is a much more direct way to more
revenue, and could be relatively cheap to set up with the right partnerships.

------
crescentfresh
I'm not too up-to-speed with Patreon, is it like twitch but for any type of
creative content?

~~~
spike021
Not so much like Twitch, IMO.

Patreon is purely for gathering a fanbase with open communication between fans
and creators and the ability to share content in exchange for support of the
creators.

So a musician might link to private music videos on youtube with the financial
supporters on Patreon first. Or they might provide a special .mp3 that is only
available there.

As far as I know, Patreon doesn't actually have the capability to host videos
itself (I could be wrong since I haven't looked at it in a while).

------
justinzollars
Why do they need so much money?

~~~
beambot
Best time to raise funds is when you need it least. Maybe this was a way to
pad the bank account in case of a downturn.

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perseusprime11
Is it coming down to Patreon vs. Medium?

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outoftacos
Oh god, now they're trapped in the endless useless growth demand cycle. Too
bad, I enjoy supporting a few artists on there and it's just a matter of time
until this hurts them.

~~~
egypturnash
Seriously, I enjoy having my comics supported by my fans there and I'm not
looking forwards to them having to Make A Profit.

~~~
stephenson
They should help you make a profit, but not make one themselves?

~~~
TaylorAlexander
They should make a profit. What we don't want is to spoil the nice service
with desperate attempts to earn enough profit to satisfy investors.

~~~
pc86
Ah, so they should make a profit but not too much.

~~~
Xixi
The problem is not if Patreon is making enough profit to satisfy investors.
The problem is if they don't. The reasoning goes as follows: VCs are chasing
the next Google, and if Patreon cannot grow enough there is a real risk that
it will die/resort to shady business practices by trying too desperately to
achieve this growth. Without VCs it could remain a healthy, profitable,
medium-sized company...

~~~
wpietri
Exactly. It's the devil's bargain that you make when you take venture capital.
VC is a hits-driven business. If it looks like you'll only be a moderate
success, they will push you to take risks and spend more money in hopes of
being giant. That will push up your odds of total failure and worse.

------
EGreg
What if there was a crypto-currency for this? :)

~~~
wongarsu
Currency exchange is too high of a barrier for supporters.

A large portion of Patreon is artists asking for support for content they
offer for free, with only token benefits for the supporters. Making the act of
giving money as simple and convenient as possible is key in that scenario.
Using a crypto-currency is pretty much the opposite.

~~~
EGreg
No, I mean one crypto-currency specifically designed for what Patreon does.

Instead of paying Patreon with a credit card, you'd pay to buy this crypto
currency. And then distribute it micropayment-style to all kinds of things.

Isn't anyone doing that? IMHO the hardest part is the Coinbase thing -
collecting credit cards and dealing with chargebacks etc. in a compliant way
in many countries.

The other stuff is easy - such as localization in many languages.

You know who does this also? Kickstarter. They just launched in Japan!

~~~
wongarsu
Ah, yes, you could do that.

But aren't you then stuck with either one platform which does that, offering
you no advantage over what Patreon offers today, or loosing a lot of the
miscellaneous Patreon features for keeping Patreons and creators in touch in
exchange for gaining censorship resistance?

It's certainly doable, but I think it would be a hard sell compared to Patreon
or any regular centralized Patreon alternative.

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dandermotj
That's a P/E of 60... Also this:

> In exchange, Patreon takes only a tiny 5% cut.

I hope this is sarcasm, because if I had to pay 5% to make any other
transaction I'd be fuming. With a marginal cost of facilitating a new patron
near zero, I don't think creators or patrons will suffer this as Patreon
grows.

~~~
falcolas
Apple takes 30%. So does Google. Kickstarter takes 5%. Many online stock
trading firms take somewhere around 10-15%. That fairly well justifies the
qualifier of "tiny" in today's world.

Given that the basic cost for processing credit cards and other such minutia
is already around 2%, the benefit of not having to worry about chargebacks,
fraud, or PCI compliance... worth that extra 3% IMO.

~~~
nilved
Nobody should be okay paying Apple or Google 30%. That is highway robbery.

~~~
wongarsu
They essentially have a monopoly on App sales on their respective platforms.

At least in Google's case, antitrust-lawsuits in Europe and Russia are slowly
working on making it possible to create viable competition to Google's Play
Store. Maybe we'll see prices fall in the next decade or so.

