
Ask HN: How to create a service similar to Patreon? - rainydaybook
I&#x27;d like to create a service similar to Patreon, I know how to do the technical side but not so sure about financial side: how do I charge users to send the funds to other type of users (creators), while subtracting a small percent? How does it need to be set up from the POV of financial compliance? Can it be reported as &quot;payment to support Creator xyz&quot; without a specific product? Does the company need to register as a bank or something similar to a bank? Financial services company? Where can I find some relevant resources, and how can I narrow down my research so that I don&#x27;t have to read everything about all types of financial services but only more or less relevant info? (located in the US).
======
makeee
I built a patreon competitor using stripe connect. It wasn’t super successful,
had a handful of creators making $20-$100/month, but it’s definitely doable
without a ton of legal work. Stripe makes it pretty easy. You can set it up so
payments go directly from supporter to creator’s stripe account, with a
percent going to you. If you want to batch payments or have more control over
funds then you actually need to collect funds and do the payouts, which makes
things a bit more complex. Feel free to email me if you want to chat.

Honestly, dealing with payments is nothing compared to the amount of hand
holding required to help creators set up a nice profile, pick good rewards, do
a good job promoting their page, actually fulfill their rewards so they don’t
lose backers, etc. It often took months of back and forth with creators to
finally get their page launched. I’d avoid building a patreon competitor
unless you personally know some very big creators (500k+ followers) or have a
very specific niche in mind.

~~~
Kiro
How did you handle taxes for the creators?

~~~
chii
Why can't the creators handle their own tax?

~~~
asutekku
If there’s a possibility to not handle the tax i would use that service in a
heartbeat. The less i have to do the better.

~~~
netsharc
Heh "Like Uber, but for tax accountants": attract tax experts from the
creator's state/country to work for a percentage of their earnings.

Does it get more complicated if the creator has donations from different
states/countries? I have a feeling yes. Oh geez.

~~~
deanalevitt
There used to be exactly this, called Teaspiller. It was acquired by TurboTax.

------
wheelerwj
I’ve worked in the fintech space for 6 years this month. I’ve been a
ceo/founder, vp of product, and managing partner. there’s no way to shortcut
this, you’re going to need a chief compliance officer and to adhere to the
right financial regulations, likely money transmission but possibly others as
well. you need to contact a lawyer and get started BEFORE you process your
first payment.

i will warn you, starting down this path can be lucrative in extreme cases,
but in all situations will lead to massive frustration, headache, and stress
coupled with minimum 5 year reporting and record keeping requirements.

this is a hard life for a solo entrepreneur and i do not recommend it wothout
having raised a minimum of $2-5 million usd and 5-10 years of experience in
regulated industries. this is not the industry where you get to move fast and
break things. if you want more information or help hashing things out, you’re
welcome to reach out directly. i think my email is in my profile or its my
username.

~~~
Improvotter
> this is a hard life for a solo entrepreneur and i do not recommend it
> wothout having raised a minimum of $2-5 million usd

Let's not get everyone in the mindset that venture capitalism in the US is a
good thing. Many startups and entrepreneurs in Europe and other continents
have found success without raising any capital.

~~~
geofft
I read this comment as "You can't do this as a scrappy one-person startup,"
not "You must raise VC." Bootstrapping by using $2-5MM you / your cofounders
have (from previous ventures, happening to be rich, etc.) would work fine.

Many startups and entrepreneurs can work great with minimal capital, both in
Europe and outside Europe. The claim of this comment was this is the wrong
business to be in if that's your goal (and I think that claim is intended to
apply equally well in Europe).

~~~
wheelerwj
thanks for helping me get the point across, that's exactly what i meant.

------
therealmarv
There is absolutely no shortcut in this things. As soon as you are paying
users there will be all sort of legal requirements/side effects which you need
to be aware of. Starting with money laundering, taxes (yours and from your
users even!), pleasing your payout provider that your content is not illegal,
beeing able to payout in US&Europe or even global and ending with costs (you
will probably never be able to compete with 5% from patreon). The thing is
that all this risks apply mostly to your payout provider (this is why it is a
hard problem, it's not only your risk alone). Good luck in finding a good
partner. I'm betting that sites like Patreon have developed this things from
scratch and in-house.

~~~
hardwaresofton
One question (since I do like shortcuts) -- what about if you have uses pay
each other (through whatever means is available to them), and only act as the
sort of negotiation point? Here's what I'm thinking:

\- user signs up

\- user registers x supported payment accounts (Paypal, Venmo, etc)

\- when a user wants to pay another user on their site, you send them to the
appropriate payment provider with the details of the other user

\- take confirmation from user that received payment and use it to update
"trustworthiness" scores for both users.

This seems like it could work as a way to sidestep _some_ of the legal
requirements?

Though the amount of value the OP's company offers is a little lower (since
you're not handling payments), I think the other benefits (discoverability,
concentration of information, etc) that patreon offers are still seemingly on
the table. Fraud of course is still an issue, but the upside is you can punt
that to whatever payment provider they specify.

~~~
benatkin
[https://streamlabs.com/](https://streamlabs.com/) does exactly this with
PayPal. It goes directly to the streamer, and shows the name of the streamer’s
PayPal account. For Chess Grandmaster Benjamin Finegold whose stream I watch
on Twitch, that’s some chess education center in Atlanta. It also shows their
email address and possibly a physical address, and it might show mine to them.
I think the privacy issue might not make it work well for casual users like
Patreon has, but for commercial users it would probably work better. I feel
like I’m more likely to get my PayPal account flagged by donating to random
streamers on StreamLabs than with an intermediary like Twitch or Patreon. I’m
not too worried about it but I am more careful.

It also helps that tipping is just a minor feature of the product. Their
product is an OBS which shows overlays and stuff in the stream, including an
animation when someone leaves a tip. They also sell merchandise much like
CafePress. I have a coffee mug with Hikaru Nakamura on it. Some info:
[https://venturebeat.com/2018/10/07/how-streamlabs-is-
helping...](https://venturebeat.com/2018/10/07/how-streamlabs-is-helping-
livestreamers-monetize-their-audience-via-tips/)

If you can find a way to make tipping part of a larger product/service, it
seems less likely to be used for money laundering, and to be more likely to
work without a huge amount of expertise in the area of payment platforms.

~~~
hardwaresofton
Exactly what streamlabs does is a thing I thought I might make some day -- now
I can wipe it off my list since it seems like they are already producing a
fantastic product.

I really think that the streaming world could benefit from a decentralized
streaming application but this seems like something streamlabs could easily
pursue in a pivot or as a new feature so I think it could happen some day.

Thanks for sharing how you feel using the service as well (being a bit more
careful) -- I'm sure it will help OP a bunch

~~~
thisacctforreal
Decentralization would require the streamer to have enough bandwidth to upload
to each viewer. Uploading one stream to a CDN is ideal.

~~~
hardwaresofton
Right, except that decentralization is also the solution to fast data delivery
-- CDNs work by _decentralizing_ data, and if the people who built this were
smart, they'd work in a way where users could get discounts for helping to
spread/rehost paid streams (for a discount to their sub fee, for example), or
choose to help a streamer out by replicating their stream for free.

I personally think you could find a lot of people who would be willing to help
CDN/share/host for streamers they support, a nice step between watch for free
and upvote/like and send the streamer money.

Even if you didn't want to go the P2P route, there's no reason that streamlabs
can't step in to help provide that infrastructure if it's cost effective (i.e.
if the streamer is paying) -- surely a streamer is going to be willing to drop
$50 on extra resources for a stream if they think it's going to bring them
>$50 worth of recognition/good content for their streamers. Streamlabs
wouldn't even have to keep these resources on hand, they could spin them up on
demand and just charge a slight premium. Even better, streamlabs could give
streamers easy tools to enable purchasing cloud resources for better stream
quality, and charge them for the convenience (and let them know of course that
they pay the AWS bills at the end of the day).

------
warp_factor
May I ask what is pushing you to want to create a competitor?

I bet it is because you strongly disagree with their stance on free speech
(they ban creators based on all type of nonsense backed with the typical "Hate
speech" excuse). This is actually a very difficult problem, as you will now
depends on Stripe, and behind that Visa and Mastercard. Those companies will
happily ban you if you support any creator that isn't Politically correct
based on the consensus at that time.

I'm myself considering jumping into that space, but the financial world is
held together by a couple of Titans, and it is unfortunately extremely
difficult to go against the general "mobbing" that happens on the usual
platforms.

~~~
rainydaybook
No, that's not the reason. Also it's not a direct competitor, I want to focus
more on microtips.

------
elliotec
Start with a legal team. Seriously.

That said, I feel like this is a bit of a weird post for HN. You are asking
the hardest questions of “How do I build a successful competitor to an already
successful competitor?” - isn’t that the essence of founding a company?

Like i don’t want to discourage thoughtful discussions on this site and I’m
not saying any rules are being broken, but it feels a bit disingenuous to be
asking these questions in the sense that people that have real answers to this
are probably charging REAL fees, if not already doing the whole thing
themselves.

~~~
tiuPapa
Not OP, but I think there are tons of different application of the basic idea
that patreon is based on. I took this as a technical question which could also
be worded as "how do I build a service where I can link a buyer with a seller
and earn money on that transaction?"

~~~
elliotec
The OP specifically states that they know the technical part and are asking
about the "financial side".

But - > "How do I build a service where I can link a buyer with a seller and
earn money on that transaction?"

I googled that exact phrase just to see what came up, and the first link was
this: [https://www.sharetribe.com/academy/how-to-design-your-
market...](https://www.sharetribe.com/academy/how-to-design-your-marketplaces-
transaction-flow/)

Which highlights Paypal and Stripe as clear and strong answers to this
question, which I'd expect most people asking it to already know - it's the
other questions that are tougher.

~~~
rainydaybook
That article is about creating a marketplace rather than a "support" type of
setup that Patreon has. From a financial & compliance POV it's quite different
because it's not a payment for a specific product.

------
giancarlostoro
On a code specific sidenote there's LibrePay which is open source under CC0.
This might be a good starting point code wise. If you do make a profit off
their codebase I advise you donate some back to them, but you're under no
obligation to do so, likewise with any code improvements, but again no
obligation. I know you're asking more business geared questions, but figure it
wouldn't hurt to mention. The only thing is LibrePay doesn't take a cut, not
sure if you'd have to go out of your way to implement that 'cut' into the
service. But reading about their setup might guide you towards what you do
need to do in order to start your service. I am no lawyer, financial or other
kind of expert (just a lowly Software Engineer on HN), just pointing out
availability options.

[https://github.com/liberapay/liberapay.com](https://github.com/liberapay/liberapay.com)

------
blihp
Here's a post about a story that made the rounds back when Patreon made some
changes a while back: [https://geoffkratz.wordpress.com/2017/12/10/is-patreon-
about...](https://geoffkratz.wordpress.com/2017/12/10/is-patreon-about-
regulations/) It should give you a few pointers on things _not_ to do in order
to steer clear of violating financial regulations. It's probably far from a
complete list, but should give you some starting points of things you'll need
to be aware of.

~~~
tylerhou
Although that post should have a heavy disclaimer to talk to a lawyer; I
wouldn't risk my savings/a business based on a blog post.

~~~
blihp
Yep, that's why I only suggested it as a starting point. Anyone embarking on a
business that potentially involves a (heavily) regulated industry needs to
step carefully.

------
FerretFred
There needs to be a Patreon alternative. I decided to contribute to a
favourite author and found that I could register for an account, but logging
on and paying people? Ha! I'm not a robot but I'm fscked if I'm going to
battle through _19_ Captchas (I gave up at 19). I even wrote to Patreon but
not even the courtesy of a reply was forthcoming.

Sod'em

/rant

~~~
thejohnconway
As a creator on Patreon, I find this disturbing. I've had problems battling
through captchas to log in, but I didn't consider the supporter side. I wonder
what's going on there.

------
jillesvangurp
I was pondering doing a stellar based platform for this a few weeks ago. It
wouldn't be that hard to do technically but there are many legal and practical
hurdles.

Using something like stellar would sidestep some of the financial headaches
around trying to do this through the existing financial system at the cost of
being less user friendly. IMHO particularly recurring payments would be a big
headache (like monthly donations). On the flipside, any fiat interactions, and
the associated tax consequences would be offloaded to exchanges and users.

One cool thing that you could do with stellar is use so-called federated
accounts to represent content owners and users. This simply means you have a
database with accounts that you map incoming payments (from stellar) to based
on a memo that is attached to the transaction. So, this allows us to have lots
of accounts represented by a single stellar wallet. More importantly, it
allows most of the users/owners to sidestep the issue of wallet and key
management until they have to care. And finally it allows us to do micro
payments. Imagine distributing 5$ worth of XLM or whatever token on stellar
across hundreds of content owners based on likes or preferences of the user.

Another thing you could do is represent content owners preemptively (i.e.
before they've even heard of you) with their own little federated wallet. The
way that could work is that users reward whatever they think is worth
rewarding and those rewards go to a dedicated account for the content owner.
When owners register, they claim their rewards by proving ownership, doing
KYC, and whatever else we need them to. Unclaimed rewards simply get
redistributed periodically to selected good causes related to open content
(e.g. wikimedia).

Building this technically is not that hard. But the organizational challenges
around this are big. You need legal staffing and IMHO this only makes sense
when run as a foundation and not as a VC funded walled garden/money grab for
investors & shareholders. The foundation itself could run off donations via
its own platform plus maybe some kind of base fee of e.g. 2-3%. When
restricted to R&D and operational cost, it should not need a lot of resources
and IMHO incentives for profit contradict the overall goal of the site which
is to allow users to reward content producers.

------
LoSboccacc
Don't want to discourage you but money health and law are the three worst
thing to work with in IT

First of all you can't neither "term-of-service-away" nor delegate diligence,
second because the regulatory frameworks around them updates almost yearly if
not more often.

Self research these three topics doesn't seem a good idea. Budget for or
partner up with an expert in the field, because even using a third party
service doesn't fully absolve you from responsibilities.

------
mjfl
This is a really hard problem. You do not want to have to register as a bank
or hire an expensive compliance team. Use Stripe.

~~~
rainydaybook
Does Stripe actually allow this type of use though? Does it have to be special
agreement / account with them or just a regular plain stripe account?

~~~
dbbk
They literally have a product for this use case, it's called Stripe Connect.

------
Deimorz
Hire someone that knows the answer, ideally someone that's worked on exactly
this type of system before. Don't make any decisions about something this
delicate based on the advice of random people on the internet.

------
oliverx0
Take a look at Stripe Connect

~~~
tehlike
I second this. Stellar experience.

------
dob_master
From a short cut perspective, you could do the following:

Require each of your customers (creators) to sign up for a Stripe account and
have them input into your system their processing keys. Whenever somebody
wants to pay them, use their keys to process the payment and it goes directly
into their Stripe account. This would offload all legal liabilities (Stripe
would determine whether their business is okay to operate from a processing
standpoint) and tax responsibilities fall completely on them.

Here are the drawbacks:

1) You wouldn’t be able to automatically take a percent of a creator’s
billings but rather would have to calculate it and invoice them / charge their
card

2) Patrons wouldn’t be able to save a credit card and use it across multiple
creators

3) Your fees would be on top of the 2.9% that Stripe charges a creator which
would be limited to 2.1% if you want to compete with Patreon at 5%

~~~
ValentineC
> _You wouldn’t be able to automatically take a percent of a creator’s
> billings but rather would have to calculate it and invoice them / charge
> their card_

Stripe Connect allows you to collect an "application fee":
[https://stripe.com/docs/connect/direct-charges#collecting-
fe...](https://stripe.com/docs/connect/direct-charges#collecting-fees)

------
aregue
There was a story on HN a while ago about Bootstrapping 10er, a Patreon-
similar service for Danish creators
[https://news.ycombinator.com/item?id=18820196](https://news.ycombinator.com/item?id=18820196)
It was a single person running it.

~~~
corobo
Oh wow, I had no idea failory did success interviews.. I've been assuming
anything that's appeared there has shut down

------
james_in_the_uk
In Europe you would need to set yourself up as a payment services provider
(PSP). I believe the US has a similar regime.
[https://paymentscompliance.com/us-money-
transmitters](https://paymentscompliance.com/us-money-transmitters) You'll
need a reasonable amount of capital behind you. Next step would be to find a
law firm specialising in payments and go and get some advice.

------
mooreds
Heya, I built something similar for a startup usig stripe connect:

[https://stripe.com/connect](https://stripe.com/connect)

I'd start with their docs.

We pushed all tax concerns to the client (we used standard accounts for our
sellers, which might not be an option for you) and made it clear it was their
responsibility.

The downside was the price. Not a lot of alternatives at the time (Braintree,
PayPal) but that may have changed.

------
no1youknowz
Oh boy. You are in a world of hurt here.

The issue here is on the banking regulations than the technical side. The
technical side here is a breeze, an absolute breeze that any technically
competent developer can knock out a Patreon clone in about a week.

I've gone through most of the answers already and not surprised by the lack of
knowledge. I've been looking at banking for the l8 months - almost 2 years. My
next step is to approach someone competent and with a track record in the
industry to start up a fintech company and approach a bank to start the long
process of becoming a bank.

But I digress :)

To do this yourself. Let me explain the following steps you'll need to fulfil.

1) The ability to on-board individuals and perform KYC.

2) Taking and validating the individuals bank account for payments.

3) Processing credit card payments and splitting them up between the % for you
and the rest for the creator.

4) Dealing with fraud when taking the credit card payments.

5) Sending the payment to the creator and doing FX spot transactions where
necessary.

6) Performing AML on each payment.

There's so much more, but I want to keep this post succinct.

As others have said. Stripe is the quickest shortcut to this. They have
already built it all out and you just need to connect your platform to their
API.

The downside is that whether rightly or wrongly. Patreon is their preferred
partner in this space. Let's say "Sargon of Akkad" joined your platform and
Stripe is processing your payments. You would be shut down when word got out.

If you don't understand what I mean. Please do some googling. I won't go into
it with this post.

Now if you definitely want to do this yourself, here are some of the problems
you'll face.

The first thing you need to realise, that by not actually running right now.
No credit card processor is going to touch you. I've been knocked back by many
processors because I have no volume. It's a chicken and egg problem. How can I
start if I have no credit card processor? They don't care.

If you do find a credit card processor, there are still some issues. Can the
processor split the incoming payment? Many can't. If that is the case you'll
have to become the merchant of record which means you'll be responsible for
all the chargebacks/refunds/etc instead of the creator. But then also means
you'll need banking licenses for all the geo-locations of the individuals that
on-board on the platform. The reason being that you are holding client's
monies.

The next thing is that KYC and AML checks are very expensive. Although the
credit card processor will do the checks themselves, you'll have to do it as
well when monies flow into your account. You'll have to KYC the individual on-
board and then AML whenever a payment is sent out. I haven't yet found an all
you can eat. They want you to purchase packs ahead of time and also they run
out. Also KYC and AML are separate companies as well. So that's double the
cost.

The next thing is that you'll need to find a company to help you sending ACH
payments and then either SWIFT or XRP for international payment as well.

Finally, there is another way. If you do find a credit card processor that can
on-board individuals and hold them accountable for the payments instead of you
and can then split the payments and put the funds in their home bank account
or an intermediary for moving on later. Subscribe Star does something similar
to this. You can achieve that.

However, you are back to square one. You are not current processing and thus
service providers won't work with you.

You have a long road ahead. I suggest going with Stripe. Build out your
platform, get some processing and when you want to cut the cord with Stripe.
The other financial service providers will be willing to work with you.
Because you'll have volume.

Oh and ensure you have well over 100k a month of transactions. That's the
sweet spot from my many conversations. I've lost count now of how many service
providers I have spoken to. 250 or more lol.

------
stonewhite
If I were to withhold 3% of everyone’s total to cover credit card fees plus
$0.10 per every transaction because the bank fees range from 1%-3% per card
and it’s difficult to sort them, would it be legally acceptable? Any insights?

~~~
bdsa
Huh [https://newproject2.com/why-zero-fees/](https://newproject2.com/why-zero-
fees/)

------
GuillaumeBrdet
I wish you the best with this if you do move forward!

Lots of room for competitors in this space for now. I think one of your focus
should be on helping someone that was previously on Patreon make more on your
platform.

------
zerr
Related: How to create Stripe or Paypal? Again, from the finance and I guess
soft-skill perspective. Do I need to negotiate with particular banks,
countries, etc...?

------
sidcool
I would also be interested in the technical side of it. What kind of domain
model, system design would you use? What tech stack would be suitable? etc.

------
motohagiography
Sharetribe does this as a service, and I don't understand why they are not
bigger than Patreon.

Before reading this thread, I had all but written off cryptocurrencies. This
is the use case. Now the only thing missing is content compelling and unique
enough for people to buy the tokens to access it.

Funny that it will be art that will do what gambling, drugs, money laundering,
tax evasion, and black markets could not.

------
paulcarroty
[https://liberapay.com/](https://liberapay.com/)

------
scarmig
My advice would be to join Patreon/Stripe/some other payment services company,
and realize that it isn't something a single engineer, no matter how skilled,
can throw together in a week, a month, a year, or a decade.

~~~
rainydaybook
How did Patreon start exactly? IIRC it was just two guys without major
backers, I'm really curious what was their MVP like.

~~~
robot
[https://techcrunch.com/video/patreon-the-
idea/](https://techcrunch.com/video/patreon-the-idea/)

------
arisAlexis
there is an uncensored version using Bitcoin at bitpatreon

------
orionblastar
There was an alternative named Hatron that used Visa until Visa pulled
services because they funded conservatives. Libertarians, and white nationals.

So contact the credit card companies and watch who you fund.

~~~
jazzyjackson
it was probably the white nationalists that caused visa to pull out

~~~
cwyers
Yeah. And I mean, they called it Hatreon. "What if Patreon but for hate" is
_the brand_. They weren't subtle.

------
savgeborn
My friend does it, he operates a company (In NYC) which accepts the payments
and he then wires the creators after holding back X% in reserve fee less the
service fee

He's been doing it for a while (4 years) now averaging 500K per month in
payments.

All his customers are people from third world or second world countries like
Russia, India etc...where accepting international credit cards is bit
difficult and probably has more fees.

He raises invoices in his own company name then the creators are written off
as independent contractors.

So creators will need to do their own taxes.

He's using Braintree and Stripe and load balancing between these two.

He's one man show and knows nothing about law/accounting.

He also got one accountant who is helping him calculate and make financial
reports

It can be done I guess

~~~
ermir
Please get me in touch with your friend, my contact info is in my profile.

------
expopinions
There are a lot of sites doing similar things, which aren’t as well known as
Patreon. Patreon is popular, but it does have some drawbacks, such as only
taking USD.

Some alternatives include:

Sther - A site all about inclusivity, aimed at the LGBTQ and POC communities.
Steady - Designed more as a way for freelancers to fund their work. Podia -
Recently launched membership crowdfunding, building on their short course and
digital download platform. Ko-Fi - It is a freemium model that requires paid
membership to receive monthly payments from fans, instead of one offs. Drip -
A recently opened membership funding site which is owned by Kickstarter.
Liberapay - A site for repeat donations. Open Collective - for transparent
ongoing funding of groups. Backerpass - Another membership funding
alternative, based on reaching goals. SubscribeStar - For subscribing to
Social Media influencers and helping them with payment subscriptions. Collide
- Yet another alternative which has recently been launched. Ratafire - Another
small creator membership site. Minds - A Cryptocurrency option for
subscriptions. Kind of. I’m sure there’ll be many more sites like these in
future, as fan funding is certainly something that’s catching on!

~~~
venturin
Let's not forget about Tipeee, which might be the only platform actually not
in debt (they merely raised 150 000€ 3 years ago, and officially declared
benefits last year).

------
_nalply
Partner up with someone knowledgeable, perhaps a paralegal who has worked in
finance. They will know when to call in the big guns.

~~~
elliekelly
OP needs a team of experienced regulatory compliance attorneys. Suggesting a
paralegal to assist with this issue is akin to suggesting an x-ray technician
to help someone who needs surgery.

