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Could someone explain why Patreon needs to raise funding? I thought a service built with the express concept of collecting money (and a very popular service at

Could someone explain why Patreon needs to raise funding? I thought a service built with the express concept of collecting money (and a very popular service at that) wouldn't need external funding. Also, in an unrelated point, > I had been making YouTube videos with my band, Pomplamoose Finally! I thought I was crazy for thinking it was the same guy. If you haven't listened to his band, you definitely should.

cryptoz 9y ago
> Could someone explain why Patreon needs to raise funding? I thought a service built with the express concept of collecting money (and a very popular service at that) wouldn't need external funding. I don't know the details of Patreon, but profitable companies raise money all the time. Patreon is presumably a startup, and has growth in mind. It is likely that they want to grow faster than their current cash flow would allow - in fact, they may need to do this in order to survive in the long term. A more in-depth description of this from pg: http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html
- s73ver_ 9y ago
  "It is likely that they want to grow faster than their current cash flow would allow - in fact, they may need to do this in order to survive in the long term." Do they really, though?
semperdark 9y ago
The TechCrunch article about the funding [0] claims they make about $7.5 million a year, based on their transation fee and some public "total payments" numbers. I can see that being too little if they're hiring a significant number of people. This is a nontrivial dilution so I assume that they need the money. [0] https://techcrunch.com/2017/09/14/patreon-series-c/ https://techcrunch.com/2017/09/14/patreon-series-c/
- dkersten 9y ago
  Apparently they employ 70ish people. That's essentially the 7.5m gone on payroll.
michaelbuckbee 9y ago
Something I have to continually fight is my own perceptions. Because, I agree with you, I think Patreon is well known, they should be crazy profitable, etc. But if you look at the larger scheme of things: How many Podcasts have a Patreon? How many YouTube channels? Is it even on their radar? And the answer is of course -> fractions of a single digit percentage. Even compared to some other "competitors" they are quite small - consider that there are individual Kickstarters that have raised more than Patreon's profits over the past year. They need to massively ramp up user/influencer acquisition: sponsoring conferences, booths at tradeshows, paying people to use them, a big "success team", etc. etc.
- throwaway40483 9y ago
  Crazy profitable? They make $7.5M in revenue with 70 engineers (in SF?). Sounds to me like they might actually be losing money.
patio11 9y ago
Could someone explain why [a company in San Francisco] needs to raise funding? What's your guesstimate of how many engineers it takes to run the company? Multiply that by $200k [+]. Quintuple [++] the result. Divide by your guesstimate of their margin. That's the sales number you need to not raise funding. This math is brutal. You can build a very nice product that a lot of people like and still get run over by it. [+] Total cash cost to the company (salary, benefits, taxes, etc). This corresponds to an offer of approximately $140k~$160k to the engineer. [+] Judgement call required here; software startups generally spend 20%~35% or so on engineering. The other big bucks that are not COGS are marketing, sales, and G&A ("everything else that isn't COGS").
rdiddly 9y ago
They want to hire more people and do things even faster!!!!!!!! The breathless hyperbole in this announcement is itself a bad sign in my book, but my main worry is that just looking at the photo, the team already looks plenty big. Much bigger than that, and you run into the well-known "negative network effects," namely communication chaos. Then you have to set up a (for some people "stifling") corporate hierarchy and cease to be nimble. Accepting outside funding is a Faustian bargain because those investors want scale, scale, S C A L E!! So now I'm worried about this company and this fairly awesome concept they've implemented. I would focus this company on slower growth with attention to continuous profitability. And if there's something you can't do with 80 friggin people (which seems hard to imagine), then put that shit in the backlog and get to it when you get to it. The core idea is sound, focus on that. But nobody asked me! :)

cryptoz 9y ago

> Could someone explain why Patreon needs to raise funding? I thought a service built with the express concept of collecting money (and a very popular service at that) wouldn't need external funding. I don't know the details of Patreon, but profitable companies raise money all the time. Patreon is presumably a startup, and has growth in mind. It is likely that they want to grow faster than their current cash flow would allow - in fact, they may need to do this in order to survive in the long term. A more in-depth description of this from pg: http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html

s73ver_ 9y ago
"It is likely that they want to grow faster than their current cash flow would allow - in fact, they may need to do this in order to survive in the long term." Do they really, though?

semperdark 9y ago

The TechCrunch article about the funding [0] claims they make about $7.5 million a year, based on their transation fee and some public "total payments" numbers. I can see that being too little if they're hiring a significant number of people. This is a nontrivial dilution so I assume that they need the money. [0] https://techcrunch.com/2017/09/14/patreon-series-c/ https://techcrunch.com/2017/09/14/patreon-series-c/

dkersten 9y ago
Apparently they employ 70ish people. That's essentially the 7.5m gone on payroll.

michaelbuckbee 9y ago

Something I have to continually fight is my own perceptions. Because, I agree with you, I think Patreon is well known, they should be crazy profitable, etc. But if you look at the larger scheme of things: How many Podcasts have a Patreon? How many YouTube channels? Is it even on their radar? And the answer is of course -> fractions of a single digit percentage. Even compared to some other "competitors" they are quite small - consider that there are individual Kickstarters that have raised more than Patreon's profits over the past year. They need to massively ramp up user/influencer acquisition: sponsoring conferences, booths at tradeshows, paying people to use them, a big "success team", etc. etc.

throwaway40483 9y ago
Crazy profitable? They make $7.5M in revenue with 70 engineers (in SF?). Sounds to me like they might actually be losing money.

patio11 9y ago

Could someone explain why [a company in San Francisco] needs to raise funding? What's your guesstimate of how many engineers it takes to run the company? Multiply that by $200k [+]. Quintuple [++] the result. Divide by your guesstimate of their margin. That's the sales number you need to not raise funding. This math is brutal. You can build a very nice product that a lot of people like and still get run over by it. [+] Total cash cost to the company (salary, benefits, taxes, etc). This corresponds to an offer of approximately $140k~$160k to the engineer. [+] Judgement call required here; software startups generally spend 20%~35% or so on engineering. The other big bucks that are not COGS are marketing, sales, and G&A ("everything else that isn't COGS").

rdiddly 9y ago

They want to hire more people and do things even faster!!!!!!!! The breathless hyperbole in this announcement is itself a bad sign in my book, but my main worry is that just looking at the photo, the team already looks plenty big. Much bigger than that, and you run into the well-known "negative network effects," namely communication chaos. Then you have to set up a (for some people "stifling") corporate hierarchy and cease to be nimble. Accepting outside funding is a Faustian bargain because those investors want scale, scale, S C A L E!! So now I'm worried about this company and this fairly awesome concept they've implemented. I would focus this company on slower growth with attention to continuous profitability. And if there's something you can't do with 80 friggin people (which seems hard to imagine), then put that shit in the backlog and get to it when you get to it. The core idea is sound, focus on that. But nobody asked me! :)