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Patreon's problem, I think, is that they've taken enough VC money to be at a kind of "half-unicorn" status -- and there's no possible way for them to return on

Patreon's problem, I think, is that they've taken enough VC money to be at a kind of "half-unicorn" status -- and there's no possible way for them to return on that investment unless they start wooing megastars to their platform. The majority of creators are always going to be way back in the long tail, but the folks at the top of the curve need to be bringing in a lot. Like, a lot. A million a month or more. And I can't help but suspect that this realization necessitates changing, if not the business model, the business strategy. Patreon in 2017 is fine with Chapo Trap House and Amanda Palmer as the top moneymakers; Patreon in 2020 needs the next Taylor Swift and Lady Gaga. (Better yet, the current Taylor Swift and Lady Gaga.) That doesn't mean they have to actively drive out the podcasters and comics nerds and furries, but it probably means they have to put all their resources into going after whales.

dannyw 7y ago
A middleware that can be described as Wordpress with access control and Stripe integration, but worse in terms of performance and UX; somehow takes on $165 million in funding [1] and describes their business model as "not sustainable" [2]. Patreon is a low touch SaaS platform that charges up to 12% PLUS payment processing fees. They do not provide any meaningful level of discoverability: you must build your audience yourself. I wonder how the business would be doing if it disregarded that "raise money and spend money at all costs" model, that Softbank exaggerated? What if it had a WhatsApp-size of team: ~20 employees using sensible and well-architected tech stacks (not chasing the latest shiny thing just cuz its hip or cool)? I'm sure they'd be outrageously profitable. [1]: https://techcrunch.com/2019/07/16/patreon-raises-60m-series-d-targets-international-growth-and-more-customization/ https://techcrunch.com/2019/07/16/patreon-raises-60m-series-... [2]: https://www.cnbc.com/2019/01/23/crowd-funding-platform-patreon-announces-it-will-pay-out-half-a-billion-dollars-to-content-creators-in-2019.html https://www.cnbc.com/2019/01/23/crowd-funding-platform-patre...
- chipotle_coyote 7y ago
  I'm going to push back a little on this. I've run a Patreon and have a pretty good idea of what they provide for creators, and I've also looked into how I could replicate their services on my own -- and it turns out it's not really that trivial. - I want something that handles tiered membership levels with paid access control. - I also want something that keeps track of "goals" for donation drives (e.g., "if I bring in $500 a month, I'll do this thing for everyone"). - If I have rewards at different levels (which I did), it's nice to have something that keeps track of when I need to send those out and who I sent them out to. - It's nice to have what amounts to a basic CRM, keeping records of who paid me what at what points. If I say "maintain the membership at the $9/month level for at least six months and I'll send you this widget at the end of the year," I want my membership platform to be able to tell me who was at that level for six months even if they're not at that level at the end of the year. - It's nice to have a built-in mailing list if I need it. - While Patreon is very up front about not being a discoverability platform, aggregation of creators still matters: it is way easier to support a half-dozen or more creators monthly when you get one monthly charge instead of many monthly charges, and in fact people do occasionally discover new creators by discovering who creators they follow are supporting. If I were running this on my own, I wouldn't get that benefit and I probably couldn't have a "just pay me a little because you're nice" tier: it's no problem to pay $1 or $2 a month to somebody if it's part of that bundle, but it's not worth the hassle if it's standalone. (This was why everyone on Patreon screamed bloody murder when they proposed unbundling charges a few years back.) - Last but not least, not every creator is going to be comfortable putting together a Patreon-esque platform on their own. The more friendly the solution is, the more likely it is to cost money, and Patreon's pricing structure ends up being more competitive than you might think. WordPress membership management plugins that don't suck are often commercial, some with fees of $100+ per year; Memberful is free for limited use, but $25 per month otherwise; Substack charges 10% of your revenue and, like Patreon, doesn't cover processing fees that way. Obviously none of these give Patreon a "lock-in" and it might make sense for creators to jump ship anyway; I'm certainly keeping my eye on alternatives. But I'm kind of a control freak. I genuinely don't think "anyone can build their own Patreon over a weekend" is true, and I don't think the amount of money they charge over and above processing fees is super unreasonable.
- Marazan 7y ago
  Yes, Patreon should be rolling in cashflow. Them taking venture capital is right up there with GumRoad taking VC money for levels of completely inexplicable for both the VC and the company.
- hef19898 7y ago
  There seem to be a lot of businesses out there, that should be cash positive. Yet, the VC funded ones (also the ones you read about), aren't. No idea why, maybe easy access to VC money, and VCs themselves, cause them toneglect cash flow? I also saw this effect with Chinese manufaturersofsolar modules, whatever amount of cash they need, they get from Chinese banks. In their day to day operations, cash flow doesn't really play an important role, as long as they are marginally profitable at the end of the year.
  - mumblemumble 7y ago
    So, I've never worked in a startup, but I've done my time in a large conglomerate. While I was there, I noticed a pattern that I believe translates fairly well: Business teams make decisions that are based at least as much on the resources that are available to them as on what makes business sense. A really well-funded software team will buy itself a bunch of expensive computers, and proceed to write a to-do list app that assumes it's running on high-end kit. A really well-funded marketing team will throw huge blowout after-hours parties at trade shows even though the target audience is people who go to bed at 8pm. All well-funded teams hire too many people too quickly, and then waste productivity on failing to do a good job of keeping everyone coordinated. The corollary to this is that the best-funded teams have a tendency to underperform. (Or at least that's the impression I get.) My sense is that it's similar with individual companies: The best way to create a train wreck is to find a really promising up-and-coming startup, and help it become a well-capitalized up-and-coming startup.
  - vladus2000 7y ago
    I know someone working at a VC funded startup for a few years, they have way more employees than they probably need and seem to be paying 20-30% above the going rates to attract talent. That combination makes it hard to turn a profit. Yet they keep getting more cash infusions even though they are losing money.
  - jerf 7y ago
    Employee count seems to be the major problem. The current Patreon site doesn't seem to justify more than 50, and I still feel I'm being generous; I really want to say 20. A couple of web people, contract out any design work you need, some sales staff, a few support people, definitely some business people and support people to deal with chargebacks and the credit card company, and I'm having trouble finding how they have 5 times that many. I feel I need to expand that because that's going to read to a lot of people as "Patreon shouldn't need more than 20 or 50 people." But it actually makes sense to me that Patreon could have 250 people. There's plenty of ways for VC-fueled growth to indeed take over this market and become the household name as VC-style growth intends to do. The problem is that what I see from them doesn't seem to justify that. The complaints that people are posting in other comments have been like that for years. Discoverability of artists is awful. Obvious places to list patron-only media are missing, let alone any sort of hosting. Community features are very perfunctory. Their outreach seems to be stalled out; the top of the patron chart seems to gas out weirdly, where I think there ought to many dozens of people making $10K/month by now by the way the economics of this should work. Patreon today hardly seems any different than it was three or four years ago. As a startup with a couple hundred people, I'd expect to see it moving fast and breaking things and rolling out new features every couple of months, if not weeks, not being so stagnant. I mean, I've worked for a "startup" [1] that had ~200 employees. It had several products, each of which pushed significant updates around once every two months, sales staff, support staff, physical manufacturing staff... it moved fast and sometimes broke things. In any six month period you could take any of the products it had and there were clear changes and improvements, probably a new model, probably starting up a new product since then. Totally different business, my experience is not entirely applicable of course, but Patreon from the outside feels like a business that is already running a bare bones staff as it treads water while the business winds down, not an exciting startup getting things done. Where's the features? Where's the improvements? I don't just mean techical, either, I mean business improvements too (better deals for the users over time, better business partnerships for the aforementioned content hosting, etc.) Why is it still possible to effectively set up a feature-parity competitor to Patreon in a few months with just a few people? Shouldn't they have both technical and business features that make that harder by now? Where's the output of all those people's work? I dunno. I don't expect to be able to see all of it anyhow... but I don't see much at all. If that ~200 person startup had suddenly been switched to working on Patreon, in a year we'd have a good forum (even if we had to write it from scratch), we'd have some sort of custom content hosting, we'd have listened to our customers and built what they wanted more... & I'm judging it against what we could have done 15 years ago at the time. Today a decent prototype of some of what I'm talking about is 10 minutes with CloudFormation or equivalent, and then you can tune from there (since you may not be able to afford to directly ship that). [1]: I can understand if you don't want to call that a startup any more.
davidgerard 7y ago
Last time Patreon tried fucking over the small-timers, in late 2017, it was the whales who objected and fought them on it - Chapo, Amanda Palmer. Because the whales remember when they were minnows, and the small timers is where the big timers come from. Patreon has wanted to dispose of the pain-in-the-backside long tail for ages - this was an explicit business plan by mid-2017. Because they took VC money and turned a sustainable small-time business into something that MUST GROW, whether it makes sense or not.
helsinkiandrew 7y ago
I've always wondered if Patreon's core business can ever be big enough to justify the VC and company size. A generic 'patronage' business will always be expensive to develop and run compared with more targeted discovery and patronage platforms - music, video, podcast, porn. If I can see the 'patron early' videos in my normal youtube feed, or pay podcasters from my podcast app I'd use that. It takes a huge amount of effort to support 'long tail' artists - those that I'm not a mega fan of - on a different site.
coldpie 7y ago
I've never been in the position of taking VC funding, and I don't expect to be in my life, but if I were, I don't think I would. It seems to be a recipe for destroying your company ~5 years down the line. Perhaps the early founders get out with a bunch of money, and maybe that's the point, but I just don't think I'd want to do that to my employees and the people who came to depend on my company. If you don't have a sustainable business model from day 1, you've already lost, haven't you?
- stagger87 7y ago
  > Perhaps the early founders get out with a bunch of money, and maybe that's the point
- chipotle_coyote 7y ago
  Probably, yes. Personally, I don't think too uncharitably of Patreon's founders; I genuinely don't get the impression that they started the service because they thought it was a way to make oodles of money, but that they genuinely saw it as doing good for small creators. But I think they let themselves be talked into the idea that they could be the Next Big Thing if only they took enough VC money to follow the "ramp up, get big, and then figure out how to pay for it" model that a lot of startups during the last decade took. The vast majority of those startups failed while they were still small, and the vast majority of the rest only ended up "successful" by selling out to someone else before the bills started coming due... but that's not the story that most of us wanted to hear back then.
- draw_down 7y ago
  It’s not about the company, it’s about the founders. They will still get rich if they’re not already. They certainly have elevated profiles in SV. They’re set pretty much no matter what. The returns are the VC’s problem. You can always start another company.

dannyw 7y ago

A middleware that can be described as Wordpress with access control and Stripe integration, but worse in terms of performance and UX; somehow takes on $165 million in funding [1] and describes their business model as "not sustainable" [2]. Patreon is a low touch SaaS platform that charges up to 12% PLUS payment processing fees. They do not provide any meaningful level of discoverability: you must build your audience yourself. I wonder how the business would be doing if it disregarded that "raise money and spend money at all costs" model, that Softbank exaggerated? What if it had a WhatsApp-size of team: ~20 employees using sensible and well-architected tech stacks (not chasing the latest shiny thing just cuz its hip or cool)? I'm sure they'd be outrageously profitable. [1]: https://techcrunch.com/2019/07/16/patreon-raises-60m-series-d-targets-international-growth-and-more-customization/ https://techcrunch.com/2019/07/16/patreon-raises-60m-series-... [2]: https://www.cnbc.com/2019/01/23/crowd-funding-platform-patreon-announces-it-will-pay-out-half-a-billion-dollars-to-content-creators-in-2019.html https://www.cnbc.com/2019/01/23/crowd-funding-platform-patre...

chipotle_coyote 7y ago
I'm going to push back a little on this. I've run a Patreon and have a pretty good idea of what they provide for creators, and I've also looked into how I could replicate their services on my own -- and it turns out it's not really that trivial. - I want something that handles tiered membership levels with paid access control. - I also want something that keeps track of "goals" for donation drives (e.g., "if I bring in $500 a month, I'll do this thing for everyone"). - If I have rewards at different levels (which I did), it's nice to have something that keeps track of when I need to send those out and who I sent them out to. - It's nice to have what amounts to a basic CRM, keeping records of who paid me what at what points. If I say "maintain the membership at the $9/month level for at least six months and I'll send you this widget at the end of the year," I want my membership platform to be able to tell me who was at that level for six months even if they're not at that level at the end of the year. - It's nice to have a built-in mailing list if I need it. - While Patreon is very up front about not being a discoverability platform, aggregation of creators still matters: it is way easier to support a half-dozen or more creators monthly when you get one monthly charge instead of many monthly charges, and in fact people do occasionally discover new creators by discovering who creators they follow are supporting. If I were running this on my own, I wouldn't get that benefit and I probably couldn't have a "just pay me a little because you're nice" tier: it's no problem to pay $1 or $2 a month to somebody if it's part of that bundle, but it's not worth the hassle if it's standalone. (This was why everyone on Patreon screamed bloody murder when they proposed unbundling charges a few years back.) - Last but not least, not every creator is going to be comfortable putting together a Patreon-esque platform on their own. The more friendly the solution is, the more likely it is to cost money, and Patreon's pricing structure ends up being more competitive than you might think. WordPress membership management plugins that don't suck are often commercial, some with fees of $100+ per year; Memberful is free for limited use, but $25 per month otherwise; Substack charges 10% of your revenue and, like Patreon, doesn't cover processing fees that way. Obviously none of these give Patreon a "lock-in" and it might make sense for creators to jump ship anyway; I'm certainly keeping my eye on alternatives. But I'm kind of a control freak. I genuinely don't think "anyone can build their own Patreon over a weekend" is true, and I don't think the amount of money they charge over and above processing fees is super unreasonable.
Marazan 7y ago
Yes, Patreon should be rolling in cashflow. Them taking venture capital is right up there with GumRoad taking VC money for levels of completely inexplicable for both the VC and the company.
hef19898 7y ago
There seem to be a lot of businesses out there, that should be cash positive. Yet, the VC funded ones (also the ones you read about), aren't. No idea why, maybe easy access to VC money, and VCs themselves, cause them toneglect cash flow? I also saw this effect with Chinese manufaturersofsolar modules, whatever amount of cash they need, they get from Chinese banks. In their day to day operations, cash flow doesn't really play an important role, as long as they are marginally profitable at the end of the year.
- mumblemumble 7y ago
  So, I've never worked in a startup, but I've done my time in a large conglomerate. While I was there, I noticed a pattern that I believe translates fairly well: Business teams make decisions that are based at least as much on the resources that are available to them as on what makes business sense. A really well-funded software team will buy itself a bunch of expensive computers, and proceed to write a to-do list app that assumes it's running on high-end kit. A really well-funded marketing team will throw huge blowout after-hours parties at trade shows even though the target audience is people who go to bed at 8pm. All well-funded teams hire too many people too quickly, and then waste productivity on failing to do a good job of keeping everyone coordinated. The corollary to this is that the best-funded teams have a tendency to underperform. (Or at least that's the impression I get.) My sense is that it's similar with individual companies: The best way to create a train wreck is to find a really promising up-and-coming startup, and help it become a well-capitalized up-and-coming startup.
- vladus2000 7y ago
  I know someone working at a VC funded startup for a few years, they have way more employees than they probably need and seem to be paying 20-30% above the going rates to attract talent. That combination makes it hard to turn a profit. Yet they keep getting more cash infusions even though they are losing money.
- jerf 7y ago
  Employee count seems to be the major problem. The current Patreon site doesn't seem to justify more than 50, and I still feel I'm being generous; I really want to say 20. A couple of web people, contract out any design work you need, some sales staff, a few support people, definitely some business people and support people to deal with chargebacks and the credit card company, and I'm having trouble finding how they have 5 times that many. I feel I need to expand that because that's going to read to a lot of people as "Patreon shouldn't need more than 20 or 50 people." But it actually makes sense to me that Patreon could have 250 people. There's plenty of ways for VC-fueled growth to indeed take over this market and become the household name as VC-style growth intends to do. The problem is that what I see from them doesn't seem to justify that. The complaints that people are posting in other comments have been like that for years. Discoverability of artists is awful. Obvious places to list patron-only media are missing, let alone any sort of hosting. Community features are very perfunctory. Their outreach seems to be stalled out; the top of the patron chart seems to gas out weirdly, where I think there ought to many dozens of people making $10K/month by now by the way the economics of this should work. Patreon today hardly seems any different than it was three or four years ago. As a startup with a couple hundred people, I'd expect to see it moving fast and breaking things and rolling out new features every couple of months, if not weeks, not being so stagnant. I mean, I've worked for a "startup" [1] that had ~200 employees. It had several products, each of which pushed significant updates around once every two months, sales staff, support staff, physical manufacturing staff... it moved fast and sometimes broke things. In any six month period you could take any of the products it had and there were clear changes and improvements, probably a new model, probably starting up a new product since then. Totally different business, my experience is not entirely applicable of course, but Patreon from the outside feels like a business that is already running a bare bones staff as it treads water while the business winds down, not an exciting startup getting things done. Where's the features? Where's the improvements? I don't just mean techical, either, I mean business improvements too (better deals for the users over time, better business partnerships for the aforementioned content hosting, etc.) Why is it still possible to effectively set up a feature-parity competitor to Patreon in a few months with just a few people? Shouldn't they have both technical and business features that make that harder by now? Where's the output of all those people's work? I dunno. I don't expect to be able to see all of it anyhow... but I don't see much at all. If that ~200 person startup had suddenly been switched to working on Patreon, in a year we'd have a good forum (even if we had to write it from scratch), we'd have some sort of custom content hosting, we'd have listened to our customers and built what they wanted more... & I'm judging it against what we could have done 15 years ago at the time. Today a decent prototype of some of what I'm talking about is 10 minutes with CloudFormation or equivalent, and then you can tune from there (since you may not be able to afford to directly ship that). [1]: I can understand if you don't want to call that a startup any more.

davidgerard 7y ago

Last time Patreon tried fucking over the small-timers, in late 2017, it was the whales who objected and fought them on it - Chapo, Amanda Palmer. Because the whales remember when they were minnows, and the small timers is where the big timers come from. Patreon has wanted to dispose of the pain-in-the-backside long tail for ages - this was an explicit business plan by mid-2017. Because they took VC money and turned a sustainable small-time business into something that MUST GROW, whether it makes sense or not.

helsinkiandrew 7y ago

I've always wondered if Patreon's core business can ever be big enough to justify the VC and company size. A generic 'patronage' business will always be expensive to develop and run compared with more targeted discovery and patronage platforms - music, video, podcast, porn. If I can see the 'patron early' videos in my normal youtube feed, or pay podcasters from my podcast app I'd use that. It takes a huge amount of effort to support 'long tail' artists - those that I'm not a mega fan of - on a different site.

coldpie 7y ago

I've never been in the position of taking VC funding, and I don't expect to be in my life, but if I were, I don't think I would. It seems to be a recipe for destroying your company ~5 years down the line. Perhaps the early founders get out with a bunch of money, and maybe that's the point, but I just don't think I'd want to do that to my employees and the people who came to depend on my company. If you don't have a sustainable business model from day 1, you've already lost, haven't you?

stagger87 7y ago
> Perhaps the early founders get out with a bunch of money, and maybe that's the point
chipotle_coyote 7y ago
Probably, yes. Personally, I don't think too uncharitably of Patreon's founders; I genuinely don't get the impression that they started the service because they thought it was a way to make oodles of money, but that they genuinely saw it as doing good for small creators. But I think they let themselves be talked into the idea that they could be the Next Big Thing if only they took enough VC money to follow the "ramp up, get big, and then figure out how to pay for it" model that a lot of startups during the last decade took. The vast majority of those startups failed while they were still small, and the vast majority of the rest only ended up "successful" by selling out to someone else before the bills started coming due... but that's not the story that most of us wanted to hear back then.
draw_down 7y ago
It’s not about the company, it’s about the founders. They will still get rich if they’re not already. They certainly have elevated profiles in SV. They’re set pretty much no matter what. The returns are the VC’s problem. You can always start another company.