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Patreon has raised hundreds of millions (https://www.crunchbase.com/organization/patreon/company_financials https://www.crunchbase.com/organization/patreon/comp

Patreon has raised hundreds of millions (https://www.crunchbase.com/organization/patreon/company_financials https://www.crunchbase.com/organization/patreon/company_fina... - according to this $414M in 10 rounds) in venture capital. Meanwhile in January they said they had taken in a total of $3.5 billion in creator lifetime funding. At lets say 8% average cut that means they've made a total of $280M in their whole history, although earlier accounts got grandfathered at the original 5% rate I think. We'll go with 8% to be generous. Even at 12% that means total lifetime income for patreon is $420M, around the same as their VC funding. Then they have to pay all the processing fees, their own development and operational staff (~300 employees in 4 offices), etc. Then they have to actually make money as profit to satisfy investors. VC funding killed patreon.

dagi3d 4y ago
you don't have pay back your vc's you raised from(unless you raised debt). another story is that their investors might have forced them to cut costs and make everything needed to become profitable as soon as possible.
- LegitShady 4y ago
  edited my post. We don't know the terms of the funding so that was just a guess. Even still I don't think they're rolling in money. They're ~10 years old but until 2019 they were only taking 5%. I'd guess they've always lost money.
6stringmerc 4y ago
That guy from Pomplamoose taking Patreon to VCs is what killed it.
sailfast 4y ago
Good point. I also can’t help but notice their CEO monetizes almost entirely on YouTube with scary pockets and other videos.
robocat 4y ago
> VC funding killed patreon. A company is worth it’s future cash flows. You are making an incorrect argument about the sunken costs (sunken costs do admittedly have relevance to individual funds, but not to your argument). You don’t get 10 rounds of investment without a convincing argument (or believable story) for future profitability at each round (even if some rounds turn out to be duds later).
- LegitShady 4y ago
  >You don’t get 10 rounds of investment without a convincing argument (or believable story) for future profitability at each round (even if some rounds turn out to be duds later). Patreon has had multiple rounds of layoffs since 2020. Their finances aren't public but no matter what they're selling investors, what they're doing shows they're bleeding money all over, and VCs make many mistakes betting on the wrong horses.
  - robocat 4y ago
    > VCs make many mistakes betting on the wrong horses A poor analogy. VC is more like putting 20 horses in a race, hoping that 1 horse will win billions of dollars. The other 19 horses usually make approximately $0 in comparison to the winner. VC is not zero-sum. Most sports are zero-sum and most sports betting is worse than zero-sum due to house take and taxes. Using sports for analogies with business often gives invalid intuitions because of this. I think you are also making a fat tail error, the opposite of survivorship/selection bias[1]: you see heaps of failures so you are not properly offsetting correctly for the small percentage of big wins which is the theoretical modus operandi of VC[2]. A majority of VC funds fail to return enough for their risk, but that alone doesn’t tell you whether investing in VC funds gives a poor return: perhaps one VC fund returns 100x, perhaps an investor is willing to pay for investment diversity, perhaps other reasons to invest in what superficially appears to be a poor performing sector. [1] https://en.m.wikipedia.org/wiki/Survivorship_bias https://en.m.wikipedia.org/wiki/Survivorship_bias [2] https://techcrunch.com/2017/06/01/the-meeting-that-showed-me-the-truth-about-vcs/ https://techcrunch.com/2017/06/01/the-meeting-that-showed-me...

dagi3d 4y ago

you don't have pay back your vc's you raised from(unless you raised debt). another story is that their investors might have forced them to cut costs and make everything needed to become profitable as soon as possible.

LegitShady 4y ago
edited my post. We don't know the terms of the funding so that was just a guess. Even still I don't think they're rolling in money. They're ~10 years old but until 2019 they were only taking 5%. I'd guess they've always lost money.

6stringmerc 4y ago

That guy from Pomplamoose taking Patreon to VCs is what killed it.

sailfast 4y ago

Good point. I also can’t help but notice their CEO monetizes almost entirely on YouTube with scary pockets and other videos.

robocat 4y ago

> VC funding killed patreon. A company is worth it’s future cash flows. You are making an incorrect argument about the sunken costs (sunken costs do admittedly have relevance to individual funds, but not to your argument). You don’t get 10 rounds of investment without a convincing argument (or believable story) for future profitability at each round (even if some rounds turn out to be duds later).

LegitShady 4y ago
>You don’t get 10 rounds of investment without a convincing argument (or believable story) for future profitability at each round (even if some rounds turn out to be duds later). Patreon has had multiple rounds of layoffs since 2020. Their finances aren't public but no matter what they're selling investors, what they're doing shows they're bleeding money all over, and VCs make many mistakes betting on the wrong horses.
- robocat 4y ago
  > VCs make many mistakes betting on the wrong horses A poor analogy. VC is more like putting 20 horses in a race, hoping that 1 horse will win billions of dollars. The other 19 horses usually make approximately $0 in comparison to the winner. VC is not zero-sum. Most sports are zero-sum and most sports betting is worse than zero-sum due to house take and taxes. Using sports for analogies with business often gives invalid intuitions because of this. I think you are also making a fat tail error, the opposite of survivorship/selection bias[1]: you see heaps of failures so you are not properly offsetting correctly for the small percentage of big wins which is the theoretical modus operandi of VC[2]. A majority of VC funds fail to return enough for their risk, but that alone doesn’t tell you whether investing in VC funds gives a poor return: perhaps one VC fund returns 100x, perhaps an investor is willing to pay for investment diversity, perhaps other reasons to invest in what superficially appears to be a poor performing sector. [1] https://en.m.wikipedia.org/wiki/Survivorship_bias https://en.m.wikipedia.org/wiki/Survivorship_bias [2] https://techcrunch.com/2017/06/01/the-meeting-that-showed-me-the-truth-about-vcs/ https://techcrunch.com/2017/06/01/the-meeting-that-showed-me...