Over the last week I’ve been reading articles, watching youtube clips and listening to podcasts about Patreon’s orgins and evolution. He’s a short history of the company.
1. The Start
Patreon was co-founded in May 2013 by Jack Conte (multi-instrementalist, half of the duo Pomplamoose, and Patreon CEO) and his college roommate, Sam Yam (Stanford computer science graduate, analytics expert and Patreon CTO).
Here’s a basic explanation of how it works:
In his 2013 presentation at the XOXO festival Conte explained that he hit upon the idea for Patreon while making a music video that maxed out his credit cards. After a period of relative success with Pomplamoose, a downturn in creative productivity highlighted to Conte how hard it is to make money from music unless you sell out to big record deals. For content creators producing stuff in their spare time, or relying on platforms like Youtube, finding time and money to support their creative output is really hard. Conte explained that in recent years this has been compounded as the value of youtube hits declined, meaning video makers receive less money from advertising on their channels. Rather than rely on an indirect relationship with advertisers and the desires of companies to satisfy shareholders rather than content creators, Conte wanted to put a virtual tip jar on his own website so fans could give money when they felt like it, or give him their credit card details and agree to give $x for every video he posted. He realized that there are lots of people in the same position:
“…I started thinking about webcomics and all these people putting up stuff for free it not making money and I realize that maybe this is something for other people too, not just me.”
He spoke to Yam, and over the next couple months the Patreon website was built, and launched with three creators.
Conte and Yam sought seed funding for the company and they raised $2.1m by August 2013 from Alexis Ohanian (Reddit co-founder), and a number of venture capital(ists) firms: Atlas Venture, CRV, Freestyle Capital, Garry Tan, Jonathan Teo, Rothenberg Ventures, SV Angel and Tyler Willis.
By October 2013 the site was hosting 4000 creators.
Series A funding (the next step after seed funding) was sought in 2014 and Patreon raised $15m from 17 backers (https://www.crunchbase.com/organization/patreon), including some of the original funders. Danny Rimer is the lead investor and got a seat on the board alongside Conte and Yam.
In a podcast with Surviving Creativity, Conte explained the process of raising this new capital. Here it is important to note that Patreon is a tech startup which isn’t about making loads of money, or showing the potential to make loads of money before being bought by a massive company like Google or Amazon. Patreon sells itself on being ‘creator centric’. Conte has explained this as different to many platforms found online as the aim isn’t to get more readers, viewers, subscribers, listeners etc. Rather it is about putting creators first and helping them generate income direct from their fans.
“I’ve seen so many companies grow and forget where they started, and fuck over their users…I’m scared to death that will happen to Patreon.”
This meant finding the right kind of investor. Patreon takes 5% of the money given to creators by patrons, and Conte gives an example of a potential backer who saw a point in the future where this percentage could be increased to 10%, therefore doubling the company’s income overnight. Conte knew this wasn’t the right investor for Patreon. In contrast, Danny Rimer was. So much so, that to demonstrate his alignment with Patreon’s founding principles, he offered to take half the voting rights of Conte and Yam on the board. These principles, and the community nature of the company is really interesting and something I’m planning to follow up as my research continues.
By June 2014 the site had grown to 25,000 creators, and with the series A funding the company could expand. Patreon moved to new offices in San Francisco and hired more staff to build a mobile app, help run the site, handle the increasing number of users and liaise with creators and patrons.
In October 2014 Patreon creators were receiving over £1m a month from patrons. The site had over 125,000 patreons doing this giving.
3. Acquisition of Subbable
Patreon.com isn’t the only company doing this sort of crowdfunding. Subbable was launched in July 2013 with a similar approach to Patreon. It grew to over 38,000 subscribers, but in March 2015 when Amazon (Subbable’s payment processor) changed its regulations creators faced a massive funding crisis.
“The short version of the story is this: creators on Subbable were about to see a 30 to 40% decrease in their monthly income due to a change within Amazon Payments.”
Patreon and Subbable agreed a deal which saw the latter’s creators migrate to the former. Patreon - along with Kickstarter, Lyft, Twitter and Pinterest - use Stripe to process their payments.
4. Further Growth
At the time of writing (31st July, 2015) Patreon has between 70-75,000 creators in various stages of ‘launch’.
To be continued...