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>> "Ultimately, we couldn’t find a way to make the business viable. We explored a number of different options—voluntary subscriptions from users, premium featur

>> "Ultimately, we couldn’t find a way to make the business viable. We explored a number of different options—voluntary subscriptions from users, premium features, increased fees—but the resources required to support a high number of lower-volume creators always outpaced our revenue." I wonder if Patreon ran into a similar problem trying to stay afloat without handing more control over to VCs.

johnfactorial 7y ago
Can someone help me understand, honestly, how a business gets started and funded without the answer to "how to make it viable" being answered already?
- replicatorblog 7y ago
  Sure, 1) The founder makes the case that if they reach a critical mass of "X users," or "Y Transaction volume," or another relevant metric there will be a windfall to be shared. 2) The investor evaluates the viability of the plan based on macro factors and the track record of the founders. Every startup pitch has a certain amount of uncertainty. In this case, the market for a Patreon-like service was well-understood. The risk in this deal was whether or not the team could actually execute. There's no definitive way to tell if a team will be able to execute or not until you invest. It turns out that this team has a strong pedigree in community-building, but perhaps less in the day-to-day operation of a market place in a market with an entrenched competitor. They also seemed to be focused as much on achieving ideological milestones as financial ones (which is fine!). The outcome is unfortunate, but that doesn't mean the bet was bad when it was made.
- soneca 7y ago
  Did they get funded? They mention explicitely that they didn't follow the VC route because they couldn't answer how to make it viable. Anyway, Facebook, Twitter and etc started and grown a lot only with the promise that they would be viable someday. It worked out in a big way for Facebook at least.
- mathattack 7y ago
  Because Google and Facebook and several others got started that way. VCs know that the biggest wins often emerge in unexpected ways. And they can pay for a lot of stupid ideas.
  - gowld 7y ago
    Google and Facebook both had technology that was obviously monetizable from the start. They just needed time to build the product and build the monetization features.
    - ollerac 7y ago
      This is a rosy way to look at things after-the-fact, but, as far as I understand, the way Google monetized their search (by showing only relevant ads) was still a fairly new business practice at the time. And Adsense wasn't well tested either. Both were bets that ended up transforming the entire online Ad industry...
      - sixQuarks 7y ago
        It was Overture that started doing pay per click ads on their search engine. Google copied that business model and actually got sued for it.
replicatorblog 7y ago
I think a lot of Patreon's controversial decisions, e.g. raising fees, have come largely because they gave VCs control. I have no inside knowledge, but Patreon seems to be straining to meet the needs of its creators while also reaching the scale its investors expect.
Deimorz 7y ago
Patreon has already been starting to call their own business unsustainable lately: 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...
anotherfounder 7y ago
Didn't they just lay off a significant percentage of their staff?
- CondensedBrain 7y ago
  If they did, I can't find any information on it. Where did you hear about this?
  - anotherfounder 7y ago
    Bunch on Twitter, this is an example: https://twitter.com/EricaJoy/status/1136061641441681408 https://twitter.com/EricaJoy/status/1136061641441681408

johnfactorial 7y ago

Can someone help me understand, honestly, how a business gets started and funded without the answer to "how to make it viable" being answered already?

replicatorblog 7y ago
Sure, 1) The founder makes the case that if they reach a critical mass of "X users," or "Y Transaction volume," or another relevant metric there will be a windfall to be shared. 2) The investor evaluates the viability of the plan based on macro factors and the track record of the founders. Every startup pitch has a certain amount of uncertainty. In this case, the market for a Patreon-like service was well-understood. The risk in this deal was whether or not the team could actually execute. There's no definitive way to tell if a team will be able to execute or not until you invest. It turns out that this team has a strong pedigree in community-building, but perhaps less in the day-to-day operation of a market place in a market with an entrenched competitor. They also seemed to be focused as much on achieving ideological milestones as financial ones (which is fine!). The outcome is unfortunate, but that doesn't mean the bet was bad when it was made.
soneca 7y ago
Did they get funded? They mention explicitely that they didn't follow the VC route because they couldn't answer how to make it viable. Anyway, Facebook, Twitter and etc started and grown a lot only with the promise that they would be viable someday. It worked out in a big way for Facebook at least.
mathattack 7y ago
Because Google and Facebook and several others got started that way. VCs know that the biggest wins often emerge in unexpected ways. And they can pay for a lot of stupid ideas.
- gowld 7y ago
  Google and Facebook both had technology that was obviously monetizable from the start. They just needed time to build the product and build the monetization features.
  - ollerac 7y ago
    This is a rosy way to look at things after-the-fact, but, as far as I understand, the way Google monetized their search (by showing only relevant ads) was still a fairly new business practice at the time. And Adsense wasn't well tested either. Both were bets that ended up transforming the entire online Ad industry...
    - sixQuarks 7y ago
      It was Overture that started doing pay per click ads on their search engine. Google copied that business model and actually got sued for it.

replicatorblog 7y ago

I think a lot of Patreon's controversial decisions, e.g. raising fees, have come largely because they gave VCs control. I have no inside knowledge, but Patreon seems to be straining to meet the needs of its creators while also reaching the scale its investors expect.

Deimorz 7y ago

Patreon has already been starting to call their own business unsustainable lately: 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...

anotherfounder 7y ago

Didn't they just lay off a significant percentage of their staff?

CondensedBrain 7y ago
If they did, I can't find any information on it. Where did you hear about this?
- anotherfounder 7y ago
  Bunch on Twitter, this is an example: https://twitter.com/EricaJoy/status/1136061641441681408 https://twitter.com/EricaJoy/status/1136061641441681408