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Patreon raises big round at $450M valuation

techcrunch.com

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Re: Patreon raises big round at $450M valuation

#31

Post by ryguytilidie »

jerf wrote: post #15
joelthelion wrote: post #5

That means they're going to expect a lot of revenue. Which they plan to take on money that people give freely. I don't see that ending well.

I use Patreon on a lot, and I don't have any expectation that they are doing it for free. If they were doing it for free, then that would mean to me that the service would be unstable and would disappear some random month without recourse when its unpaid developer gets a job somewhere else, or someone files some light lawsuit against them and that's enough to take the whole thing down. A bigger problem than that they…

"I use Patreon on a lot, and I don't have any expectation that they are doing it for free."

That's not really the criticism you're responding to though. It's not "People will be upset Patreon makes money", it is "people will be upset that Patreon will have to take SO MUCH MONEY from people giving it to others to justify their valuation."

Re: Patreon raises big round at $450M valuation

#32

Post by s0rce »

falcolas wrote: post #24
dandermotj wrote: post #13

That's a P/E of 60... Also this: > In exchange, Patreon takes only a tiny 5% cut. I hope this is sarcasm, because if I had to pay 5% to make any other transaction I'd be fuming. With a marginal cost of facilitating a new patron near zero, I don't think creators or patrons will suffer this as Patreon grows.

Apple takes 30%. So does Google. Kickstarter takes 5%. Many online stock trading firms take somewhere around 10-15%. That fairly well justifies the qualifier of "tiny" in today's world. Given that the basic cost for processing credit cards and other such minutia is already around 2%, the benefit of not having to worry about chargebacks, fraud, or PCI compliance... worth that extra 3% IMO.

Which stock trading firms do you use? Most I've seen are 5-10$ per trade and small % for currency exchange transactions. Paying 10-15% for a stock trade could easily cost $10s of 1000 in commisions which is clearly not the case. Also for small trading Robinhood has free trades.

Re: Patreon raises big round at $450M valuation

#33

Post by chrshawkes »

falcolas wrote: post #24
dandermotj wrote: post #13

That's a P/E of 60... Also this: > In exchange, Patreon takes only a tiny 5% cut. I hope this is sarcasm, because if I had to pay 5% to make any other transaction I'd be fuming. With a marginal cost of facilitating a new patron near zero, I don't think creators or patrons will suffer this as Patreon grows.

Apple takes 30%. So does Google. Kickstarter takes 5%. Many online stock trading firms take somewhere around 10-15%. That fairly well justifies the qualifier of "tiny" in today's world. Given that the basic cost for processing credit cards and other such minutia is already around 2%, the benefit of not having to worry about chargebacks, fraud, or PCI compliance... worth that extra 3% IMO.

Google takes more than 30% on YouTube earnings, it's actually 45%.

Re: Patreon raises big round at $450M valuation

#34

Post by creaghpatr »

IshKebab wrote: post #28
joelthelion wrote: post #5

That means they're going to expect a lot of revenue. Which they plan to take on money that people give freely. I don't see that ending well.

They have a fee of 5%. Let's assume they have a price/earnings ratio of 20, that means they expect people to spend something like $450m/year on Patreon. According to Wikipedia they are at around $150m/year already. I think it is totally feasible that they could increase that to $450m/year and not have to increase their 5% fee. Seems like a reasonable valuation to me.

Are they structured as a payfac? If they are facilitating $100M in payments they probably pull in a couple million in revenue just from processing (assuming they charge for processing, I'm not sure)

Re: Patreon raises big round at $450M valuation

#36

Post by creaghpatr »

joelthelion wrote: post #5

That means they're going to expect a lot of revenue. Which they plan to take on money that people give freely. I don't see that ending well.

It will be interesting to see how their board changes as a result. I think VCs may be trying to get a grip on controlling the content allowed, in addition to the profitability and scaling potential.

If Patreon gets winner-take-all huge, the BoD could literally steer culture by drawing the boundary lines on acceptable content. High amount of intangible value there.

Re: Patreon raises big round at $450M valuation

#37

Post by patrickaljord »

toomuchtodo wrote: post #26
jerf wrote: post #18

Earlier quoted context omitted.

"People are moving all their eggs from Youtube to Patreon." That's less of a concern though, because Patreon is easier to replace than YouTube. The problem with YouTube is that, at least as long as the Internet chatter I hear is still accurate, YouTube itself is still losing money, so replacing YouTube involves being able to immediately hugely subsidize people watching lots of video, and to be willing to do so when i…

> Patreon can't literally be replaced in the legendary "HN denizen claims to be able to replace $X in a weekend", because dealing with taking payments takes longer than that. Stripe literally has an offering just for this use case: https://stripe.com/connect Forum + Stripe Connect + CDN for Video (Cloudfront, Fastly, Whatevs) = Patreon replacement. You could literally replace it with a weekend Hackathon.

You're missing the network effect. With Patreon you can see who your friends are supporting and use the network effect to influence or signal to your friends who you're supporting, kind of like Kickstarter. Conversion rates are higher too because chances are your would be supporters already have an account on Patreon.

It's like anyone could write a Facebook clone, the hard part is cloning the community.

Re: Patreon raises big round at $450M valuation

#38

Post by wongarsu »

gourou wrote: post #7

They probably have the biggest platform for paying creatives, I wonder when they'll ditch YouTube to get more control over their user base and increase their 5% margin.

I fail to see any advantage in ditching YouTube? On private videos for Patreon subscribers Youtube supplies free video hosting with a decent and familiar experience for the content creator. For public videos (or videos that become public after a delay), Youtube offers free hosting and lots of discoverability.

In both cases I only see Patreon having additional cost with little to no upside by ditching Youtube (especially since Youtube policies are already very lenient on non-monetized non-public videos).

Maybe I'm missing something obvious?

Re: Patreon raises big round at $450M valuation

#39

Post by egypturnash »

outoftacos wrote: post #35

Oh god, now they're trapped in the endless useless growth demand cycle. Too bad, I enjoy supporting a few artists on there and it's just a matter of time until this hurts them.

Seriously, I enjoy having my comics supported by my fans there and I'm not looking forwards to them having to Make A Profit.

Re: Patreon raises big round at $450M valuation

#40

Post by wongarsu »

EGreg wrote: post #9

What if there was a crypto-currency for this? :)

Currency exchange is too high of a barrier for supporters.

A large portion of Patreon is artists asking for support for content they offer for free, with only token benefits for the supporters. Making the act of giving money as simple and convenient as possible is key in that scenario. Using a crypto-currency is pretty much the opposite.

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