Patreon upgrades content creation from a passion to a profession by paying artists 95% of subscription payments from fans instead of 55% of skimpy ad revenue like Facebook and YouTube. Now Patreon itself is getting paid with today’s official announcement of the big series C funding round TechCrunch broke news of last week.
Patreon has raised $60 million led by Chris Paik at Thrive Capital which also led its Series B. As we reported, Index participated in the round that two sources told us value the startup at around $450 million. The Series C also includes existing investors CRV and Freestyle, plus new back Draper Fisher Jurvetson via partner Barry Schuler. The funding brings Patreon to a total of $107 million raised.
The new capital will go towards hiring and scaling up growth by recruiting more videographers, political pundits, game developers, illustrators, musicians, and comedians. Patreon’s business is doubling in size each year across metrics like creators on-boarded and paying subscribers, and it expects that grow to continue. Patreon already has 50,000 creators and 1 million subscribers on the platform that pay an average of $12 per month.
Patreon’s tiny 5% cut of subscription revenue is highly attractive to creators who are used to a much smaller share than 95% (minus credit card processing fees).
“5% is a philosophically important mark” co-founder Jack Conte told TechCrunch in June. “When we pitched the Series B, some of [the investors] didn’t get it, and some of them did.” While Patreon might have been able to get away with charging 10% or 15%, the low rake incentivizes creators to funnel fans from other platforms like YouTube, Facebook Instagram, podcasts, and blogs to Patreon where they can more effectively monetize them.
Some creators like political commentators Chapo Trap House earn over $80,000 per month via Patreon. Even smaller artists can pull in a few hundred dollars per month, which goes a long way towards them making rent and being able to pursue their creative inspirations instead of taking a part time job. And unlike releasing the occasional album or book, or using project-based crowdfunding platforms like Kickstarter, Patreon provides a reliable paycheck.
But to become a truly successful business and justify its new validation, Patreon will either need to grow much larger, or boost the amount it earns. Right now despite its success, it’s only on track to earn $7.5 millon in revenue off the $150 million to creators this year.
The funding could help Patreon develop new premium tools for creators that they’d pay extra to use. Those could include ecommerce functionality for selling merchandise or event tickets, enhanced analytics and CRM features, or new ways to communicate with fans.
As other ad platforms tighten their restrictions over what content is allowed, Patreon has found a way to allow artists to earn a living by being themselves.