On: Patreon raises big round at $450M valuation

[IshKebab]

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.

[buro9 → IshKebab]

It is 5% on top of payment processing, and averages around 10% for content publishers.

I keep telling people just to use a PayPal Donate button.

Unless you're in the top 1% of people on Patreon, you would do better just ensuring that more of the donations that exist ends up in your pocket.

If Patreon isn't delivering more donors than your content and self-marketing can attract... you are losing out.

[wpietri → buro9]

I'm a relatively heavy Patreon user; I donate ~$100/month to ~12 different people. The PayPal donate button doesn't solve the problems that Patreon solves for me. Those include: providing long-term support, managing my ongoing support in one place, finding out what the people I support are up to, and getting a notion of how much support they're receiving.

I still do an occasional one-off donation to somebody who doesn't use Patreon, but as far as recurring billing for long-term support, this is all I use now.

[mdorazio → buro9]

If you don't have your own website (like the many, many YouTube content creators), it's much easier to promote a Patreon link and get people to support you on a regular basis than it is to drive people to donate with PayPal. Patreon also offers novel ways to support creators, like tiered donations and per-creation donations. This level of nuance (and the management that comes with it) is hard to replicate on your own.

[dmix → buro9]

There's a lot more to Patreon that simply being a payment platform...

[Anderkent → buro9]

However, a paypal donation gets you a one-off payment, whereas a patreon gets you regular money.

[alexasmyths → IshKebab]

5% is not earnings, it's revenue.

A tiny fraction of that will be earnings.

Hence a problem with the valuation.

Assuming they have 10% margins - that means sales of 10x what you described in order for the valuation to make sense.

Note that Twitter and many others, have never even turned a profit, and are still billions away from breaking even.

[danmaz74 → alexasmyths]

I would expect variable costs for Patreon to be very low, and this their margins to be way higher than 10%, especially if they continue growing.

[alexasmyths → danmaz74]

These companies usually end up spending a fortune on advertising and overhead.

One would 'expect' Twitters 'costs' to be low as well, I mean, it's a very simple service, and 'infrastructure costs' are not huge for them.

And yet - they still lose money.

Taking on a huge amount of money is an easy way to start being inefficient. This is looking like an 'Etsy' story.

[jcdavis → IshKebab]

Revenue != Earnings.

They would need a lot more than $22.5m in revenue to generate that much profit

[psadri → IshKebab]

Series C investors hope to multiply their investment. So the goal is much higher.

[creaghpatr → IshKebab]

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)