Patreon, as we all know, traditionally allows creators to earn income by offering exclusive content and experiences to their patrons who pay a subscription fee. It was founded on May 7, 2013, by musician Jack Conte and developer Sam Yam.

However, with evolving times and changing creators’ economies, the business model of Patreon is now changing. We will discuss the new changes in Patreon and what’s making the $4B company founded by two musicians evolve. 

Jack Conte, The Musician/Artist

Conte, started making music and videos after graduating college in 2007. He had spent months working on a new record called "Nightmares and Daydreams" and was trying to find ways to reach an audience. 

At 30 years of age, Jack was texting musicians on MySpace and requesting to open for them, at local bars on the West Coast, along with reaching out to music venues via mail to get booked. 

“I played the dankest local bars and I sang my guts out and I sweated and I sang and I sweat and I sang and I ate tacos out of the back of my car while my friends were all getting promoted and high-paying jobs as investment bankers and I did that for years tour after tour and I'm using the word tour lightly here like there weren't people at my shows like nobody came I had no fans.”

- Jake Conte, SXSW 2024 Keynote

In between all that hustle, he experimented with creating content for the internet, including uploading videos to YouTube. Back then, the idea of documenting his recording process and sharing it online was unique.

“It wasn’t millions of views, but it was so much better than playing empty bars.” - Jake Conte, SXSW 2024 Keynote

He discovered YouTube and started using his creativity to showcase his music and the process behind it. His online content began to gain traction, and he eventually built a following. 

YouTube's subscribe button, according to him, allowed him to establish a direct connection with his audience. This foundation led him to form a new YouTube channel with his girlfriend, Natalie, called Pomplamoose. Through this collaboration, they gained thousands of subscribers and began performing live shows.

The Power of Community Building: Making $400,000/year as an Indie Duo in 2012

Jack Conte's journey into community building began when he collaborated with his partner, Natalie, to create a song together in 2008 on a YouTube channel called Pomplamoose.

As Jack and Natalie continued creating content together, they reached 18,000 subscribers within a year and started performing live shows. The shift from playing empty venues to having 40 enthusiastic attendees at a performance in San Francisco was an incredible milestone for them, showing the tangible impact of building a community of engaged supporters.

Selling Merchandise

In their videos, Jack and Natalie often included their viewers in unique and fun ways. For example, they filmed a vlog featuring Natalie's sister holding a bar of grapefruit-scented soap. 

This soap—aptly named "Pommo soap"—generated such interest from their community that they offered it for sale and received hundreds of orders.

Jack and Natalie also explored different formats to engage with their audience, such as offering their music on USB thumb drives instead of CDs. They went as far as hand-signing each drive to create a more personal connection with their fans. 

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Their ventures into new merchandise options, like thumb drives, were well-received by their community, allowing them to adapt to changing trends and technology.

Additionally, they involved their fans directly in the creative process, such as by hosting a contest to design the album artwork for their first Pomplamoose album on iTunes. 

The response was tremendous, with hundreds of talented submissions pouring in. This inclusive approach further solidified the bond between Jack, Natalie, and their community, making them feel like an integral part of the creative journey.

Through these experiences, Jack discovered the magic of community building—creating a loyal and engaged audience willing to follow him and Natalie across platforms, support their work, and even contribute their own creativity. 

This strong connection with their community became a cornerstone of Jack's work as a creator and later influenced his vision for Patreon. With these branded merch, mp3s, and touring, Pomplamoose was making a whopping $400,000 a year. 

Finding Patreon with Sam Yam

Sam Yam and Jack Conte met during their college years at Stanford University. They were both students at Stanford and shared an interest in technology and entrepreneurship. Their mutual curiosity and enthusiasm for innovative projects brought them together, fostering a friendship and collaborative relationship. 

In 2013, Jack Conte poured his life savings and maxed out his credit cards to create a music video for his song "Pedals." The arduous process left him emotionally and financially drained, with the end result yielding only minimal ad revenue despite reaching millions of viewers. 

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This stark contrast between effort and reward made him realize the need for a better way to support creators. Jack sketched out the initial idea for Patreon on sheets of paper and reached out to his friend Sam Yam for help. 

Sam, in all these years, was in touch with Jack and had also grown and sold his own company, AdWhirl to Google. They met in person to discuss Jack's vision, with Sam offering valuable advice about prioritizing execution over secrecy. 

Together, they agreed to partner and build Patreon, working with limited resources and no established infrastructure. As they launched Patreon in May 2013, they found initial challenges in gaining creators' interest and managing payments. 

However, once creators saw the platform's potential, interest surged rapidly. Within two weeks, Jack was making six figures, and over a thousand creators signed up on launch day. The platform quickly expanded, prompting them to seek funding and hire staff. 

Raising Investment

To scale the business and support the increasing demand, Patreon needed to secure funding. The first round of outside investment they sought aimed to raise $700,000, but it didn't go smoothly at first. 

Jack Conte and Sam Yam approached investors and pitched the idea by sharing Jack's personal story of creating the "Pedals" music video and the financial challenges he faced.

Their persistence paid off when Freestyle Capital, an early-stage venture capital firm, decided to invest the full $700,000 in Patreon. Once Freestyle Capital took the entire investment round, the "floodgates opened" and interest from other investors followed. 

Ultimately, in 2014, Patreon was able to raise over $2 million in its first round of funding, allowing it to scale its operations, hire additional staff, and expand the platform's capabilities.

A Decade of Success and Failures

Jack Conte was an artist and creator from the world of Web 1.0 who transitioned into Web 2.0 when he witnessed the growth of platforms like YouTube and Facebook. He himself transitioned into a Web 2.0 entrepreneur with Patreon and saw the world of creators and the internet evolve. 

However, surviving over a decade, from 2013 to 2024, is itself a huge milestone, which most internet companies fail to hit. However, Patreon kept evolving as per the market needs and also saw its fair share of ups and downs. 

2015-2018: Establishing the Right Business Plan

By 2015, Patreon's creator base had grown rapidly, and the platform boasts over 10,000 creators. However, it was under huge pressure to show ROI because of the VC investments it raised, and hence, it kept changing its pricing and subscription models from time to time. 

For example, Patreon announced a change in fee structure in 2016, shifting the burden of processing fees from creators to supporters. This change is met with significant backlash from creators and fans, and the decision is reversed within six days.

Similarly, in 2018, the company implemented a new pricing structure with multiple plans: a 5% fee for the basic plan, 8% for a "Pro" plan, and 12% for a "Premium" plan. Existing creators are grandfathered into the existing 5% plan.

2019-2021: Leveraging the COVID-19 Creators’ Surge

In 2019, Jack Conte expressed concerns about the sustainability of Patreon's business model in an interview with CNBC, despite the platform's success. Although Patreon has raised $105 million in investment by this point, much of it has come from VC firms.

However, the biggest shifts happened in 2020, during the COVID-19 pandemic, which led to a surge in creators and pledgers. Over 30,000 new creators join Patreon alone in the first three weeks of March. 

Patreon raised $90 million in the same year in a new round of investment, pushing the company's valuation to $1.2 billion. The following year Patreon raised an additional $150 million in a Series F round of financing, reaching a valuation of $4 billion.

2021-2023: The Big Patreon Downfall

During this time, the internet and content creation were going through huge shifts, because of, of course, TikTok, which introduced a new style of content recommendation feed, with its ‘For You’ feed and short vertical video formats becoming the new trend.

Everyone from Instagram to YouTube adopted this shift, as we all know, with Instagram Reels and YouTube Shorts. However, for Patreon, things weren’t looking as bright. In 2022, a memo to Patreon staff reveals that the platform's valuation has dropped by 70%, leading to layoffs and the closure of offices in Dublin and Berlin.

By the end of 2022, Patreon's growth has slowed significantly. The total number of pledges processed through the platform had grown at an annual rate of 7.5%, down from previous rates of over 60%. 

Why Patreon Started Falling Off?

By April 2023, Patreon's creator plans and business model were under scrutiny due to the uneven distribution of pledges among creators and the platform's reliance on top earners. This skew in distribution prompted criticism of Patreon's exploitative pricing model and its tendency to favor a small group of high-earning creators. 

Patreon experienced significant issues due to an update in its payment infrastructure, resulting in billing errors and support loss for many creators. Additionally, the dependency on the Payoneer service for international creators led to withdrawal issues, affecting the trust creators had in the platform.

Moreover, this was primarily due to the shift from creators having a core and dedicated fan base to creators having a bigger distribution yet not-so-dedicated fans. Creators were going from ‘quality fans’ to ‘quantity fans.’

The introduction of new features such as Patreon Video and the new "Patreon" tier added further complexity to the platform. These changes aimed to integrate creators more deeply into the ecosystem, but they also increased concerns about the platform's control and influence over creators' work.

Patreo’s Pivot and New Philosophy: Promoting True Fans Culture

As the world shifts and Web 3.0 comes through, Jack Conte also realizes the shift and senses the need to evolve and adapt. Patreon is going through a significant shift in its approach to supporting creators and fostering community on the internet. 

In light of recent challenges creators face with declining engagement on traditional social media platforms and the uncertain future of online content distribution, Patreon's founders aim to create an ecosystem that promotes deeper connections between creators and their most dedicated fans.

Jack seems to be driven by the idea of empowering creativity and making art for fans and artists, rather than for algorithms. He stresses building that top 5% ‘True Fans’ that are the creators’ ride or die. 

The company's pivot includes a broader focus beyond traditional membership and subscription payments. New features like free membership, commerce, and live experiences allow creators to connect with fans who may not be ready to commit to a subscription but still wish to engage and support them. 

Patreon has a rather more complex business model now, but it offers its creators various ways to monetize, rather than relying on just one. 

These offerings cater to a variety of fan preferences and financial situations, providing creators with more opportunities to build sustainable businesses. The model is divided into the following main categories: Media, Community, and Business, which are further divided into subcategories, as shown in the image below. 

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The goal is to empower creators by providing tools to cultivate loyal communities, support their work, and enhance their creative freedom. By combining media, community, and business aspects, Patreon envisions itself as a foundation for the next decade of professional creativity on the internet.

Conclusion

Patreon is taking a brave step by evolving itself and adapting to the new market. Patreon has a lot of responsibility to its employees and creators, and whether it responsibly handled that or not is arguable. 

However, that’s not the point here. The biggest takeaways are the resilience and adaptability that the founders show. Moreover, the company also seems to have a mission and purpose that it’s following, so it’s not just driven by numbers and statistics. 

Patreon has been an important tool for creators for the last decade, and whether or not it’s relevant now is a different discussion altogether. Irrespective of whether you’re rooting for the company or not, it definitely is important, or at least services and platforms like Patreon are important, to enable creators to monetize their art. 

Further, it’s hard to comment on what the unpredictable world of the internet holds for us. There may be a new media company that solves all these problems in an innovative way and disrupts the industry yet again. 

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