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Comment by LegitShady | Hacker News Reader

Patreon has raised hundreds of millions (https://www.crunchbase.com/organization/patreon/company_fina... - according to this $414M in 10 rounds) in venture capital.

Meanwhile in January they said they had taken in a total of $3.5 billion in creator lifetime funding. At lets say 8% average cut that means they've made a total of $280M in their whole history, although earlier accounts got grandfathered at the original 5% rate I think. We'll go with 8% to be generous. Even at 12% that means total lifetime income for patreon is $420M, around the same as their VC funding.

Then they have to pay all the processing fees, their own development and operational staff (~300 employees in 4 offices), etc. Then they have to actually make money as profit to satisfy investors.

VC funding killed patreon.

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> VC funding killed patreon.

A company is worth it’s future cash flows. You are making an incorrect argument about the sunken costs (sunken costs do admittedly have relevance to individual funds, but not to your argument).

You don’t get 10 rounds of investment without a convincing argument (or believable story) for future profitability at each round (even if some rounds turn out to be duds later).

>You don’t get 10 rounds of investment without a convincing argument (or believable story) for future profitability at each round (even if some rounds turn out to be duds later).

Patreon has had multiple rounds of layoffs since 2020. Their finances aren't public but no matter what they're selling investors, what they're doing shows they're bleeding money all over, and VCs make many mistakes betting on the wrong horses.

> VCs make many mistakes betting on the wrong horses

A poor analogy. VC is more like putting 20 horses in a race, hoping that 1 horse will win billions of dollars. The other 19 horses usually make approximately $0 in comparison to the winner.

VC is not zero-sum. Most sports are zero-sum and most sports betting is worse than zero-sum due to house take and taxes. Using sports for analogies with business often gives invalid intuitions because of this.

I think you are also making a fat tail error, the opposite of survivorship/selection bias[1]: you see heaps of failures so you are not properly offsetting correctly for the small percentage of big wins which is the theoretical modus operandi of VC[2]. A majority of VC funds fail to return enough for their risk, but that alone doesn’t tell you whether investing in VC funds gives a poor return: perhaps one VC fund returns 100x, perhaps an investor is willing to pay for investment diversity, perhaps other reasons to invest in what superficially appears to be a poor performing sector.

[1] https://en.m.wikipedia.org/wiki/Survivorship_bias

[2] https://techcrunch.com/2017/06/01/the-meeting-that-showed-me...

I think you're reading too much into an analogy I used saying 'sometimes VCs invest money and fail'. I'm not looking at other companies, I'm looking at Patreon, and they're not making enough money to justify their valuation, as far as I can tell. And they don't act like they're profitable either.

To flog a dead horse, I just think saying “VC killed Patreon” is senseless.

Profitability might not matter to the VC investors if they can IPO like Uber.

Patreon has been amazing for small and large content creators, providing a big win for society IMHO, and Patreon seems likely to continue in some form even if they don’t meet the VC growth targets. In a perfect world, things would be different, but there there is little surprising here (which is part of the crux of your point?).

Profitability is almost meaningless for a growing company (see Amazon). Perhaps Patreon turns out to be a loser for the investors, or perhaps a loser for society. But we have to wait and see, and meanwhile take the wins we get.

They have sacked some employees, but employees take that risk on when they join a startup, and those risks are obvious to anyone that is paying any attention.

Sure, VCs make mistakes, often big hurtful ones. That’s part of the game. You are calling the game over, and it isn’t half-time (to stretch some sporting analogies badly), and most importantly: you are a spectator and you are not the ref. As far as I can tell, you don’t understand the rules of the game.

That guy from Pomplamoose taking Patreon to VCs is what killed it.

you don't have pay back your vc's you raised from(unless you raised debt). another story is that their investors might have forced them to cut costs and make everything needed to become profitable as soon as possible.

edited my post. We don't know the terms of the funding so that was just a guess. Even still I don't think they're rolling in money. They're ~10 years old but until 2019 they were only taking 5%. I'd guess they've always lost money.

Good point. I also can’t help but notice their CEO monetizes almost entirely on YouTube with scary pockets and other videos.

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