Kye Fox




Patreon's Future: Venture capital is bad, and destinations become dead ends

It’s easy to say Patreon’s fate was sealed the moment it took venture capital (VC). It’s widely understood that VC locks a company on a trajectory with three possible outcomes: acquisition, IPO, or yet another “our incredible journey” shutdown. The received wisdom is that all of Jack Conte’s sincere pleas for patience and trust are meaningless because he no longer ran the company once the VCs got in. As someone currently relying on Patreon for more than bare sustenance, this was...deeply troubling.

Venture capital is like The One Ring in Lord of the Rings: by the time you’re powerful enough to wield it with wisdom and self-control, you don’t need it.

So I did what any nerd does when faced with the prospect of an uncertain future and set out to overanalyze it! This path would have had three major beats.

  1. Figure out who invested in Patreon and the fate of other companies in their portfolios

  2. Identify possible outcomes and threats to Patreon-based income based on 1

  3. Identify backup plans for each scenario in 2

And it’s at this point that it hit me: if I have to do this level of analysis, I’ve already lost the plot. Getting the detail of data needed requires, as best as I can tell, a ~$350/year subscription to Crunchbase Pro or poring through TechCrunch articles across the years.

That’s obviously not happening. I just want to write and make music and get paid. I don’t want to have to think about Silicon Valley politics. Compare thinking about Patreon to thinking about Substack, which I use for my newsletter.

Substack has two rounds of seed funding, the latest from Y! Combinator, which generally seems to have a strong preference for slow, careful growth while educating founders on business. Substack connects directly to my Stripe account and lets me export an email list.

I don’t like depending on Stripe any more than I like depending on Substack or Patreon, but at least Stripe is content with being a payment processor. All their VC rounds go to more new API endpoints for different ways to handle payments. Substack only has a couple of seed rounds. The glamour of huge funding rounds has fallen away since the VC ring re-emerged in the world after the .com collapse, so they’re not likely to take one before they don’t need it anyway.

Patreon lets you export your patrons, email included, but not connect directly to Stripe. They aim to be a full-service creative destination, and giving you a way out doesn’t serve VCs who see a half billion dollar valuation. I’ve been around the e-block a bit and know exactly how it goes when companies get destination ambitions. See: AOL, Twitter, Facebook. All three followed the same path of closing off ways for third-party tools to access the services while they ate a growing market.

Walled gardens and silos have four phases:

  1. They start out as a way to get somewhere and connect with people

  2. Then they become a destination, one of many points of interest along the way

  3. Then they become prisons as a source of relief and prosperity turns into an obligation

  4. Something else comes along to remind people of what they lost

Every company had an AOL keyword in their ads. Then it was a Twitter handle or a Facebook page. You already see Patreon pages mentioned in YouTube videos and podcasts from the same creators who watched as Google upped the demands of video length and content compliance before they would bestow sufficient monetization.

Patreon is at phase 3. Everyone starting a company or promoting a protocol (like Bitcoin) at phase 1 thinks they’re doing something different. The truth is, no one ever knows what #4 looks like.