Patreon is a membership-based service where content creators can engage with their fans on a more personal level than ever before. Despite their popularity prior to 2021, the company has capitalized on the coronavirus pandemic. The health crisis has forced people to explore new routes to find entertainment, particularly with being stuck at home for most of the day. In the same vain, the platform has also given creators across all spectrums of entertainment a new way to monetize their content. With all this in mind, it’s no surprise that the Patreon IPO date is en route in 2021.
The company makes money by taking a cut of what creators make from using their platform, usually in the form of a flat rate, which varies depending on how many subscribers and how much revenue a creator brings in every month. The Information recently reported that Patreon is looking to go to market this year, seeking to capitalize on their recent growth.
TL;DR
- Patreon is an eight-year-old company that acts as something of a middleman between content creators and their fans. Through subscription offerings, creators can engage with their fans on a frequent and casual basis.
- The platform makes revenue by taking a cut of how much an individual creator makes each month from their subscribers. They make additional revenue by charging a processing fee if the creators sell any tangible merchandise through the Patreon platform.
- The company is currently valued at $1.2 billion as of September of last year. To date, they have raised $256 million in funding from investors.
- Popular creators on Patreon include Philip DeFranco, Chapo Trap House, and Amanda Palmer. The platform has recently added former rapper and pop culture mogul Joe Budden as the Head of Creator Equity.
A quick company history of Patreon
Co-founded in 2013, Patreon started off as a way for then-musician Jack Conte to make some money from the YouTube videos that he was producing. Teaming up with Sam Yam, Conte and his new partner began developing a platform on which creators could allow their fans (aka patrons) to support their various ventures and content.
After going through numerous rounds of funding through the year 2014, Patreon grew to the point where the creators using their platform were making a combined $1 million per month from their patrons. They then purchased Subbable—one of their leading competitors in the subscription-service industry—in March of 2015. With the acquisition of Subbable, Patreon was able to combine the forces of the two company’s creators, as well as their subscribers.
Patreon has since continued to experience year-over-year growth, adding creators to their platform on a consistent basis. These creators range from podcasters to musicians, writers to novelists, models to photographers—and that’s just a brief synopsis of the types of people you’ll find on the platform.
Patreon fundraising has gotten the company where they are today
To date, Patreon has raised $256.8 million over six rounds of funding. Lead investors throughout these fundraising efforts have included Thrive Capital, Glade Brook Capital Partners, Wellington Management, and Index Ventures.
The money brought in throughout rounds of financing are as follows.
- Seed round: $2.1 million, 9 investors
- Series A: $15.3 million, 17 investors
- Series B: $30 million, 7 investors
- Series C: $59.4 million, 6 investors
- Series D: $60 million, 10 investors
- Series E: $90 million, 4 investors
Funding like this shows a firm trajectory toward the public domain. Patreon is following in the footsteps of numerous artistically based companies who have gone public before them.
Path to the Patreon IPO
What we know is that Patreon plans to go public sometime in 2021, most likely during the second quarter of the year. What we don’t know is exactly how they will go to market.
This is an increasingly relevant question as special purpose acquisition companies (SPACs) swell in popularity. In the first seven weeks alone, there were already 160 SPAC IPOs, which accounts for 78% of public offerings during the time period. There’s also a direct listing, which is quicker and more streamlined than a traditional IPO.
Related: A guide to special purpose acquisition companies
For Patreon specifically, there are a few options on the table. They include a traditional IPO, a direct listing, or a hybrid between different methods. We’ve seen many companies use a SPAC method to get their company to market these past few years, but using a direct listing is still relatively infrequent. Luckily, it isn’t too complicated of a method to wrap our heads around, so retail investors should fare just fine regardless of which route they choose for the Patreon IPO.
When a company pursues a traditional IPO, they typically enlist the help of a financial services company to underwrite the stock. BofA Securities, Goldman Sachs, and JPMorgan are all common companies to encounter when dealing with underwriting. These companies are cut out of the process when using a direct listing, accounting for the first big process change.
The second large process change for a direct listing comes when the company that’s going public issues new shares of the company’s stock. That step is also skipped—kind of.
Shares are, of course, distributed to new investors. However, they’re sourced from the positions of existing investors. While a listing price is predetermined in a traditional IPO, a direct listing allows the price to arrive through trading. In a way, this is truly letting the market determine what the stock is worth.
Direct listing IPOs are much easier to purchase than traditional IPOs, as they don’t require you to purchase shares ahead of the listing day, which usually can’t be done by retail investors. With a direct listing, as soon as the listing day comes, you can trade the stock at the market price just like you would any other security.
When is the Patreon IPO date?
The official date for the Patreon IPO has yet to be announced, but it will become public information once Patreon publicizes their paperwork with the Securities Exchange Commission (SEC). As of February, they maintained a confidential filing to keep investors out of the loop for as long as possible. While it sounds malicious, it’s quite common—particularly during an era of extreme unpredictability in the market and economy alike.
What investors need to know ahead of the Patreon IPO
Regardless of what method the company uses to get to market, investors ought to act with caution and ensure they do adequate research before putting money into any company or security. This is called doing your due diligence, and it is truly up to every individual investor to do so.
While a direct listing may seem “easier” to access for retail investors when compared to a traditional IPO, that doesn’t mean that it makes it a guaranteed better investment than other companies.
In regards to Patreon, the platform has seen extensive growth over the past years, and has brought on plenty of new talent to the platform as well. Their loyalty lies with the content creators that call Patreon home, as evidenced by their recent hire of Joe Budden as head of creator equity. In this role, Budden will act as a liaison of sorts between the platform and creators. It shows that Patreon is committed to a just corporate structure that benefits their creators rather than solely uplifting the executive chairs.
You might be wondering what the difference between Patreon and a GoFundMe-type platform is. Honestly, it’s a valid question whether or not you’re an investor.
Patreon’s market niche lies within their offering of month-to-month subscription services, much like a cable television subscription or other monthly subscription boxes that have gained in popularity as of late. Whereas a GoFundMe centers largely around a one-time donation, Patreon gives fans the opportunity to receive exclusive content for a monthly premium. Exclusive, a word that is usually just for show, holds substantial value on Patreon.
Creators post content that their fans won’t be able to find anywhere else, things like exclusive podcast episodes, tutorials, or access to merchandise. This adds another layer to Patreon’s appeal for both creators and fans alike.
Bottom line
The end of the pandemic is looming on the ever-growing horizon, but there’s little to no question that many changes brought on by 2020 will be here to stay for the long haul. Chief among those is the consumer’s obsession with content. Netflix, Hulu, Disney+ and more all saw massive growth in subscription metrics over the past year. So have companies who sell books, newspaper subscriptions, and music streaming memberships.
In a way, Patreon is in this camp, but they’ve got their own niche, too. Patreon offers the “small guy” a chance to monetize their content alongside the big fishes. But make no mistake about it, Patreon doesn’t plan on being a small guy for long, and neither do the creators that have found success thanks to the platform.