Behind the Scenes of Patreon’s Recent Fundraising Round
Three lessons I learned while raising Patreon’s Series C
I have a long history with Patreon’s CEO and co-founder Jack Conte — we first met more than 15 years ago when Jack approached me after a Japanese taiko performance that I had played at Stanford. It was our first quarter of freshman year, and he engaged me in a conversation with his characteristic friendliness and eagerness to make something happen: Hey! I’m Jack. You seem like a drummer. Wanna jam sometime? That turned out to be the start of a long and rewarding friendship — we’ve played music together ever since, and I even got to play drums with Pomplamoose (a band that Jack formed with his girlfriend Nataly Dawn) on their US tours. Jack and I often remark how we wish we had a video of that first conversation, especially after all the years of friendship that stemmed from it.
Fast forward to this summer: Jack and I are sitting in my beat-up car outside a fancy VC firm on Sand Hill Road, blasting Skrillex and eating burritos. We’re PUMPED. It’s just like getting pumped for a Pomplamoose gig… it’s our first pitch of the Series C round, and we’re telling each other that we’re gonna CRUSH it.
We pitched a bunch of VC firms over a 2-week period and essentially finished the round within a month. It closed fast and we raised $60 million (!!) on great terms. Most importantly, we upheld Patreon’s core value of putting creators first. At Patreon, we surround ourselves with teammates, partners, and investors who care deeply about creators, and that’s why we’re thrilled that Thrive, Index, CRV, and Freestyle returned for this Series C round. It’s also why we’re excited to welcome DFJ to our team of investors — DFJ brings tremendous talent and experience, and they’re fired up by our vision of a better web that celebrates and compensates creators for the immense value they create (more on that from Jack, here).
Although I learned a ton during this fundraising round, three lessons stood out to me. I hope you find them useful when you raise your next round.
1. Emphasize confidence when you practice your pitch.
Our confidence significantly affected each investor’s confidence. In our first pitches, Jack and I noticed that when we expressed our opinions strongly, investors got excited and moved towards questions like: How much do you want to raise? What’s your timeline? When we expressed doubt in our positions, investors dug into our weak areas, asked harder questions, and even left mid-meeting to get snacks (yep, that actually happened).
In hindsight, this wasn’t all that surprising because the same thing would happen at Pomplamoose gigs — we’d get pumped-up and go wild on stage for a room full of Pomplamoose fans, and fans loved our confidence. After our initial VC pitches, Jack and I started specifically projecting confidence in our practice pitches. We literally said “our confidence becomes their confidence” as we prepped for each pitch. We identified the “oh shit” questions that we were afraid they’d ask, articulated our points of view, and practiced responding to those questions with rock-solid conviction. That doesn’t mean that we concealed risk or uncertainty; instead, we identified the most cogent way to summarize the business context and described our approach with confidence. Competitors? We’ll address competition with the following strategy. Market size? I’ll review our model with you now, and we’ll share it with your team so that they can review it in detail. Rehearsing our confidence made a huge difference in strengthening our pitches.
2. Show the data warehouse, not just a slide deck.
Although we pre-populated a slide deck with lots of important charts, we intentionally omitted some charts so that we could show investors our data infrastructure. For example, every investor asked: How many patrons support multiple creators? That’s when I would flip my computer towards them, open a web browser, log into our dashboard system, and scroll through a huge menu of well-organized dashboards before opening the one that described multi-patronage on Patreon. Investors LOVED this. Wow, you have dashboards for everything! Is there anything you don’t know about this business?
If you really want to impress investors, answer their questions in real-time using your data warehouse. (It helps if you have a badass data warehouse, which is well worth the investment.) In addition to answering their questions, you’ll show them that you’re capable of answering any question about your business.
3. Seize an opportunity; raise the round as soon as you have a strong business case.
We weren’t planning to raise a Series C this summer, but we launched the process because we had sustained strong and accelerating growth for several quarters — enough to build a strong case for a fundraise. We definitely weren’t strapped for cash, but we decided to take the opportunity as soon as we had demonstrated sufficient growth to raise a round on good terms. There’s a common phrase for this approach: Don’t eat when you’re hungry. Eat when there’s food.
I’m glad we took the opportunity because the additional financing allows us to focus even more on our mission to get creators paid. Instead of continuing at our current healthy rate of growth, we’re now in an even stronger position to tackle the hardest problems for creators in a smarter and faster way.
If you can raise money on good terms, go for it. Raise the round even if you don’t need the money for another few quarters.
I hope this helps, and I wish you all the best with your next fundraise!
PS: We’re hiring!
If you want to see creators get paid, and want to join our team to help make this happen, then check out our open positions. (And, feel free to refer us to talented folks you know!)
One more recommendation:
Take lots of pictures. Document the process. Jack and I took selfies throughout the round, and I bet we’ll treasure those photos for the rest of our lives.
