In early 2013, twenty-eight-year-old singer-songwriter Jack Conte decided to finally put together a music video he’d had in mind his entire life. He’d grown up in the Bay Area as a Star Wars fanatic, watching the films seventy-two times in a single summer; now, in adulthood, he set about re-creating the cockpit of Han Solo’s Millennium Falcon to form the backdrop of the video for his thumpy electronic track “Pedals.”1
Conte started by storyboarding the video from start to finish, recruiting two inventors—a teenaged American prodigy and a middle-aged tinkerer from the UK—to bring along their creations (a spidery black android and a disembodied animatronic human head) as his costars. Next came the Falcon. Conte bought 1,000 washers on eBay and 150 wall plates from Home Depot. Over the course of fifty straight sixteen-hour workdays, he spray-painted each panel and glued every wire nut himself. By the time he and his robotic compatriots recorded their video, he’d spent $10,000, draining his savings and maxing out two credit cards.
The numbers didn’t add up for Conte. After clocking over 2 million views on YouTube, the video earned him less than $1,000 in advertising revenue. In other words, there were more ways than ever to distribute content, but the means of monetization remained meager. Conte’s experience inspired him to found Patreon, a platform where musicians, authors, podcasters, and all sorts of other creatives could release projects to an audience of patrons who’d pledge to pay an artist-specified amount of money per month, or per creation. Patreon would take a mere 5 percent cut, plus a processing fee, generally delighting creators accustomed to splitting microscopic advertising revenue totals with YouTube, as Conte had with “Pedals.”
“That was the video that launched Patreon,” says Conte, bald-headed and bushy-bearded at his company’s San Francisco headquarters, where his Millennium Falcon re-creation resides to this day. “I thought it’d be cool to have that set in the office as a reminder of where we came from. Just the hard work—the weird discrepancy between all the work that we put into this video—and the dollars that I was paid for it. It’s a great symbol for why Patreon exists.”
Conte started training to be a creator much earlier than he did for his role of tech company CEO. He began playing piano at age six and never stopped, ending up in an ill-fated pop band after college before forming a duo called Pomplamoose with his now wife, Nataly Dawn, in 2008. Together they covered popular songs from Beyoncé’s “Single Ladies” to Edith Piaf’s “La Vie en Rose.” Their quirky, do-it-yourself videos racked up hundreds of millions of YouTube views, but not many dollars, at least not before Patreon.
To create the company, Conte teamed up with his Stanford roommate—a programmer and entrepreneur named Sam Yam—sketching out the idea on fourteen sheets of printer paper following the launch of “Pedals.” Within two weeks of Patreon’s 2013 debut, Conte’s monthly music video income had ballooned from $200 to $5,000 as scores of users signed up to pay him and other creators, chiming in with ideas for new features and functionality. By 2018, Patreon was passing along some $300 million annually from 2 million monthly active patrons to a community of 100,000 creators, with plans to distribute $500 million in 2019 via 3 million patrons.
Individuals backed the creators, but Conte turned to Silicon Valley to provide the funding for Patreon itself, eventually raising more than $100 million. Conte is one of a handful of entertainers to raise a nine-figure sum for a company of his own, and among a rare bunch who managed to build a platform capable of lifting the earning potential of his fellow creators. At the same time, the company’s journey is one of a few that offers valuable lessons regarding the perils presented by growth—and the unexpected dilemmas that come along with raising vast amounts of cash.
As Conte launched Patreon, a number of other industry veterans were beginning to see the value in creator-owned enterprises, among them a serial entrepreneur named Adam Lilling. A former record executive who’d launched Southern California startup accelerator Launchpad LA in the early 2010s, Lilling started spending time speaking with top managers and attorneys in the entertainment business, offering to educate them on the startup world for free. His reward: a Rolodex full of names that would help him launch Plus Capital, a firm dedicated to pairing stars with startups, in 2013.
“There are people who effect more change in one day than [some] do in a lifetime, but they need to be married up with operators and entrepreneurs,” he says. “In Hollywood, there’s a force field around celebrity. And the only people that could [navigate] it are the con men and crazy people and the hairstylist’s best friend’s cousin.”2
And people like Lilling, whose model offered a simple alternative. He’d link celebrities with startup founders looking for a way to boost their companies’ profiles, arranging equity deals and taking a cut for Plus along the way; the outfit would only get paid if the star did. Celebrities had long hired agents for landing gigs or writing books; why not have, in essence, an agent for securing startup stakes? Perhaps in part because of those analogous layers of show business—and the legitimacy gained by working on a deal with Ellen DeGeneres—Lilling found it relatively easy to recruit others in the entertainment world.
In the early days of his company, Lilling focused on fixing the endorsement-for-equity model. Skeptics of the setup rightly claimed that stars often negotiated the largest stake they could get in exchange for the smallest amount of effort they could contribute; just because celebrities had a stake in a company didn’t mean they’d actually promote it. Lilling advocated deals that included a commitment—his stars usually promised a minimum amount of promotion on social media.
“It’s the same way you do a traditional endorsement,” says Amanda Groves, a partner at Plus Capital. “You don’t give them half a million dollars to do nothing, you do it because they’re going to post four times or whatever it is.”3
As time went on, though, stars grew increasingly hesitant to flood their social streams with product placement, even if they owned a piece of the company in question. Another option remained for well-known creators: starting their own companies, but not necessarily in the ways they did in the 1990s, when enterprises seemed to be inextricably linked to the celebrities themselves, in cases like Martha Stewart Living and Diddy’s Sean John.
The companies in this new generation were a bit more independent of the entertainers behind them. Lilling took advantage of the new trend by opening an arm of his business called Plus Foundry, built to help celebrities create their own companies. For example, Plus partnered with singer Hayley Williams of Paramore to start cruelty-free hair dye brand Good Dye Young; it became a Sephora mainstay within a year and a half of its 2016 launch. Says Lilling: “If a celebrity has a cofounder, then it’s magic.”4
It wasn’t always the most famous names that made the biggest impact. Just as Williams and Conte were part of music’s vast middle class before starting their businesses, Jessica Alba had been plodding along the B-movie circuit in search of something better. She was getting plenty of work, to be sure, but mostly in cheesy rom-coms and mid-budget thrillers that weren’t exactly thrilling. In 2010 alone, Alba appeared in five movies, but only one received a positive audience score on film review aggregator Rotten Tomatoes (her worst, An Invisible Sign, didn’t earn a single positive review from critics, according to the site).
Alba’s career trajectory changed thanks to a pile of onesies. Before giving birth to her first child in 2008, she broke out in hives after trying to wash the garments, which she’d received as baby shower gifts. Alba became determined to find detergents that wouldn’t have the same effect on her child, but couldn’t. As she researched household staples, she learned many common products were packed with potentially harmful chemicals. Inspired, she became an expert, even traveling to Washington in 2011 to advocate for new legislation to replace the Toxic Substances Control Act of 1976, which permitted some 80,000 untested chemicals to remain in household goods.
“People have to get sick or die from a certain ingredient or chemical before it’s pulled from the marketplace,” Alba said in 2015 (through a spokesperson, she declined to be interviewed for this book). “I felt like my needs weren’t being met as a modern person.”5
Alba’s solution: founding the Honest Company, which would sell everyday products featuring eco-friendly ingredients free of harmful chemicals. Alba’s husband, the entrepreneur and film producer Cash Warren, introduced her to LegalZoom cofounder Brian Lee, who came on as CEO and teamed up with two other cofounders, helping to seed the startup with $6 million. In 2012, the company’s first year selling products, Honest reached $10 million in revenue.
Alba would soon have to compete with existing giants in her space, as did Conte in his. For Patreon, those included crowdfunding pioneers such as Indiegogo, GoFundMe, and Kickstarter, all of which first appeared shortly before Patreon.6 (Kickstarter, the best known of the bunch, counted Kutcher among its investors, albeit in a roundabout sort of way: he insisted on plowing a slug of A-Grade cash into billionaire Chris Sacca’s Lowercase Capital, which had gotten in on Kickstarter shortly after its launch in 2009).
But Kickstarter was a service for crowdfunding specific projects. Patreon aimed to support individuals from musicians to illustrators to YouTube stars in an ongoing manner, becoming a home for everything from podcasts to web comics to writing to animation, with a healthy dose of racy images as well. Conte served as the startup’s creative soul, while Yam focused on linking Patreon with its first investors—mostly from the cast of usual Silicon Valley suspects. Though they would go on to raise nine figures for Patreon, Conte initially didn’t want to top $700,000; one of his backers convinced him to push that number to $2 million. “That allowed us to hire a few more people,” says Conte. “And make a few more mistakes.”7
Conte took the DIY approach he employed for his music videos and applied it to Patreon. The company’s first office was the two-bedroom apartment where he lived; during the day, his early employees came by and worked in the living room. Still, for Conte, adding big backers was complicated. He insisted that Patreon keep its cut of artist income at 5 percent (plus a processing fee) even as potential investors pushed for an upward modification. “There were people who said things like, ‘Hey, look, if you’re not gonna adjust the rate, if you’re not gonna go up to 15 percent or 20 percent, then we’re not gonna work with you,’” Conte recalls. “And we didn’t work with those people.”
Some of his investors seemed like modern versions of the very Renaissance-age patrons of the arts whose support Conte aimed to re-create, in aggregate, through crowdfunding. For instance, Danny Rimer of Index Ventures—an early investor in Patreon and Dropbox, among others—was a former trustee of the San Francisco Museum of Modern Art. Conte remembers walking into his home and finding it packed with sculptures and photography from around the world.
Index led Patreon’s $15.3 million Series A in 2014, and Conte soon secured a proper office. The firm was joined by Bay Area investors including Ron Conway’s SV Angel as well as the venture arms of Hollywood talent agencies CAA and UTA. While all investors ideally bring more than just cash to the relationship, the latter two names came with a very different sort of Rolodex than the typical venture capital outlet.
“They’re constantly looking for ways to help their creators and artists make money,” says Conte. “They realized that it’s a new day and age, and ad revenue isn’t gonna cut it. They have relationships with thousands of amazing creative people, which is important to us. It felt like a good fit. Over the years, we’ve maintained relationships, looked for ways we can partner, help them with their creators in their roster, and their needs.…we’re a tech company now, I guess.”
Of course, Conte had a Rolodex of his own, and put it to good use recruiting musicians like Amanda Palmer, known for her work as half of cabaret duo the Dresden Dolls. With her solo releases, she’d become one of the earliest examples of how an artist could fully fund projects on Kickstarter—raising $1.2 million for an album—but for her, that was essentially a loss leader en route to her next crowdfunding home, Patreon.
Palmer released her first song on Conte’s platform in 2015, an acoustic lament called “Bigger on the Inside,” also available for free on YouTube. She set donation levels at $1, $3, $5, $10, $100, and $1,000, with escalating perks. The top two levels included personal communication, so she capped them at thirty and five people, respectively—and they sold out almost instantly. All in all, she raised about $25,000 for the song, and that was just a starting point: by 2016, she was earning over $150,000 per year from 8,500-plus patrons on the site,8 doubling her audience within three years.
“But it isn’t about making money, it’s about creating a sustainable environment in which I can grow in a noncommercial way,” she says. “I haven’t had to sell my soul to corporations. I haven’t ever had to compromise the work. That’s been the biggest win.”9
As Patreon grew, Conte found himself grappling with some familiar issues faced by founders across all industries: hiring new employees and firing old ones that don’t work out, keeping users happy, and expanding his company without destroying what made it sing to begin with. While he was learning to be an executive, Conte’s experience as an artist came in handy.
“That’s definitely a skill,” he says. “With a creator turned executive, you’re gonna get somebody who deeply understands the customer. At least for me, I feel a personal obligation toward creators, people using Patreon, many of them are my friends and peers. I care about them immensely.”10
As Alba’s Honest Company grew, she decided to expand into a category every young family needs: diapers. To go bottom-to-bottom with giants like Procter & Gamble, though, she needed more cash—and turned to Silicon Valley.
Alba found an ally in Lightspeed, which had previously funded Kim Kardashian’s subscription fashion service ShoeDazzle alongside Andreessen Horowitz. Though ShoeDazzle at one point sported a valuation as high as a quarter-billion dollars, it ended up merging with a competitor in a deal that reportedly valued it at just $30 million or so. Part of the reason ShoeDazzle may not have reached its superstar potential: Kardashian seemed to be a celebrity attached to the company, as opposed to being a celebrity who built the company, like Alba.
“Jessica was in the office every day…this was her company,” says Lightspeed’s Jeremy Liew. “It was her idea, which makes a really big difference…she built the community around something.”11
Long before becoming Lightspeed’s first consumer specialist in 2006, Liew had gotten his start at Citysearch selling websites in the mid-1990s, eventually moving along to Andreesen’s Netscape (“after the rock stars left the building,” he says). Liew witnessed Silicon Valley moving away from consumer-oriented businesses after the first dot-com crash; when he started out at Lightspeed, ecommerce seemed fairly lonely. Yet a lot had changed in the intervening decade. The cost of starting companies had fallen drastically—by 90 percent or so, according to Liew—and soon-to-be behemoths such as Facebook were beginning to hit their stride, providing channels for famous creators to drive customers to their startups.
“Historically, ecommerce company startups really only get an opportunity to grow when there’s a new scalable, repeatable customer acquisition channel,” says Liew, referring to social networks where stars like Alba gain immense followings. “There’s usually a short window of maybe three to five years…and then over time, it gets priced efficiently.”
Liew was eventually joined at Lightspeed by Nicole Quinn, a former retail analyst at Morgan Stanley. They loved what they saw in Alba and the Honest Company, and Lightspeed teamed with two other firms in 2012 to lead a $27 million Series A. By 2015, the company had raised over $100 million and was doing $150 million in revenue, sporting a valuation approaching $1 billion—while making Alba herself a centimillionaire on paper.12
Two years later, Quinn and Liew teamed up with a pair of Lightspeed colleagues to appear on Apple TV’s first original show, a startup competition called Planet of the Apps, headlined by a panel of four A-list judges. Alba brought her Honest Company expertise, while entrepreneur Gary Vaynerchuk lent his experience growing his family’s liquor store into a $60 million ecommerce site for wine. Will.i.am of the Black Eyed Peas arrived with insights gleaned as a stakeholder in startups like Beats; actress Gwyneth Paltrow shared tips inspired by building her startup, Goop, from a weekly newsletter to a lifestyle company curating everything from health food to skin cream to pseudoscientific wellness advice.
Contestants on the ten-episode series were given sixty seconds to pitch the merits of the app they’d created. Winners got to pick one of the four judges as a mentor before moving on to bring their ideas to Lightspeed for a chance at funding and a prime spot in the Apple store. The show lasted only one season but spawned a number of valuable business relationships between the judges and contestants, like Lauren Farleigh, founder of virtual mall app Dote. That’s especially valuable in the context of Silicon Valley, where the dearth of female founders can result in limited options when it comes to finding mentors who’ve faced similar challenges.
“They still have meetings, phone calls, and Lauren loves to get the perspective of Gwyneth,” says Quinn. “Not just because she’s a celebrity, but because she’s a founder.”13
Paltrow got plenty out of the experience, too: after befriending Liew, Quinn, and their colleagues on Planet of the Apps, she landed Lightspeed as a lead investor in Goop’s $50 million Series C. “It’s great to be Gwyneth Paltrow when you’re raising money, because people take the meeting, but then you get a lot more rejections than you would if they didn’t want to take a selfie,” Paltrow said. “It becomes easier when you have a thriving business and your unit economics looks good.”14
Quinn attributes the company’s initial success to Paltrow’s ability to make people feel that a Goop store must be just like her own house—and that they can approximate her way of living by purchasing a few items (the merit of those items, however, is another issue altogether). In any case, startups launched by stars often seem to resonate more with consumers than products pushed under typical endorsement deals, whether executed on television or Instagram.15
“No one believes that Tiger Woods did a comprehensive check to decide that Rolex was the best possible watch in the world for golfers, and that’s why he’s sponsored by Rolex,” says Liew. “Gwyneth was developing Goop as an expression of her own interests and tastes in lifestyle for years…it’s very clearly hers. The same thing is true with Jessica with the Honest Company.”16
The way Liew sees it, there’s a set of people who are founders and a set of people who are entertainers; in the Venn diagram between the two, there’s a thin area of overlap. His experiences with Alba, for example, haven’t been much different from his experiences with non-famous founders: they sit in a conference room and review slides. And, like most other entrepreneurs, she has learned by experience. “Unless you’ve been a founder before, you have to teach them how to be a founder,” he says. “That’s what circumstances demand.”
Within several years of Patreon’s start, meanwhile, some of its most promising creators were finding ways to earn tens of thousands of dollars per month on the platform. More patrons meant more money for creators, but also more headaches for Conte.
“When you have automation, the rate at which you have to scale is unreasonable, it’s very weird,” he says. “You have instant scale, and so, just to keep up with the inbound influx of tickets and customers and payments, you have to add employees at a rate that’s unprecedented.”17
As Patreon became mainstream, the company also started to appear on the radar of malicious types. In the fall of 2015, employees discovered hackers had gained access to scores of users’ names, emails, and mailing addresses. The episode shook Conte’s community and resulted in additional expenses for his company, including the hiring of a security firm to conduct an audit and implement “new tools and practices to ensure industry-leading security.”18
In addition to security threats, Patreon faced challenges from well-funded competitors, including Kickstarter, which launched a new feature called Drip—allowing creators to receive ongoing funding in a manner similar to Patreon—in 2015. That same year, Conte’s company acquired Subbable, a Patreonesque video subscription service launched by YouTube stars. Terms of the deal weren’t disclosed, but Subbable added some 40,000 subscribers to Patreon’s total of roughly a quarter million at the time.
To fund all these endeavors, Patreon turned to its Silicon Valley backers again and again. The company raised some $30 million in a 2016 Series B round and double that in a Series C the following year, putting its total north of $100 million and reportedly valuing the company in the neighborhood of $450 million.19 Expansion yielded more tough decisions for Conte, and he admittedly didn’t always make the right ones.
In the first week of December 2017, for instance, Patreon changed its fee structure. While holding its own piece of the pie steady at 5 percent, the company shifted additional transaction fees from a sliding 2–10 percent to a fixed 2.9 percent plus a flat $0.35 fee. The goal was to streamline the Patreon process and make payments more predictable, but the decision resulted in a community uproar, particularly for creators dependent on $1–$2 donations. Within a week, Conte reversed his decision and apologized to users, promising to come up with a better alternative.20
“I still think of Jack as my artist friend who decided to become a CEO,” says Palmer. “I love that he is taking it for the team and steering this ship, but I also know that a successful business can be a different sort of reward than a successful artwork, and I understand that dilemma more than anyone. So I call him and hug him occasionally. And thank him for what he’s made possible in all of our lives.”21
Conte seems to have grown more comfortable with the business side of his role. Shortly after the Series C, for example, one team wanted to work on building a way to more efficiently sort through new creator signups to Patreon; the most promising ones would be flagged and linked with a team that could help them boost their content releases. Conte didn’t feel this would really be helpful but challenged the team to prove him wrong—“disagree and commit,” as he describes it.22
“Sure enough, they were able to sift through inbound signups and collaborate with the sales team and the creator team to help identify really awesome creators that were gonna launch on the platform, and then potentially help their launches be even better,” says Conte. “They finished the quarter exceeding their goals…you just have to trust people around you who’ve done things like this before.”
By 2018, some of Patreon’s top creators were pulling in more than $100,000, not per year but per month. Among them: the snarky commentators of Chapo Trap House, news junkie Phil DeFranco, and online entertainment outfits Kinda Funny and Complexly. The following year, the company announced a $60 million Series D, with funding coming mostly from its usual cast of Silicon Valley investors. For the first time, the group also contained creators—including comedian Hannibal Buress and musician Serj Tankian, known best for fronting rock band System of a Down.
Conte doesn’t claim to be anything close to perfect as an executive; in fact, he seems more willing than most to admit past mistakes and potential challenges coming down the line. What rankles him more than the notion of being wrong is the idea that any bad decision he makes is the result of investor pressure, as some suggested when he made the fee structure switch. Conte claims his investors actually hold him back from making controversial business-first decisions. He says that at one point he suggested bringing in brands to become patrons of individual creators, but a prominent venture capitalist told him to slow down. “Patreon’s so cool right now,” he said. “Don’t ruin it.”
According to Conte, his backers are not setting financial targets for Patreon; rather, the company’s numerical goals are set by him and his team. He sees financial success—and the ability to control his company’s destiny—as inextricable from Patreon’s ability to help creators get paid, since a different sort of corporate structure could yield a less palatable platform for them.
“I don’t want to sell Patreon to YouTube,” he says. “I don’t want to get into a position where the company has to exit because we’re running out of cash, or whatever. So I care very deeply about Patreon being on a healthy trajectory toward independence. For me, that means an IPO down the road, or whatever it is, but a way for Patreon to stay an independent company.”
Even while running the show at Patreon, Conte still finds time to create. He cranks out about 100 music videos per year, split evenly between Pomplamoose and Scary Pockets, the funk band he started in 2017. Once a month, he spends a weekend in Los Angeles to make music like a particularly catchy cover of Radiohead’s “Creep”—Scary Pockets now has more than 400,000 YouTube subscribers as well.23
“That would not work without Nataly essentially being the CEO of Pomplamoose and my buddy Ryan basically running Scary Pockets,” he says. “That allows me to basically be a creator with weekly releases, publishing content frequently, but still be at Patreon.”24
Constant vigilance is crucial, as Conte learned in the wake of Patreon’s hack and the blowback over its fee structure. Other entertainer-owners have gone through even more daunting controversies: legal action over the Honest Company’s labeling led to class action settlements25 as well as a reformulation of its laundry detergent and a voluntary recall of its baby wipes and powder; along the way, the outfit replaced cofounder Brian Lee as CEO and reportedly lost its unicorn status in 2018.26 That same year, Goop settled a false advertising suit with the California Food, Drug, and Medical Device Task Force for $145,00027 after the agency argued that the company had made deceptive claims about fifty-one of its products.28
Patreon, Goop, and the Honest Company are vastly different companies sporting healthy valuations, but they face the same dilemma as many well-funded startups shifting from youthful promise to awkward adolescence: too big for a centimillion-dollar buyout to serve as anything other than a letdown to investors, they must either become sustainably profitable as private companies or get big enough to go public.
In Silicon Valley, the founders of a company that raises $100 million and sells for $200 million could conceivably walk away with nothing if their investors have negotiated a favorable liquidation preference. The idea of raising too much money—and the expectations that go along with it—is a lesson many entrepreneurs learn only by doing. That’s assuming they can even make it to the point of an exit.
“Whether you’re an artist or whether you’re building a company, nothing works, everything’s on fire, you get hacked, it’s just fucking so hard,” says Conte. “I think a lot of people experience that, and maybe think, ‘I guess I’m not doing this right, I guess I should just give up. The universe is giving me signs, maybe I’ll just do something that’s easier.’…You just have to muster it up and just keep going.”29
The soundtrack coming from Patreon’s speaker system as we wrap our interview—Journey’s “Don’t Stop Believin’” and Chumbawamba’s “Tubthumping” (“I get knocked down, but I get up again”)—underscores that notion. And, in the end, Conte’s tribulations as chief of a tech platform haven’t changed his fundamental belief in the merits of his mission, as he makes clear with a final analogy.
“The museum is there to serve the paintings, to be a frame for the paintings,” he says. “I feel the same about Patreon and YouTube and all these other distribution platforms. In the end, distribution platforms come and go, new technologies come and go, but art is often hanging in there for thousands and thousands of years, the same art. And art in general will always be the focus of those things.”