Founder Effect

How a mental breakdown launched this $4 billion start-up: 'I sat there in a puddle of bottled water, crying like a baby'

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How we built a start-up called Patreon that's worth $4 billion

Patreon is approaching a critical moment.

The online membership platform, where internet creators can run subscription services for their top fans, has secured more than $400 million since launching in 2013. It has paid out billions of dollars to creators, and has a reported $4 billion valuation, as of an April 2021 fundraise.

Now, co-founders Jack Conte and Sam Yam are weighing whether or not to take their company public —but their story starts before Patreon even raised its first dollar from investors. In 2012, Conte and his wife, Nataly Dawn, were known as the indie musician duo Pomplamoose. They were bringing in roughly $400,000 per year in revenue, and even had employees to handle everything from scheduling tour dates to merchandise with 401(k) matches.

A mental breakdown changed all of that. After spending three months producing an intricate music video for their song "Pedals," maxing out his credit cards in the process, Conte found himself sitting alone, burnt out, crying from exhaustion.

"I sat there in a puddle of bottled water, crying like a baby," he tells CNBC Make It. "And it was so dumb."

Adding insult to injury, the video generated embarrassingly little revenue despite racking up millions of views, Conte says. There had to be a better way for creators to get paid for their work, he thought.

Enter Yam, Conte's freshman roommate and a fellow musician who instantly recognized the business opportunity in connecting creators directly to their fans' wallets. Together, the pair built one of the internet's most popular platforms for content creators. After roughly a year of operations, Patreon had already helped its creators earn $1 million.

"In retrospect, now you look at like us being able to send $3 billion now to creators, like the scale has been extremely rapid," Yam says.

Now, that rapid growth is bringing the company to a crossroads as it weighs an IPO

"There's always a risk that the company shifts in balance, and that's a risk I think we've seen play out with lots of other companies. I don't want that to play out at Patreon," Conte says. "And that's why it's, like, the top thing on my mind every morning when I get out of bed."

Watch the video at the top of this page to learn how Conte and Yam built Patreon, and how they're weighing the massive business decision that lies ahead.

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