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Feb. 18, 2020, 12:40 p.m.

Need cash fast? Patreon is now lending money to its creators to launch projects with high startup costs

“Patreon has access to all the data about a creator’s earnings history, what they offer as benefits, how much they engage with their patrons…everything needed to forecast their earnings and retention, without a creator even needing to submit an application.”

I was tempted to kick this story off with a platitude along the lines of: “Starting something is the hardest part.” Then I thought better of it, because that’s not strictly true. Keeping something going can be much harder, as in the case of a conversation, relationship, or even this newsletter, because with starting something, you at least get the energy-sparking juice of novelty. Hell, you could even apply that argument to this very section: 76 words in and I’m barely keeping the energy up.

But wait! Don’t go, because I think this is a really interesting one, especially if you like stories about financing for creative projects. The peg here involves the fine folks over at Multitude, the Brooklyn-based podcast collective and production studio that we’ve written about a couple of times now.

To recap: Multitude is an independent outfit built around a handful of warm-hearted shows, mostly but not always of the relaxed conversational variety. Here’s how they sum themselves up:

Our mission is to create shows about the subjects we love, from mythology to basketball to Dungeons & Dragons, and build incredible communities around them—all supported by our community of MultiCrew members. We also help our clients produce, edit, market, and monetize great podcasts, and rent our NYC studio at affordable rates.

Learn more about our podcasts: a celebration of all things basketball for fans and newcomers alike; a sound-rich audio drama governed by the rules of Dungeons & Dragons; a grown man’s first tour through a beloved children’s book series; a drink-and-chat history lesson; and a passionate re-watch of an obscure queer TV show. We are all about enthusiasm, nuance, and thoughtful examination of the stuff we love.

They’ve consistently piqued our interest for the shrewdness of their operation; since launching in 2017, Multitude has nimbly pushed to diversify its revenue beyond the classic ad-support model, including a spirited adoption of direct support, primarily via Patreon and Memberful, and a tertiary business renting out studio space.

We can now add one more notch to the interesting-ness of their financial life: The Multitude crew are now among the earliest patrons of Patreon Capital, a new alternative financing service by the membership platform. The service provides cash advances to creators in exchange for a slightly greater sum of their future income generated on Patreon.

It’s a relatively speedy financing option, one that could come in handy if you need a quick burst of funds to finance a new project requiring higher-than-usual upstart capital. Which is precisely what Multitude needed.

The crew had been developing a somewhat experimental audio sitcom series called Next Stop. Because they were planning to build that series as a SAG-AFTRA production — and thus, needing to pay SAG-AFTRA rates — they were faced with requiring more upfront money than usual to get things off the ground.

As a smaller business, the issue was an acute expression of their on-going resource managing reality. “We were running into this problem where we have a ton of great ideas, but because we’re a small business, we constantly have to decide between putting money towards paying our people and getting more equipment versus saving it up for a bigger project,” said Amanda McLoughlin, Multitude’s CEO. So, instead of struggling with that balancing act and waiting for a longer period of time to save up the funds, they turned to Patreon Capital when the opportunity came up.

Patreon provided the team with a cash advance of around $75,000 to cover the production budget for the series, with the expectation for Multitude to pay back a slightly greater sum from Next Stop’s Patreon earnings over the next two years. (Neither party disclosed the exact figure that Multitude needed to funnel back.) As a matter of risk mitigation, the Patreon revenues of another Multitude show, Join the Party, will be taken as collateral if Next Stop isn’t able to generate enough return to fully pay Patreon back after the two-year period.

About a dozen of these Patreon Capital cash advances have been given out so far, and Patreon hopes to expand the program to cover more creators in the year to come. And as the collateral stipulation in the Next Stop arrangement suggests, Patreon will generally be focused on creators who already have a track record in developing solid followings on its platform. “This arrangement is directly tied to the fact that we have successful podcasts making money on Patreon, and that we’ve already invested in the Patreon system to pay this stuff back,” said Eric Silver, Multitude’s head of creative.

I’m told Patreon Capital is generally modeled after Shopify Capital; the Canadian e-commerce platform originally rolled out its version of the service in 2016, but it appears to have really vaulted forward in prominence over the past year. According to its latest earnings report, Shopify Capital cash advances were up to $115.9 million last quarter, a 61 percent increase from the same period the previous year. Stripe, the online payments processing giant, has also launched its own “flexible financing” service for businesses using its platform, called Stripe Capital, last September.

Patreon Capital, then, is an adaptation of those services for the creative class, whose members are increasingly being made to understand themselves as business entities — meaning they increasingly require the kinds of services that contribute to the support of conventional businesses. And given its history and positioning as a creator support platform, Patreon believes it’s in a better position than banks to provide creators with the business support they need.

“After all, Patreon has access to all the data about a creator’s earnings history, what they offer as benefits, how much they engage with their patrons…everything needed to forecast their earnings and retention, without a creator even needing to submit an application,” said Carlos Cabrera, the company’s VP of finance. “This would be essentially impossible for a bank to replicate.”

Patreon Capital is part of Patreon’s broader efforts to build a more sustainable future for itself. Around this time last year, Patreon’s CEO Jack Conte told CNBC that it needed to “build new businesses and new services and new revenue lines in order to build a sustainable business,” saying its core membership platform product — which at that time practiced a one-size-fits-all pricing tier that paid out 90 percent to creators — was likely to eventually become unsustainable. The company has since switched to a three-tier pricing offering and changed payment processing fees.

That context might be useful to know if you find yourself in Multitude’s position and are interested in taking advantage of Patreon Capital. This service is an undoubtedly useful one, and it has the capacity to help substantially more creators manage the risk of standing up new projects — but these things don’t exist in a vacuum, you know?

Next Stop is due to roll out in April, and I’m told that Multitude plans to publish a blog post breaking down the full budget for that production, so look out for that.

This piece is part of this week’s Hot Pod; you can find the entire newsletter here.

POSTED     Feb. 18, 2020, 12:40 p.m.
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