- Leaked documents show that Patreon’s $1 million deal with TikTokers Larray and Lil Huddy fell short of expectations.
- Company insiders also said that Patreon was in talks with MrBeast but never reached an agreement.
- Insights into the deal come from company-wide layoffs affecting creator co-op teams.
Patreon’s deals with creators such as TikTok superstars Larray and Lil Huddy appear to have fallen far short of expectations, according to company documents obtained by Insider.
Insight into the deals comes as Patreon founder and CEO Jack Conte announced last week that he would lay off 17 percent of the company’s workforce — 80 of its roughly 470 employees.
One affected team is the Creators Partnership, which works to onboard and support creators. Going forward, Conte wrote, the division will “adopt a larger approach, with a smaller, more integrated team in the United States.” memorandum To employees before layoffs, this was also posted on the company’s blog.
“There have been several creators who signed deals, took a ton of money, released ‘exclusive’ content until their deals ran out, then left Patreon because it didn’t work out — or they didn’t care in the first place, ‘ a former employee told Insider. That person, along with several other former employees, asked not to be named to avoid potential retaliation by the company. Their identities are known to Insiders.
Ellen Satterwhite, Patreon’s interim communications director and head of U.S. policy, told Insider that the company does not comment on personal or sensitive information about specific creators.
She said that while Patreon’s creator partnership strategy has evolved over the learning process, the company is still looking to sign creators suitable for membership, although it’s unlikely to sign big deals like it did before.
All told, the layoffs impacted Patreon’s larger go-to-market team — to which the Creator Partnership belongs — as well as its operations, finance and people departments. Going forward, the company will prioritize engineering and product design, Conte said.
“There’s a lot of work to be done on the product,” a second former employee told Insider, adding that Patreon tried to recruit engineering, product and design talent from Facebook, Apple and other tech giants earlier this year. “So why are they firing most of the marketing and sales teams…because now they don’t feel like they have a product they want to launch to sell.”
The startup’s upcoming product roadmap Including local video, as well as improving the publishing and browsing experience for creators and patrons, according to an update on the company’s website.
Creator deal failed
Bittersweet comedy creator Larri “Larray” Merritt presents in December His Patreon page, where he hosts a platform-exclusive talk show called “The Hot Seat.” In January, electronic boy and musician Chase “Lil Huddy” Hudson joined. Both creators are making a splash on TikTok, with 26.3 million and 32.2 million followers, respectively.
Merritt and Hudson’s Patreon deal has a combined value of $1.325 million, according to slides from the company’s presentation obtained by Insider. (It’s unclear if those amounts also include some production and marketing expenses.)
A representative for Larray did not respond to a request for comment. A representative for Hudson declined to comment.
Patreon’s high-priced deals are often paid in the form of recoverable advances that are expected to be recovered over time, a second former employee said. The company also signed irrecoverable deals, although they tended to be smaller amounts.Based on its recoverable transactions, Patreon will recover a percentage of its total revenue each month, in addition to a separate Platform fee – The latter is paid by all creators.
According to the presentation, the company expects Larray to drive $100,000 in subscriptions in his first month on the platform. But the total membership he brought in was only $2,217, which refers to total payments from fans.
Hudson only brought in $2,670 — well below the $25,000 expected by Patreon in the first month.
The slide shows that Patreon made a costly miscalculation in onboarding talent from other platforms, especially popular TikTokers with a Gen Z fan base. In addition to Patreon, many TikTok creators are also struggling to build stable careers and build deep connections with fans. According to another filing, Patreon earlier this year predicted $6.7 million in recoverable bad debt (or arrears that are unlikely to be paid) for creator deals signed in 2021.
“They see these deals as experimenting and testing certain strategies,” said the first former employee. “Apparently, just a few months ago, there was enough money in the bank to spend millions to sign creators with only Gen Z followers, and they certainly couldn’t easily spend $10 or more a month on exclusive content .”
Efforts by other big-name creators who signed on with loyal followings never came to fruition.
Earlier this year, Patreon was in talks with one of the most recognizable creators on the planet: Jimmy “MrBeast” Donaldson, according to two former employees. But by July, one of the former employees said the talks had broken down.
One of the employees believed the deal was worth “millions,” while another said it could be as much as $10 million.
A representative for MrBeast declined to comment.
“Looks like we’re in a pretty decent space”
For some former employees, the sheer number of layoffs across the company came as a surprise amid the resilient image executives painted in all-hands meetings.
“We have a healthy balance sheet,” Insider obtained a slide during an all-hands meeting in the first quarter of this year. The slide shows that the company had $249 million in working capital in the first quarter and is expected to have $205 million in the fourth quarter. According to the slide, working capital is unrestricted cash plus other current assets, less taxes payable and other current liabilities.
Patreon last raised $155 million in a Series F round in April 2021 at a valuation of $4 billion.
Another slide shows that the business has taken a hit during the pandemic as new creators flood the platform, increasing total memberships (a measure of revenue from paying subscribers), which as of March have reached monthly $120 million.
“Having listened to the executives and their words, we seem to be in a pretty good space,” said a third former employee.
A second employee said that even though the company was losing $5 million a month, executives told employees that the company could continue to keep money in the bank for two to three years.
After the layoffs, the company’s burn rate is “significantly lower” than it is today at $5 million, Satterwhite said.
Despite shrinking its creator collaborations team, she said the company is still signing up creators, most recently adding Brittany Xavier, Pentatonix and Jon Bernthal’s podcast “The Real Ones.”
“There is no one-size-fits-all answer to creation or membership, and our strategy is constantly evolving,” Satterwhite told Insider. “Experimentation is a necessary part of learning.”