CEOInterviews.AIPatreon: Jack Conte and Sam Yam

G

Guy Raz0:00

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So how much did it cost you to make that music video?

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Jack Conte4:30

It ended up costing 10 grand. If I had known that, I wouldn't have done it. And it wasn't until about February that I kind of it almost felt like waking up after a dream and, you know, watching my savings account go down basically to zero. And I was like, I'm going to upload this video to YouTube. It's going to get a million views. And I knew that that video would bring in maybe 100 bucks.

G

Guy Raz5:05

From NPR. It's how I built this, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz and on the show today, how Jack Conte's frustration with the music business led him to launch Patreon, a crowdfunding platform where fans can support and connect with creators for just a few dollars a month.

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At some point, you might get tired of hearing me say that every great business idea often starts as a problem in need of a solution. But one reason I keep coming back to this is the sheer almost stupid simplicity of it. Like it's an equation you could explain to a six-year-old. Frustration equals idea equals action equals solution. Think about Jamie Simonoff who worked out of his garage. He needed to see who was at the front door when the doorbell rang to decide whether to get up and open the door or stay put. So, he built a video doorbell for himself and then he turned it into a business called Ring. Melissa Butler couldn't find bold and bright lipstick colors, so she created her own and then turned that idea into a business called the Lip Bar. Mike Renb had to bike 17 miles to high school. So to make that journey easier, he turned his bike into an electric bike. And that idea eventually became Rad Powerbikes. And Jack Conte's problem, it was a problem that at first glance doesn't seem that problematic. Back in 2009, he and his then girlfriend, now wife Natalie, formed a band called Pomplamoose. And in September of that year, they released a cover version of Beyonce's Single Ladies, and they made a video to go with it.

This video got millions of views and their YouTube channel blew up. They were doing media interviews and selling some of their music on iTunes. So, you're probably wondering what was the problem. Well, having lots of followers and viewers doesn't necessarily translate into a sustainable business, especially after all the middlemen take their cut. So Jack set out to solve this problem. And he wondered, is there a way for artists to make their art in a sustainable way without a big record label or publisher or studio backing them? And the answer he came up with is Patreon. Patreon is a platform that connects artists with their most passionate fans. Fans who willingly pay a monthly subscription to support their favorite artists. Since its launch in 2013, Patreon has attracted about 200,000 creators, including some names that you might know, like YouTuber Jackson Bird or the musician Beardy Man or the podcast Chapo Trap House. But mostly, Patreon helps support people you've never heard of. Ukulele teachers, graphic artists, film reviewers, science fiction writers, fantasy footballers. And that's sort of how its creators, Jack Conte and Sam Yam, envisioned it.

For starters, both Sam and Jack had creative instincts from very early on. Jack grew up in the Bay Area where he was fascinated with puppetry and loved making his own animations. Sam grew up in Pittsburgh where he worked as a waiter at his parents' Chinese restaurant and actually really loved programming his calculator. And from a young age, both of them were also really into music. Sam played classical piano and Jack started out playing jazz. In fact, their mutual love of music might be why they were paired up as roommates when they started their freshman year at Stanford in 2002. Here's Jack.

J

Jack Conte12:39

I think it was just one of those relationships that uh that was relatively easy. At least Sam, my recollection, it was like easy. Like it doesn't take a lot of work. We it just kind of it just kind of worked.

S

Sam Yam12:46

Yeah. I I think we also sort of had a very easygoing humor to to us. Uh that we found maybe some of the the same Macob type things funny and uh the same friend groups uh that that you eventually brought over uh I think really resonated with me too.

G

Guy Raz13:07

So what what were you guys studying in college? Um Jack, let's start with you.

J

Jack Conte13:10

I studied music. You know, my whole life I'd been on the arts had kind of been like the side thing, but I was on the, you know, the science and math kind of track um growing up. And um I loved physics in high school. I I thought I wanted to be a physics major when I got to college. And then, uh I remember getting to this like the next level of physics and I was sitting in a class and I think movies often show you like one moment of realization and life is rarely like that. Life is usually like a slow burn, but this was really one moment of realization for me sitting in this physics class where I was like, 'This is not what I want to do.' And um I I just I was just thinking about songs. I was thinking about my music theory class. I was thinking about other things. And that's where my brain was going. And I didn't want to do physics. And I I remember like sitting on a bench after that physics class for probably 45 minutes. I just sat there and just thought about what that meant for me cuz I was I was it was kind of a one of those moments in college that feels pivotal, you know.

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Guy Raz14:21

So, Jack, you were studying music and Sam, what were you studying?

S

Sam Yam14:25

Yeah, I I came into to Stanford not really knowing uh to be honest. Um ended up studying computer science. Uh honestly, I played a lot of video games as a child and then I was into computers.

G

Guy Raz14:36

All right. So, you are doing computer science and Jack, you're doing music. And um I'm just curious, did at any point in college, did the two of you sit around and start to kind of mull over the possibility of starting a business together or anything like that? Was that ever a conversation you ever had?

J

Jack Conte14:52

Never.

S

Sam Yam14:56

Never.

G

Guy Raz14:56

And Sam did start businesses. Sam, you were doing that In-N-Out delivery thing.

S

Sam Yam15:01

In-N-Out Burgers. I was I was Yeah. Yeah. It was awesome. You were driving In-N-Out Burgers for people. I created a website. I I was driving burgers around and to campus. This is that was my senior year in particular.

G

Guy Raz15:12

Pre-door dash.

S

Sam Yam15:13

Sure. Yeah. That I would love to take that credit.

G

Guy Raz15:16

You would take orders for burgers, drive to the burger place, and then deliver them to dorm rooms.

S

Sam Yam15:22

Yeah. To to individuals. It wasn't super well thought out. It again just, you know, riffing on ideas here.

G

Guy Raz15:27

Sammy, why are you ashamed of this? This was an awesome business, man. It was so cool. It was a big deal. Like everybody knew about it. It was one of those things.

J

Jack Conte15:34

You just mark up the burgers. I think he's worried he's going to get sued by In-N-Out Burgers for for what he did in 2004 for whatever five. But I will say this, I don't think it's a great idea because a delivered burger is just not You have to eat a burger right off the grill. Like once it gets it's in a car, it's in a box, it gets soggy, you get it to your house, it's not the same thing.

S

Sam Yam15:56

I totally hear you. Yeah. Also, the the shock every time every night that I would go to In-N-Out and order like a hundred burgers or something and then how they would have to hold up for everyone else in line. Not a good feeling. So, not a good feeling.

G

Guy Raz16:09

All right. So, you've got this burgeoning entrepreneurial business. Um, and and Jack, were you like was any part of your mind in college about business or were you really just focused on music?

J

Jack Conte16:20

No, I I don't think I was thinking about business at all. I was um I was a part of the film society at school and so and I and I was also um there was a recording studio on campus and so I was learning how to use a recording studio and I was also you know because I was part of the film study I was making movies so I would make you know a few movies a year and I would do soundtracks for other people and for myself. So I was you know I was a music major and then you know in the in the cracks I was doing music and film um and all that kind of stuff. I was not building businesses.

G

Guy Raz16:54

All right. So, so you guys both graduate in 2006 and and Sam, I guess you you go to work for your like the first of of many startups. Um, and it was called Looped. Um, and and I guess it was like an early way to to to share your cell phone's location. Um, what what happened to that startup?

S

Sam Yam17:11

Looped ended up getting acquired. Um, I I was there for about 3 years. Uh my takeaway from it um like early on I was really interested because of the founders uh particularly uh Sam Alman uh who was the CEO there later and became president of of Y Cominator and we had a whole bunch of other impressive folks there and I think just being around that talent felt very energizing.

G

Guy Raz17:34

So Sam you um kind of go off into this tech direction and Jack I guess you kind of began to pursue music. You formed a band with your then girlfriend who's now actually your wife I think right Natalie.

J

Jack Conte17:48

Yeah we started a a band uh called Pompus and and even before then I I had started using YouTube and and uploading to YouTube and um it kind of it it like felt like something was working. So I' I'd put up a video and get a few thousand views.

G

Guy Raz18:05

what were the videos of?

J

Jack Conte18:07

Me in my bedroom playing instruments.

G

Guy Raz18:12

listen, people put videos up uh opening baseball card packs today. So I mean,

J

Jack Conte18:16

yeah. I I would um I guess what the videos kind of became was the video version of a song. I called them video songs because you there were sort of two rules. It was inspired by the sort of dogma film making from the '70s. And like the the rules were if you hear the instrument in the mix, if there's an instrument in the mix, you're going to get to see it.

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Guy Raz18:36

Oh yeah. You have to play it, right?

J

Jack Conte18:37

Yeah. It's like all direct sound and Yeah. that kind of thing. And I just I really liked the idea of taking some of the mystery out of audio production because it really feels like magic when you listen to a record. You know, you there's all these sounds you have no idea how they're made. It just, you know, it feels like these people are geniuses just creating things and there's at least for me it felt like there was this gap between like where they are and where I am. And and I just liked I liked the kind of transparency of YouTube. I like that it felt like behind the scenes and I liked the idea of um kind of showing people like, hey, this is how sounds are made and here's what it looks like and it doesn't have to be super glamorous like you can be in your pajama pants on the floor of your bedroom uh playing a guitar through a shitty amp that you got, you know, on sale at at Guitar Center.

G

Guy Raz19:24

And what kind of music was it, by the way?

J

Jack Conte19:26

It was like hardcore um rock, like aggressive, intense, like electric rock. Yeah. And people Yeah. There's a market for that. Yeah. And so I graduated and started working on music and it, you know, felt like it was working. I would sell a few hundred bucks of MP3s. I used a site called Ejunkie. Um, so I would put up my MP3s for sale on on this platform.

G

Guy Raz19:47

And were people buying them?

J

Jack Conte19:49

Yeah. Yeah. I was sell I was making a couple hundred bucks a month and I was I I thought like, okay, this could this could turn into, you know, an income stream and I could do this full-time. It was the first time in my life that I felt like that would be possible. I remember like going back to that moment in college, you know, when I made the decision to become a music major. It was actually like a very depressing moment for me. Um like I I was committing in my mind I was committing to a life of poverty. My uncle is a guitar player, a jazz guitar player. And he, you know, when I told him I was going to do this, he was like, 'Jack,' the thing he said to me was like, 'Don't do it.' He was like, 'You can do anything else in your life. You're a smart guy and and you can do anything else.' He said, 'Don't do this. It's crowded at the bottom.' Is what he said. Wow. But I mean, you you have this band going at the time. Yeah, we got the band going. When we posted a YouTube video on my channel, at first we we didn't call it a band. We just posted a video on my channel. We said, 'Hey, this is me and Natalie collabing.' And

G

Guy Raz20:42

what were you what was the video?

J

Jack Conte20:43

It was It was just the two of us with a song that she wrote called Paw Encore. It was mostly in French

G

Guy Raz20:48

cuz PMlamus, of course, is fruit in France.

J

Jack Conte20:51

And that comes from her because she grew up in France and Belgium.

G

Guy Raz20:53

I got it. Okay. And what was funny was, you know, we kind of tempered each other like we we mitigated each other's extremes. So like she calmed down my kind of industrial screo side and I kind of upped up some of the softness of it and the the combo was just it was cool and and different and like it had some of my aggressive production, but then she has this very soft voice and I think it was just kind of different sounding and people seem to really like it. And so, you know, the idea was, let's see if we can make a living out of this. And and right around that time, iTunes came out. And so, we started putting our our music on on iTunes.

This is original music.

J

Jack Conte21:32

Original music. Yep. You know, we knew that that was kind of what we wanted to do. And so, we we just And YouTube seemed like it was working, so we just started making more and more videos and putting those out.

G

Guy Raz21:41

How did you get attention on YouTube?

J

Jack Conte21:44

Um, eventually we produced a record for this singer songwriter named Julia Nunes. And I was super inspired by Julia because she just had this huge presence on YouTube and I learned that it came from covers originally. Um

G

Guy Raz21:58

Ah.

J

Jack Conte21:59

And she would put out

G

Guy Raz22:00

cover covering big like well-known songs.

J

Jack Conte22:02

Yeah. Cuz

G

Guy Raz22:03

which you which anybody can do, right?

J

Jack Conte22:04

Which anybody can do. Yeah. And and that's kind of when I learned that YouTube is a search engine and so people are searching for songs that they know and if they then see a cool band who is singing that song but maybe in a completely different way with a completely different sound and they've ripped out the harmony and put in their own harmony and ripped out the beat and put in their own beat and done it in 3 four instead of 44 or whatever it is. You can kind of get introduced to a new sound um because you're coming from search traffic. And that single thing is how we ended up like growing the band so quickly.

G

Guy Raz22:37

So what was the first uh cover that you put on YouTube?

J

Jack Conte22:40

It was I think the first cover was my favorite things. We ended up doing it in uh in 54 and did a cool arrangement of it and and but that wasn't the one that hit. The one that hit was when we covered Beyonce's Single Ladies.

G

Guy Raz22:56

Oh yes, I remember that. Well, yeah.

J

Jack Conte23:03

We happened, we we knew that it was going to have a good shot at the VMAs because it was such a great video and a great song and when and she was up for for, you know, best music video. And so we we we covered the the song and and kind of just in time and put it out that night. And then Kanye did that thing where he got up at the VMAs and

G

Guy Raz23:25

when Taylor Swift won.

J

Jack Conte23:26

Yes. and interrupted her and it became this huge like internet meme and just got tons of traffic and the video just exploded

G

Guy Raz23:33

because people were searching single ladies.

J

Jack Conte23:35

Yeah.

G

Guy Raz23:40

I think that video today has about 11 million views.

J

Jack Conte23:44

It does. Yeah.

G

Guy Raz23:45

And you guys and I I've seen the video obviously and uh it's it's you guys like in in like a bedroom, right?

J

Jack Conte23:50

Yeah. It was my childhood bedroom. Like that's what it is. It's people in a room playing instruments synced up with the audio. And like it's funny cuz in 2020 that's really nothing special. But but at the time nobody was really doing that kind of thing. Like music videos looked like music videos. They looked like MTV. And to see like humans in their bedroom playing instruments and having it actually sound good was, you know, was a little it was different.

G

Guy Raz24:15

So that video blows up. And did did you start to get contact? I mean, I should say that you were I know you were on NPR that around that time because I was the host of Weekend All Things Considered and and and there was a weekend when I wasn't I was like on vacation and and you guys sadly I would didn't wasn't able to interview but you guys were featured on the show. Did you guys get a lot of a lot of calls?

J

Jack Conte24:35

We did. We we um I mean that was kind of the beginning of when Pompus really started to take off and you know we got calls from managers, we got calls uh from you know press and you know that when we came out with our second like big one that kind of really took off which was Telephone by Lady Gaga. Um you know we had a we released a record and you know at the end of the month we logged into our bank account and like we had sold 30,000 songs and because we hadn't signed with a label we owned all our own masters and therefore we owned all the royalties. So we logged in our bank account and had 22,000 bucks in it.

G

Guy Raz25:09

Wow.

J

Jack Conte25:09

Which like coming out of call like after selling

G

Guy Raz25:11

just some iTunes. That's just people paying 99 cents for your song on iTunes.

J

Jack Conte25:14

Just iTunes. 22,000 bucks in one month. And like I that was when I was like, 'Oh my like I I thought this we can do it. Like this this could be a thing.'

G

Guy Raz25:24

And did did you start to get record labels contacting you saying, 'Hey, um you guys interested in talking to us?'

J

Jack Conte25:31

We did. Yeah. We didn't get like hard offers from anybody, but we started to go down to LA and talk with them and um and we we basically decided not to do that, but we did we did talk with them and entertain it. Um we just didn't want to go that route. I mean, you know, at that point, we're making a living. Um you know, when we started doing label conversations, we were making, you know, thousands and thousands of dollars per month. We were going on tour. We were, you know, reaching millions of people.

G

Guy Raz26:00

Where were you? We were performing in front of like big audiences.

J

Jack Conte26:03

Yeah. 500 to 1,000 people.

G

Guy Raz26:05

Wow.

J

Jack Conte26:05

So, I mean, not like, you know, we're not playing Staples Center, but like

G

Guy Raz26:09

that's still pretty great.

J

Jack Conte26:10

Yeah. I mean, when I grew up, like I I thought like maybe one day I'll play for 100 people, you know, like that was like that would have been the coolest thing. And then here we are playing these clubs, you know, for like we played Filillmore, you know, in San Francisco, which is 1,200 people. It was magic. It was the best thing ever.

G

Guy Raz26:10

Sam, while all this is happening with Jack and Natalie, you're grinding away in some tech job and you're watching these guys become like massive YouTube stars. Was that was like everyone from your your year at at Stanford like people you knew like talking about them like, 'Oh my god, you see Jack Ki's like got this YouTube video. It's got 11 million views.'

S

Sam Yam26:45

I mean, yeah, the I admired Jack, right? like the from my own personal experience, I'd loved art too, but I could never take on both that risk or even bridge the connection of how I could make that like a livelihood or part of my life. And so seeing him be so successful uh down that path was was so impressive. And I remember every time that we we would catch up uh after college, I I was just fascinated by what was going on with his life and and how things were going on there.

G

Guy Raz26:45

Meanwhile, Sam, you had left um you you had left your the first startup you worked for and went on to found your own startup um called Adroll. What what was Adoll?

S

Sam Yam27:27

Yeah. Um I mean thinking back on it, a lot of this was was quite boring, but uh uh this was during the era uh when the iPhone was getting really popular and a lot of yeah developers were creating their own games and whatnot. And in fact uh my co-founder and myself at that time were also making these iPhone games and and applications and there was a lot of good money in advertising in that uh I know we created like this virtual pet game that ended up uh gathering actually millions of users at the time. Uh and we were seeing a few thousand dollars come through in just uh ads being clicked on. And so uh AdWorld was just an effective way for these mobile developers to monetize that. So you la from what I from what I've read you guys basically start this business in early 2009 and by the end of the year you were acquired by a different company. is that I mean to me that sounds like a great deal but I I can't even imagine you were up and running that like really by that point or were you it happened pretty quickly uh like just the explosion of of even interest in this space I think like there was a whole flood of developers um who it was almost like a a gold rush in a lot of ways uh cuz you had the iPhone and and this new app store and anyone could start making games and get it distributed to millions of users um and So when there was this interest in what we were doing, I think we were also caught off guard in some sense and then also immediately sold the company that same year.

G

Guy Raz28:59

Was did you sell the company cuz it was just like an offer you couldn't refuse? Like you were just offered all this money and you were just like, 'Oh my god, we got to take this.'

S

Sam Yam29:07

It wasn't all this money, but I think it was more than we had uh made, you know, independently previously than that. So the fact that it was a company that we knew to be very large in the space, it was a company called ADM Mob and then literally the month afterwards we were acquired into Google. Um

G

Guy Raz29:22

yeah, ADM Mob was acquired for like $750 million by Google,

S

Sam Yam29:26

right? Exactly.

G

Guy Raz29:27

And to be clear, that was not your money. You did not get $750 million from Google.

S

Sam Yam29:32

Uh no, we did not get 700. That would be okay if that happened. But um we were part of of ADM Mob at the time they were acquired in. And so it it felt like an appealing opportunity to to be part of something that was going to win.

G

Guy Raz29:45

All right. So your business was acquired and and you moved on and and you actually went to um to the incubator uh called Dog Patch Labs where I guess your goal was to presumably to come up with with like a new idea.

S

Sam Yam29:58

Yeah. I I mean I had a few different things but uh at this point I just wanted to to start building again. So within those few years I built a number of things. I think this was sort of enlightening for myself too. Uh in in a lot of ways I I view those years as like the years of struggle because I was there at the incubator. Uh, I was working across the table from Kevin Cester who was building Instagram at that time and we would come in. Um, I I remember actually having a bunch of chats with Mikey and and Kevin about what they were thinking about with their business and uh, all of that's really exciting I think uh, as you all feel like you're in this shared suffering together until you know something like Instagram skyrockets and then you realize that that separate space. Yeah.

G

Guy Raz30:42

No one's suffering. Um, so, uh, all right. So, you're come, you're trying to come up with a bunch of different ideas. And when you say building things, like just you'd have an idea and you start to try and build it, like code it.

S

Sam Yam30:56

Yeah. I I would code, design, launch, and this was during the time too where Techrunch disrupt was a thing. So, you had this idea that if you got a business through and you could launch on stage, that would be making it. And so, uh, I had launched a business in that area. Uh it was a company called Champon, but we effectively allowed people to create their own groupons. So it was a white labeling service and it was interesting like the whole group buying space was sort of a uh coincidentally a flash in the pan too in many ways although Groupon is still around. Um, and the takeaway for me was just how difficult

J

Jack Conte31:33

Much I should treasure if I ever had the good fortune of landing on a business that really resonated with a community or a group of people. And so most of my years during this time was, as I recall, just full of a lot of loneliness and development by myself in my bedroom.

G

Guy Raz31:55

I want to go back to Jack for a moment. So Jack, just like I'm trying to understand, while Sam is working in the startup space, you're making music with Pomplamoose, right?

J

Jack Conte32:07

Yeah.

G

Guy Raz32:08

And at your peak, I'm just curious how much money were you guys making?

J

Jack Conte32:13

We did about $400,000 in a year off of MP3 sales basically.

G

Guy Raz32:18

Wow. And it was I think that year in particular I think was 2010.

J

Jack Conte32:22

Most of it was singles. A lot of it was licensing and brand deals. We had a lawyer that we brought on very early on who was helping us negotiate these deals and work with brands. We were both music nerds and artists, but we absolutely were thinking about turning this into a sustainable thing. So we ended up buying a house and we built a recording studio. We used the money to build a recording studio on the property.

G

Guy Raz32:55

And then that became kind of the home base for Pomplamoose for the next few years. You guys were doing really well and presumably a lot of that money was coming in from iTunes sales, but then around 2010, 2011, Spotify comes along and with Spotify you can stream an unlimited amount of music for free. So what did that do for your revenue?

J

Jack Conte33:25

The transition to streaming was really hard on the band. Our streaming revenue was a tiny fraction of the iTunes revenue where people were paying a buck for a song. With a stream, you get fractions of a penny for one stream. It wasn't one for one because the user base wasn't there on Spotify yet. The volume wasn't making up for it. So the income started to evaporate, which was very scary because now we had a mortgage.

G

Guy Raz33:59

So around that time, 2011, 2012, how were you making a living?

J

Jack Conte34:07

What was bizarre about it was our reach hadn't changed.

G

Guy Raz34:13

The reach of your YouTube audience and so on.

J

Jack Conte34:16

We were growing, getting millions and millions of views. Then enter Spotify and suddenly we're up a creek in terms of revenue. What was amazing to me was I was watching this unfold over a couple years. What blew my mind was, wait a minute, I'm not doing anything differently as an artist. There is a system changing in front of me that I'm not in control of. It's just these changing systems and my artistry is yielding different results with regard to my income. That was very frustrating to watch. I know businesses have to pivot and change and be innovative, yet I found myself having to do all this gymnastics to keep up with the revenue stream. So I was selling hats and t-shirts and we were selling dongles.

G

Guy Raz35:11

On a website.

J

Jack Conte35:12

Yeah. And then we would play some shows and I remember thinking, is my value to the world a hat with a logo on it? That's not what I'm good at. That feels...

G

Guy Raz35:23

It was merch. You were just selling merch at concerts and stuff.

J

Jack Conte35:25

Yeah. And it bugged me that we had to do that because I felt like that's not what makes me special. I just wanted to be paid for my music. I loved iTunes because I could be paid for my music. So it was one of those moments where we realized that everything was changing and that three or four years from now would be completely different.

G

Guy Raz35:46

Meanwhile, what is Natalie doing? Are you guys still living together? You've got this house and a mortgage. Are you earning enough money to at least pay your bills?

J

Jack Conte35:56

Yes, we are. But we're also watching it come a lot out of savings, right?

G

Guy Raz36:01

So revenue is not increasing.

J

Jack Conte36:03

At that point, no, revenue was not increasing. It was decreasing. So it was coming out of savings. But our roommate who was living at the house did this amazing thing. She was going to make an album and she went onto this new website called Kickstarter and did a 30-day thing. We had never heard of it. I remember the night...

G

Guy Raz36:29

That she turned her computer around at the dinner table and showed us. I think she had made $12,000 or $13,000.

J

Jack Conte36:39

To make the record.

G

Guy Raz36:40

To make the record.

And that really was what Kickstarter was started out for. Started for artists. We had Perry on the show a couple years ago, Perry Chen. That was the point of Kickstarter. It was to help artists make music or records or whatever it was.

J

Jack Conte36:53

Yep. And she did that and she got $13,000 and got a studio and a mixing engineer and made a record. What was so cool about it to me was it was her fans. Her fans stepped up and wanted the record and paid her to make the record. That just felt right and felt awesome. So I know that you and Natalie did some solo projects in addition to the work you did with Pomplamoose. And I guess at some point she decides to do a Kickstarter too, right? To raise money for her music.

Yeah. And she ended up raising $104,000.

G

Guy Raz37:37

Wow. How did she reach that many people? Because Pomplamoose had hundreds of thousands of subscribers and we were getting millions of views. But how did you drive those viewers to the Kickstarter?

J

Jack Conte37:48

They just uploaded a YouTube video. 'Hey everybody, I'm doing a Kickstarter.' People went bananas. Over $104,000 to make a record.

G

Guy Raz37:57

So you're thinking, wow, your mind's blown there.

J

Jack Conte38:01

I was so happy for it. It was so awesome.

G

Guy Raz38:05

In the meantime, you're working on your own solo music too. And I guess you got interested in EDM and that sort of genre. And you eventually wrote a track that you were really proud of and you wanted to make a video out of it. This was a track called 'Pedals'.

J

Jack Conte38:22

It was kind of da punky, technologic. I was listing out all of my guitar pedals. That was the only lyric in the song, just a list of all the pedals I used to process guitar sounds. The brands or the types, the models and the makes. So the first lyric is 'Hog Pog Vox Wah Octave Multiplexer Big Muff Memory Muff Boss Chromatic Tuner.' It was just a list of pedals.

G

Guy Raz39:01

I'm watching this video right now and you're aggressive in this video. You're really aggressively playing that guitar.

J

Jack Conte39:11

Yeah. I mean,

G

Guy Raz39:11

You look a little scary. Like if my kids saw you, they'd be a little scared of you, Jack.

J

Jack Conte39:16

Yeah. I'm raging. That's what music's about.

G

Guy Raz39:19

I should mention to people who aren't familiar with it, there are robots in the video. There's a conveyor belt of guitar pedals passing by. There's other robots. There's a spider robot. It's like in this kind of laboratory of robots. I imagine this is going to cost you quite a bit of money.

J

Jack Conte39:37

It ended up costing $10,000. I didn't know that when I went into it. If I had known, I wouldn't have done it. But I didn't have a budget. I wasn't being strategic. I thought if I go deep on the business side, I'm not going to do it. I'll be staring at numbers that don't make sense. So I decided not to budget, not to think about that, and not to deal with any constraints. I ended up spending $100 a day at Home Depot, building the set and building rotating elevators.

G

Guy Raz40:14

Where did you build the set?

J

Jack Conte40:15

In the studio that Natalie and I had built on the property. I was not a carpenter, so I was trying to learn how to frame a wall and cut wood at angles. I got a miter saw. I was flailing. I was just trying to go and make it, but I was enjoying it. It was really fun.

G

Guy Raz40:42

Did you decide, all right, if I'm going to make this, I'm going to do this Kickstarter thing. I'm going to put up a video and ask people to contribute to my project.

J

Jack Conte40:51

I was considering it. The problem with that was I didn't want to do the Kickstarter conceit of 'I'm going to do this big one thing and I need a bunch of money to pay for it.' I didn't want to force fit it like that.

G

Guy Raz41:09

You weren't thinking of this as a one-off. You were thinking you need steady money to make projects.

J

Jack Conte41:18

Yeah.

G

Guy Raz41:18

So how are you going to do it? That was the part of me that decided not to think about that, right?

J

Jack Conte41:26

It was terrifying. I remember being pretty scared about that. I also thought, if I start being logical about this, I'm never going to make something great.

G

Guy Raz41:42

Of 2013.

J

Jack Conte41:43

It wasn't until about February of 2013 that I kind of felt like waking up after a dream, watching my savings account go down to zero, maxing out a couple credit cards. I felt like I was waking up and suddenly very terrified about what was on the other side. I thought, I'm going to upload this video to YouTube, it's going to get a million views, and I knew that video would bring in maybe a hundred bucks from YouTube ads.

G

Guy Raz42:24

Yeah.

J

Jack Conte42:28

I got sick, nauseated thinking about all this work and energy and time. The robots, the set, the credit cards, the draining of the savings account. I was angry. I couldn't believe that humans were just okay with this, that this is the system we've designed for artists. You put up your thing that you spend your life on and you get paid $100 in ad revenue. I thought, what the hell is going on? All these people who make things and put them online, the economics failed to evolve with the distribution technology. The distribution happened first and the economic systems to support that didn't keep up. So we were in this horrible phase where essentially artists are working for free.

G

Guy Raz43:38

So what did you start to think about? This is February of 2013 and you're clearly gears are turning. Is there an idea starting to form in your mind about how to solve this?

J

Jack Conte43:52

I sat down at my kitchen table on a Sunday afternoon. I was thinking about Kickstarter, but I want to be paid every month because I need income because I make stuff every month that's valuable to other people. At the same time, I was seeing other websites start to accept membership organizations like SFMOMA or KQED would do pledge drives. You had the option to set up a monthly payment. So I thought, great, I just want that system.

G

Guy Raz44:38

A pledge drive, like a pledge drive.

J

Jack Conte44:40

Exactly. So I sketched out this website so that my fans can do this. I was also looking at all these other YouTubers going through the same thing, podcasters, news, everybody who makes stuff and puts it online. I thought, this should be a thing like Kickstarter where anybody can set it up for themselves.

G

Guy Raz45:03

And so you sketched out...

J

Jack Conte45:05

I took out 14 pieces of printer paper. It ended up being about 14 pages. Essentially, it was a recurring payment between a fan and a creator. There was a content feed, a login page, a homepage, the whole thing. I am a terrible designer, so looking back, it was the worst.

G

Guy Raz45:35

I remember these pages fondly.

J

Jack Conte45:38

There's no way I could have done that by myself. So I started calling various people to see if they could build this for me.

G

Guy Raz45:46

Including your former roommate, Sam.

J

Jack Conte45:48

I called him up and said, 'Sam, I've got this idea and I'm really excited about it, but I don't want to tell you. Do we need to sign an NDA or something?'

G

Guy Raz45:58

Because you thought, 'My idea is so good.'

J

Jack Conte46:00

I cannot talk to people about this because they're going to steal it from me.

S

Sam Yam46:04

I remember this too because this was over the phone. You didn't tell me the idea over the phone. From my perspective, I was just excited to catch up with you, Jack. Every time it was like, oh, I get to meet this celebrity who's crushing it on YouTube. When we arranged the meeting, I wasn't in the mentality that there would be this amazing idea. I was more curious what you were thinking about.

J

Jack Conte46:32

But Sam was like, 'Jack, nobody cares about your idea. We don't need to do an NDA. Ideas are trash. Ideas are worthless.' And I was like, 'Okay.'

G

Guy Raz46:46

He's saying to you what you now know, which is ideas are a dime a dozen. It doesn't mean it's easy to find a good idea, but it's execution that matters.

J

Jack Conte46:55

It is only execution. There are so many versions of Patreon that did not work, and they were the same idea.

G

Guy Raz47:02

All right. So you go to San Francisco to meet. And the idea that you had, Jack, was it to convince Sam to help you with this or just to bounce the idea off him?

J

Jack Conte47:14

I wanted Sam to build it. I was in hardcore pitch mode because other people had told me no or just didn't seem interested.

S

Sam Yam47:22

Yeah.

J

Jack Conte47:22

I wanted Sam to do it. He was about to launch this new project and had gotten a TechCrunch article. He said, 'Hey, I can't meet till Thursday because I'm launching this thing.'

G

Guy Raz47:36

So what were you launching, Sam?

S

Sam Yam47:37

This was a photography site that I was working on.

G

Guy Raz47:45

This is like your fifth or sixth startup.

S

Sam Yam47:46

I don't know if you can call them startups, but a new project that I was interested in. So I said, 'Hey Jack, I'm busy. Maybe we can meet when this article finally comes out because I'll have launched it by that point.'

And that's what we set the target date for. I had gone up there again just expecting to catch up with Jack.

Maybe you said too, like, get some feedback on the idea. That's how you pitched it initially. I remember being surprised when the switch went off and you started selling me on this. You were really good, Jack.

I recall you talking about the problem that you and other artists were dealing with. That resonated for me because I had seen how successful you had been as an artist. I assumed you were already dancing away on your yacht doing fine. So this was really interesting hearing this from you.

G

Guy Raz48:36

And what did he tell you about it? So you convinced him not to sign an NDA.

S

Sam Yam48:42

No, you didn't bring an NDA, did you, Jack? I didn't see one. I remember I was like, 'Yeah.'

J

Jack Conte48:45

No. All right. Yeah. I mean, this is your roommate, Jack. The guy you lived with for three years.

So much hubris. I'm so ashamed of that.

G

Guy Raz48:53

He's going to steal this from you.

J

Jack Conte48:56

Dumb. I know. It's so dumb.

G

Guy Raz48:58

All right. So you are sitting there in this coffee house. What does he say to you, Sam? How does he describe it?

S

Sam Yam49:02

The things that came together for me, and now we're looking at almost eight years ago, but it's kind of how Jack mentioned that Kickstarter was a thing already and there were a lot of successful campaigns. But what resonated here was the idea that you were helping to support the individual versus a particular project. For me, the reason that resonated, first as someone who cared a lot about art but could never make it a career, I followed a lot of these people on YouTube. There was one in particular, Kina Granis, who wrote very personal music. I remember thinking in my head as Jack was pitching this, I would totally just give her money on an ongoing basis if it allowed her to keep producing her work. I could see this emotion being shared by all these other YouTube audience members. So that's the idea clicked for me as soon as Jack pitched this.

G

Guy Raz49:14

So you're saying to him, now make everybody sign an NDA?

S

Sam Yam49:19

No. Don't even sign an NDA. Just keep this to ourselves. This is it. We're going to go dark.

J

Jack Conte49:25

We're going dark.

S

Sam Yam49:26

Yeah.

J

Jack Conte49:28

So I'm staring at the email right now that I sent Sam on March 10th.

S

Sam Yam49:30

I just pulled it up.

J

Jack Conte49:33

March 10th, 2013.

S

Sam Yam49:35

And it's just kind of a summary of our agreement.

J

Jack Conte49:37

I think that's what I thought it was going to be.

S

Sam Yam49:39

Here's what I'm agreeing to.

J

Jack Conte49:41

Here's what you're agreeing to.

S

Sam Yam49:43

And one of the lines is like, you agree to be co-founder and CTO of Patreon.

J

Jack Conte49:45

You agree to build and maintain the site as laid out in the wireframes.

S

Sam Yam49:47

You will work on all technical and programming aspects of the company.

J

Jack Conte49:49

Did you pass this by a lawyer, Jack, or was this just your legal ease?

S

Sam Yam49:51

No, I just wrote you an email.

J

Jack Conte49:53

Yeah. I'm just like...

S

Sam Yam49:55

And did you guys have a conversation about how you would split the company?

J

Jack Conte49:57

Did you say was it just going to be 50/50?

S

Sam Yam49:59

Yeah, it's in this email. We agree to become 50-50 partners in Patreon.

J

Jack Conte50:01

So I mean win-win, right?

S

Sam Yam50:03

Because you get a technical co-founder and Sam you get this guy who has a pretty big platform already.

J

Jack Conte50:05

Absolutely. I was stoked.

S

Sam Yam50:07

I think I just wrote back to you, Jack. What is it? All caps or something.

J

Jack Conte50:09

No. So I wrote this long email at the end.

S

Sam Yam50:11

I said, like, I know I said this before, but I just want to stress how important it is that we communicate with each other about all aspects of the business and our relationship.

J

Jack Conte50:13

As long as we're not hiding anything from each other, as long as we're telling each other if something's wrong, we are greatly reducing the chance of hurting our friendship.

G

Guy Raz50:15

I want you to feel 100% okay with talking to me about the company finances, your interests, your ideas, your feelings, anything. This will lead to a strong partnership.

S

Sam Yam50:19

That's nice.

J

Jack Conte50:22

I mean, it's basically like, hey, we're going to put our friendship first here.

S

Sam Yam50:25

I thought it was kind of a nice thing.

J

Jack Conte50:28

And then Sam writes back all caps: 'Awesome. I agree to all of this. Okay, let's go.'

S

Sam Yam50:30

[laughter]

J

Jack Conte50:32

When we come back in just a moment, how Patreon launched with just three musicians.

S

Sam Yam50:34

One of them was Jack and one was Natalie.

J

Jack Conte50:36

And then why slowly other artists started to get on board, first by the dozens and then by the thousands.

G

Guy Raz50:40

Stay with us. I'm Guy Raz and you're listening to How I Built This from NPR.

N

Narrator52:54

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G

Guy Raz55:05

Hey, welcome back to How I Built This from NPR. I'm Guy Raz. So, it's March of 2013 and Jack Conte and his former college roommate Sam Yam have decided to launch a new crowdfunding site that will let fans pay a few dollars a month to sustain their favorite budding musicians, podcasters, writers, and artists. And Sam is so excited about Jack's idea that literally the very day they have that first meeting in San Francisco, Sam goes home to work on the coding.

S

Sam Yam55:38

I started working probably more passionately than ever on any other project. For me it felt like a race and I even had this fear that if we didn't move fast on this someone else was going to do it and we were going to regret that.

G

Guy Raz55:56

And for people who don't understand how coding works, like what's the first step? I mean it's essentially like a bunch of Lego bricks, you start to build the base level of the building.

S

Sam Yam56:08

Coding is what you do at some point, but what you're really putting together are a whole bunch of designs and Photoshops and thinking through the psychology of why a user would do this and that. So I think the way I approached this particular project was laying out all the main journeys of users and then painstakingly moving pixels around to get it to a level where you felt okay, this is an experience that I think is going to work.

G

Guy Raz56:41

And it wasn't going to cost a lot of money to get it off the ground.

S

Sam Yam56:44

No. I mean, I had launched a number of projects before. It was probably going to be a few hundred to a thousand dollars and I think we were splitting. I think it was in that email, too.

G

Guy Raz56:54

A few hundred to a thousand. A few thousand you're saying?

S

Sam Yam56:57

Yeah.

G

Guy Raz56:57

That was it.

S

Sam Yam56:58

Yeah.

G

Guy Raz56:58

Why was it so cheap? Is it because normally the biggest fees would go towards a software engineer? And Sam, you were basically the software engineer.

S

Sam Yam57:08

I think this was the case. I grew up in the area with startups where you had to rent hardware and set up your servers and collocations, but by this point, several years after that, you could launch an entire service off in the cloud. And that began with the Facebook apps and iPhone apps. So by this era, you could launch very cheaply and then sort of scale up as needed. And for us, the dreamland that I had in mind around what we were going to do was Jack obviously had a huge plan to launch to his whole audience. And on top of that, he had this whole network of artists and creators and we were going to be launching on day one with just millions of fans and artists talking about how you could support them on Patreon. So I wasn't even thinking about how we needed money. And that would be Jack through the Pomplamoose YouTube channel essentially.

J

Jack Conte58:06

In other words, we were going to not Pomplamoose, it was going to be my personal YouTube channel, which was where I was uploading all that electronic stuff. So the plan was I'll put up a YouTube video on my YouTube channel, send my fans over to Patreon, and that's kind of how we'll start. We also wanted to launch with a bunch of other artists as Sam mentioned. So we made a list of 40 or so creators that you knew to call up.

G

Guy Raz58:34

No, these are not like world famous creators, right? These are just people who have pretty strong local small followings.

J

Jack Conte58:42

Folks who I thought, hey, you're in the same boat that I'm in right now and I think this could be valuable to you. So we made an Excel spreadsheet with those folks and I found their contact info and reached out to all 40 of them and all 40 of them said no.

G

Guy Raz59:03

All 40 of them said no.

J

Jack Conte59:04

All 40 of them said no.

G

Guy Raz59:05

They were like, 'No, I don't feel comfortable asking people to pay me money.'

J

Jack Conte59:08

Crickets. Yeah.

G

Guy Raz59:09

Were you surprised?

J

Jack Conte59:11

I was surprised, but I didn't think it mattered. I thought, well, let's do it anyway and people will come around. So I wasn't bummed about it. I thought, okay, let's do it ourselves. Let's launch with me and my roommate also wanted to launch. Lauren O'Connell was one of the first three creators on Patreon. And Natalie wanted to launch, too. So the three of us, my girlfriend at the time, we launched with just the three of us on day one of Patreon. And the idea was you would take this video for pedals, this song that you're working on, and that's where you would premiere it. You would premiere this video on YouTube to get people to go to Patreon and support this video.

At the end of the pedals video, I put a vlog where I told people about the idea and I said, 'Hey, I'm building this new thing and I don't think it's just going to help me. I think it could help a lot of people. Check it out and let me know what you think. And if you're up for it, join me on this journey here.'

G

Guy Raz1:00:22

So from the time that you guys met on March 6th, 2013 to the time you launched, how long was that?

J

Jack Conte1:00:28

We launched in May, I think, Jack.

G

Guy Raz1:00:30

In May. Wow.

J

Jack Conte1:00:31

Yeah.

G

Guy Raz1:00:32

So, really quickly.

J

Jack Conte1:00:34

Yeah. We didn't have all the pieces there when we launched. We couldn't, for example, process all the payments at that time yet. I hadn't hooked any of that up. We could accept your credit card and that would get saved, very securely, by the way, because we were working at Stripe. But we hadn't built any of the logic to actually handle the processing of the funds.

G

Guy Raz1:00:58

And what did you ask for, Jack, in the video? You said, 'Hey, whatever you can do just to fund my work. Please contribute.'

J

Jack Conte1:01:08

I think I had four tiers. A dollar, $5, $10. And then the night before I thought, 'Screw it. I'm going to put up a $100 tier. No one's going to buy it, but I'll just do that.' Where you can do a one-on-one Skype session with me and I'll hang out with you. And a bunch of people signed up for the $100 tier. A bunch of people signed up for the five and the $10 tier. The average payment per patron was around seven bucks. That really blew my mind. I was thinking maybe people will give me a dollar for YouTube videos, but the fact that on average people would give me seven bucks, I couldn't believe that.

G

Guy Raz1:01:46

And what did you offer people? If you gave a dollar a month, you would have access to what? If you gave $5, if you gave 10, if you gave a hundred, what did you get?

J

Jack Conte1:01:56

At $1, you got access to my Patreon stream. You got first dibs on concert tickets. At $3, you got access to my Patreon stream, first dibs on concert tickets, and video tutorials about audio production. I just make these little extra tutorials and give folks access to them. And then $10 was a Google Hangout once a month with me and all $10 patrons.

then the $100 was the Skype sessions.

G

Guy Raz1:02:23

So, how much did you get fans to commit to paying you per month?

J

Jack Conte1:02:27

Within the first couple weeks, I passed $5,000 a month. Wow. And then soon after that, it was even more. And at the time, I was making maybe two videos a month. So, you know, suddenly, within 2 months, I went from draining my savings account to making over $100,000 a year for my solo career.

G

Guy Raz1:02:32

And Jack, did you envision continuing your career as a musician and continuing making music and building your fan base in addition to doing this, or was that not quite fully thought through yet?

J

Jack Conte1:03:02

It was not strategic. There wasn't a five-year plan. There wasn't a strategy deck. It was just solving a problem. And so I don't know that I had a clear vision about how the next year was going to go. I knew that we needed to build this thing. I knew that it was going to be a way that artists could make money. I did think it could scale and help a lot of folks. I didn't know how much work that was going to be. When you reach out to 40 people to sign up and all of them said no, and it's just you, your roommate, and your girlfriend who are the only people on the site. How did you attract other people when we launched? And this is how Patreon ended up growing when we launched. I went on to my YouTube channel. I told all my fans about Patreon and I said, 'Hey, go to this website.' And of course, creators follow creators. So, some of the people who watched my video were creators themselves. And when they landed on my Patreon page and they saw this random middle-of-the-road YouTuber making six figures, they had that same mind-blow moment that I had had two years before when Lauren launched her Kickstarter and they saw a new revenue model for professional creativity. And then those folks launched on Patreon and then they did the same thing. They went on to YouTube and they went on to their podcasts and they wrote on their websites and then that cycle just repeated and that's actually responsible for most of Patreon's growth, that viral product cycle.

G

Guy Raz1:04:32

And was the business model that you had kind of set in stone from the get-go? Because initially I think it was like you would take, Patreon would take 10%, so 5% platform fee and then 5% payment processing fee. And did you kind of do the math and the financial projections and come to the conclusion that that was the best way for you guys to reach profitability?

S

Sam Yam1:04:57

Jack, Jack, did we do the math? [laughter] [gasps]

J

Jack Conte1:05:01

No, there was zero projections. There was zero.

S

Sam Yam1:05:05

No spreadsheets.

J

Jack Conte1:05:06

No spreadsheets, no math. There was none of that. I mean, again, it's just very different than it is now. Now we have FP&A and finance teams and we're forecasting out multiple years, but back then, no, we didn't have any of that. We didn't think about any of that. We were just making this thing. Our first pitch deck, which I don't even believe we had anymore because I remember building it on a web page, just had all these emails that we had received from artists and fans about how exciting the idea was. So, we weren't really thinking about the viability of the business at that point still.

G

Guy Raz1:05:45

And then I guess a month after you guys launch, you decide, all right, now let's go get some money. And Sam, you had already been through this process. You had already been through the process of raising some money for your previous startup.

S

Sam Yam1:05:58

Yeah, I actually was pretty optimistic and excited about this fundraising process. Again, this came back from the emails and the feedback from the creators and the fans in a way that, again, several years of me trying to build things had never seen this sort of passion around a movement or an idea. And so, at the time, again, I'm naive even looking back. It felt like in the bag, and so we started off and we started pitching to investors.

G

Guy Raz1:06:26

And how much money were you guys able to raise for the first round?

S

Sam Yam1:06:26

At the time, the company was valued at $6 million, and so we ended up raising that first round, which ended up being $2.1 million at a $6 million valuation, so it was about a third.

G

Guy Raz1:06:43

Right. And because this is an important conversation to have, a lot of entrepreneurs listen to this show and we've had founders on the show who have said biggest mistake of my life. Tristan Walker will say I should never have raised money. Other founders say it was so important, I'm so glad I did it, I support and guidance. And I couldn't have built this without going to venture capitalists and taking the money. Was it absolutely necessary? Could you have done Patreon without raising money?

S

Sam Yam1:07:11

I don't believe so, Jack. I think we needed that team in the early days as we were building it out. Plus, I think the partners that we ended up working with were very much aligned with the spirit of our mission. And we haven't talked a lot about that, but at the time, this idea that we were trying to get artists and creators paid ended up filtering out a bunch of investors who just didn't even want to touch the space of music or art in particular.

J

Jack Conte1:07:41

Yeah, I think it was really important. I don't think Patreon would have gotten close to where it is today without that. I mean, even from that first day, Patreon started growing a lot, and we needed to hire people to answer emails and help build features and scale the company, and we would not have been able to afford that without raising money.

G

Guy Raz1:08:09

All right. So, you guys raised $2.1 million. What do you do with that? Do you get an office? Do you start hiring people? What do you start doing with it?

J

Jack Conte1:08:18

The first became roommates again. [laughter]

G

Guy Raz1:08:21

Oh, really?

J

Jack Conte1:08:22

Yeah. We got a home office in Noi.

S

Sam Yam1:08:25

In San Francisco.

J

Jack Conte1:08:26

We got an office in Noe Valley. Yeah. It was a two-bedroom apartment, and we moved in together. And at that point we hired Tyler Palmer, who was the first employee, and he hired a couple folks, Cole and Tony, who started building out the artist relations and the marketing and the operations customer service side of the business.

S

Sam Yam1:08:50

Yeah. It was just our bedrooms and then it was attached out into the kitchen where we set up a few desks, and they would come in every day and Jack and I would wake up and walk out into the office. So initially, I don't know, you're getting more and more people to sign up, but from what I understand, even with the 10% fee, the processing and platform fees, it wasn't covering your costs.

J

Jack Conte1:09:14

Yeah. No, we were not profitable. I mean, 5% of the 10% by the way didn't go to us, right? It

S

Sam Yam1:09:22

For you guys. It was pay Stripe and whoever. Yeah, exactly. So the 5% going to you guys wasn't much.

J

Jack Conte1:09:29

Not a lot. Yeah. Which is again, we had that business model with a really low percentage, which came from this idea of not wanting to be another wedge between creators and their fans. So we wanted to have a low rake. And so yeah, even when the company was processing $100,000, that's only $5,000 for the company.

G

Guy Raz1:09:54

So, I mean, you had a runway, $2.1 million, and that was going to run out eventually. How long did that last you before you had to go back out and raise more money?

S

Sam Yam1:10:07

We were cheap. I mean, again, Jack, even after we fundraised, Jack didn't take any salary. Actually, I don't think I took any salary on the first round either until after our second round. And we didn't spend much. That's why we rented a home as opposed to an actual office. So we didn't end up running out of that money. We had more than a year of runway left as we saw the business ramping up, and then went on to raise a much more serious Series A round.

J

Jack Conte1:10:38

That was in 2014. In 2014, we raised the $15 million round. Meanwhile, Jack, you are the CEO of the company, and I'm curious how you figured out how to do that job. Because you were a musician and you've got this part of you that I'm assuming you really want to pursue. Like, how did you, first of all, at what point did you be able to say, 'Okay, I cannot pursue music full-time. I have to make this a side gig.' First of all, it was a slow process. The desire to not take a salary really came from a place of wanting to be a creator and wanting to continue to make art and videos and music. And a couple years into the company, it became very clear that I needed it to be my full-time focus, which was a really painful tough thing because not only did this decision affect me, but my wife, we were partners in crime on this rock band that was kicking ass and getting millions of views and touring around the United States for big rooms, and we were living the dream as creators. And not only was I abandoning my career, I was abandoning her by choosing to focus on Patreon. And the moment where I basically stopped working on Pompus and took a salary as CEO, that was a tough moment because I felt I was one of those kids in my 20s who was like, I am not going to be an artist in my 20s and grow up to be a business person in my 30s. That is not the kind of person that I am. I'm going to stay an artist in my life. And then I found myself running a business.

G

Guy Raz1:12:43

Yeah. And so when you were a year into this, you had no standards, right? You didn't have any particular rules around who could join. What happened in 2014 that changed that? That was like a shot in the arm. I mean, you guys were like, wait a minute, we need to have some kind of standards here. The thing that caused the debate was a website called 8chan that launched on Patreon.

J

Jack Conte1:13:21

Yeah. And they were using Patreon to fund the development of the site.

G

Guy Raz1:13:29

And you started to look at the site and you saw crazy crazy stuff.

J

Jack Conte1:13:33

Yeah. I mean, there was sexualized depictions of minors and things that from a values perspective, we felt like there should be something in place to stop this from happening.

G

Guy Raz1:13:53

So what did you do?

J

Jack Conte1:13:53

Well, I recall this distinctly because looking back I'm sort of on the wrong side of history of this, but I remember feeling like, hey, we had not done this would be our first outright ban, which we had never done before, and it was a line that I was very concerned about. I even ended up on the call with the founder of 8chan at the time.

G

Guy Raz1:14:15

And he lives in like the Philippines or something at that.

J

Jack Conte1:14:17

That's right. Yeah. In my mind, through the conversation with him too, what was going on was he had built out a platform that was very heavily emphasizing free speech and he wanted to take down the things that were breaking the law. At least this is how he represented to me, and that's why I was sympathetic to it at the time, and I was concerned about our ask of creators to, if they didn't have the intention to be uploading these terrible things, how we could still support them in terms of the business they were building or the art they were trying to get shared.

G

Guy Raz1:14:17

Yeah. I mean, this is really interesting because this is really the beginnings of certain people weaponizing the First Amendment and this idea of free speech, really turning it into a weapon and turning it against what it's designed to do, which is to prevent tyranny. But posting photos of children or horrendously vicious and dangerous conspiracy theories is not what that's about. But it's easy, I imagine it would have been easy for him to manipulate somebody like you with the argument that it's about free speech.

J

Jack Conte1:15:40

Yes, that's how the argument began, and then there were other things that we had to talk to him about too. There were communities that were thriving there spreading hate. And so it started us really going down this path of when there is real world harm and people getting hurt, what is our role and responsibility? And I think that's where we started figuring out that we wanted healthy communities and we would have to lay out these guidelines in a very specific way.

G

Guy Raz1:16:08

So how did you begin to write them down? What did you do? Did you bring in a lawyer or outside advisors? I mean, I imagine both of you guys had really good intentions. Like if I'm in the company, I'm going to be sitting there going, 'Guys, we cannot do this. This is wrong.' At the same time, you've got investors. You've got to make money. I'm sure the 8chan community was probably generating significant revenue for you.

J

Jack Conte1:16:32

So the investors are super helpful here. Besides just the money, they connected us to people who had worked on these types of problems before. Reddit had dealt with stuff like this. Um, Facebook had to deal with stuff like this,

G

Guy Raz1:16:47

still does

J

Jack Conte1:16:48

and still does. And we got connected through those investors to a fellow who wishes to remain anonymous even to this day. He had built these very massive content policy and trust and safety enforcement systems, and he worked with us for a period of two months to draft the first version of what became Patreon's content policy, which turned out to be about 40 pages. And to tell you the truth, that was one of the most horrific two months of my life. Why? Well, because the internet can be a dark place. And there are really horrific things out there. And in that two months, we had to explore all of those cases real in the world on Patreon. And we had to have some very deep philosophical conversations about what are we okay with supporting and what are we not. And then content policy is like anything else at a company. It's a living breathing thing that you iterate on and it changes over time. But that first version, the creation of that first version, was a very difficult two months. Difficult because you had to make specific choices about what you would accept and what you wouldn't accept. There were two reasons. The first was Sam and I, this was one of the first moments where we had fundamental disagreements about the business. And so it was challenging our relationship in a way that we hadn't dealt with before. Is that fair, Sam? Like we

S

Sam Yam1:18:29

Yeah, I think that's right.

J

Jack Conte1:18:30

Yeah. Like we had to have really intense values discussions where we weren't on the same page and that was really hard. And in particular, we hadn't come up with even a framework for how we would get through these decisions. I remember there were all these sessions where we would just bring in everyone from the company and there were all these different disparate opinions and we couldn't figure out how to put them together because people were very divided even internally. And I think all of this just became very exhausting for both of us.

G

Guy Raz1:19:05

So, how did you what did you come up with? What was the policy you came up with?

J

Jack Conte1:19:09

The end state of this project working with this outside person that helped us write the first version of it was this content policy, which was a rules-based framework that gets to a level of specificity that I think most people are probably unaware of. Like for example, people say you can't define porn. You just kind of know it when you see it. I beg to differ. You can define porn. We have spent quite a lot of time defining porn in way more detail than probably anyone wants to hear about or go into. And then do that across everything. Weapons manufacturing, hate speech, what is harassment. The output of this content policy was rigorous definition around what we meant by each of those things and as many edge cases as we could think of. That's how much detail you want to go into.

S

Sam Yam1:20:02

Yeah. I think the perspective I always liked, I don't remember how we landed on this, was that we're facilitating art. Art should in some sense be bridging a lot of these divides and not increasing them like some communities would be doing. And so guided with that, we're constantly, as Jack noted, it was an evolving document, but at least we sort of knew directionally where we want to be.

G

Guy Raz1:20:30

But I mean, you guys, because of this policy did alienate some of your better known podcasters like Sam Harris, who was on Patreon and he decided to stop using it because he didn't support the policy. He said that it violated free speech. And presumably you talked to Sam about this when he decided to leave.

J

Jack Conte1:20:30

Well, I talked with Sam many times. He's such an incredible thinker. I respect him so much. And I was very clear about our logic and why we have to have a content policy. And I think these things are complicated if you're not inside a company. Over the last few years, it's become very clear to people why companies need to have a content policy. But at the time, his reasoning was the First Amendment should do it. That should be the policy. And we disagreed. And we weren't going to change our minds to keep two or three creators, as painful as that was. But again, I am really proud of our content policy and I think more folks should do that, especially emerging tech companies. I wish more folks did that. So it's a bummer and I wish Sam was raising money on Patreon. His pitch was awesome and straight from the heart and right on. But sometimes you have values-based disagreements like that and that's what happens.

G

Guy Raz1:22:16

Putting out any idea into the world, especially a platform like this, is going to create friction, right? Even though your intentions are good and by and large it serves people well, there are going to be critics. That's normal. That's part of the process. Our show gets criticized and you have been criticized for a variety of reasons. Let me just start with one of them. A critique is that actually almost nobody on the platform makes a serious living. There was an article that came out in 2017. I think it was called 'No One Makes a Living on Patreon.' It said something like 80% of the creators who shared what they earn make less than the federal minimum wage.

J

Jack Conte1:22:52

Yeah. I'm not sure that's criticism as much as just a statement. Perhaps it was meant as criticism, but Patreon is solving a very specific clear problem. One of the problems it's not solving is the demand curve. We can't solve supply and demand. We're also not solving helping everybody find new fans. These are really hard problems that other companies do way better than us right now actually. And we were very narrow in our focus of what problem are we trying to solve? The very specific problem that Patreon set out to solve early was: you're a creator, you're reaching millions of people, and you're getting paid $100 a month in ad revenue. Great. Patreon is the platform for you. But if you're not reaching a million people, or it doesn't have to be a million, but if you don't have an audience, actually Patreon doesn't work so well for you at all. And so I think it's totally fair to point that out. And I actually think it's important to be honest about that. We want to be honest if somebody expects that they're going to come on to Patreon without having found a thing that resonates with people. That's not a problem that our product solves. And if we were to try to solve that, it would be incredibly defocusing and I think we'd end up doing worse at our mission. And at the end of the day, the thing is there are now tens of thousands of creators who are making a lot of money on the platform and building media companies and leasing office space and hiring teams, and now there are creators making millions of dollars a year on Patreon. But we're not going to solve the product market fit problem for folks.

G

Guy Raz1:24:39

So, one of the challenges that you guys have had to deal with over the years is how to roll out changes to your revenue model because inevitably users don't like it when they get used to a certain system and it changes. But a few years ago, you ran into some trouble when you announced that you were going to shift the way that processing fees were being handled. So I guess instead of the creators paying the processing fees, the patrons would have to pay them on top of the subscription fees that they were already paying. And that caused a backlash, right?

J

Jack Conte1:25:17

There were. Yeah. So you were very kind about it. Thank you. Describing the backlash about patrons paying fees. That was the worst product rollout in the history of the company. And backlash doesn't begin to describe how it felt from the inside. I mean, there was a tweet at me every 2 to 3 seconds for probably 72 hours. You know, equating me to the devil. I mean, it was very anxiety inducing. It cannot be fun. It's the opposite of fun. But we learned so much about our community and product development and communication and how to talk to our creators. And so the next time we rolled out something like that, we literally talked to over a thousand creators first, which we did not do that time. We did AB tests and we got the data and the data showed that actually it was a great thing, but that's different than talking to a person and hearing them react to it and hearing their feelings about it. You can't just disassociate that from the product experience.

G

Guy Raz1:26:49

Have you become profitable yet,

J

Jack Conte1:26:51

Sam? Are we talking about profitability? [laughter]

S

Sam Yam1:26:55

Um, I'll also say, no, Patreon's not profitable. It's tracking toward profitability. We're burning money every month, but the business is very healthy. The financials are very healthy. And to help the business, last year you rolled out a new payment plan for the creators which is a tiered plan. So depending on the level of service they get, they pay either 5%, 8%, or 12% of the income that they get from the site. Is that right?

J

Jack Conte1:27:25

Yeah. This new plan, the three creator plans that we rolled out have amazing adoption. Creators are opting into those more feature-rich products and it has changed the business. So we're going to keep adding features to those. We're going to keep building out the product and building more things. But very clearly, yes, this worked. This allows us to scale and be healthy and be a long-term meaningful company.

G

Guy Raz1:27:59

And how many creators are on the platform now? Hundreds of thousands, right?

J

Jack Conte1:28:04

It's a little over 200,000. Yeah. Who are getting paid. I mean, I imagine that this era has been a blessing. I mean, it's a horrible situation, of course, but all of a sudden, you've got people at home, creators who cannot tour, who can't play in coffee houses, and it's not like stadium level bands are going on Patreon, but people who might play to 100 people now, they can't do it.

G

Guy Raz1:28:04

Have you had a massive spike in people onboarding?

J

Jack Conte1:28:04

I mean, yes, it's been wild to see. The pandemic has been such a brutal thing in the world and it is so weird to think about. It is true that it has benefited Patreon and that dichotomy is very strange for me. I think the way I'm trying to think about it is I'm glad something like Patreon exists to catch creative people right now in a moment like this. For example, AEG Live Nation both cancelled global touring operations. So very suddenly there are these creators who were looking forward to a year or two of touring and hundreds of thousands or millions or tens of millions of dollars of touring revenue that evaporated over the period of a week. And so the level of launches on Patreon are what you could expect in a situation like that. Not only creators launching on the platform, triple digit growth month over month in podcasting and music and things like that, but also patrons stepping up and really doing their part. I think a lot of people are looking for a way to help right now and patrons are too and there's a really easy way that they can.

G

Guy Raz1:29:25

Yeah. When you guys think about this path and where you are today, how much do you think that it has to do with your intelligence, skill, hard work, and how much of it is just luck?

S

Sam Yam1:30:04

I mean, my opinion on this is largely if you're fortunate enough to fall in order to build as part of a community that is this excited about an idea. I felt like if it wasn't us, it was going to be someone else. And so in a lot of ways, at least personally, I feel very appreciative of the luck of the timing and the opportunity to do this. I also think we wouldn't have been able to make it if we didn't work extremely hard from the get-go.

J

Jack Conte1:30:47

Yeah. You know, I've done a thousand things in my life. 999 of them haven't worked. Patreon was one that happened to work. Was I smarter or did I make better decisions with Patreon? No. It just was a lot of happenstance and circumstance. And Sam and I killed ourselves to do it, of course. But I love this attitude because it puts us in a place where both of us feel an immense sense of responsibility and that we have to be great stewards of both creators and the opportunity and even our teams that are helping us along on this mission. And I think we take that very seriously. And by the way, one thing that we haven't talked about is quality. How serious are you guys about the quality of the stuff that's on Patreon? I mean, you've been on YouTube. There's great stuff on YouTube. There's a lot of really awful mediocre stuff on YouTube as well. Does it bother you if someone uses Patreon to put terrible music or terrible art out into the world, or do you just not care? Oh god. We would never judge the quality of somebody's art and have that be an input into a decision whether to include them on Patreon. We would of course never ever do anything like that. I actually find it so awesome if there's something so tiny niche that only a handful of people passionately care about. I feel like that in effect is how we've piggybacked off this whole movement on the internet that allows any community to find within an interest group some set of folks who care so deeply about that. So why in the world would we ever care about that? The beautiful thing about the internet is that suppose you're a total weirdo. Suppose you make stuff that in your town nobody likes your music. Only one in a thousand people like what you have to make. Great. On the internet, there are literally millions of people who will like your stuff. If your ratio is one in a thousand, you can get millions of fans and make hundreds of thousands of dollars a month. I love that about the internet. I think that's such a special, weird, wonderful time in the development of humanity to be connected like that.

G

Guy Raz1:33:36

That's Jack Conte and Sam Yam, co-founders of Patreon. What is the weirdest, most niche Patreon creator that you've seen? Like just the most odd niche thing that you can think of.

J

Jack Conte1:33:52

One of my favorite examples of this was just like I don't get ASMR at all. I don't get it. Like it doesn't work for me.

G

Guy Raz1:33:59

ASMR. You don't get it. Not at all. It doesn't work. My brain is not tingling right now.

S

Sam Yam1:34:05

I'm getting the tinglies, guys. I don't know what you're talking about.

G

Guy Raz1:34:07

Yeah. Are you good? You have ASMR people on there?

J

Jack Conte1:34:11

Yeah, it does really well and people pay for it monthly.

G

Guy Raz1:34:13

Oh, yeah.

J

Jack Conte1:34:14

Maybe I should get on it. This gig doesn't work out for me. I'm doing ASMR Patreon.

S

Sam Yam1:34:20

Don't quit your day job.

G

Guy Raz1:34:28

Hey, thanks so much for listening to the show this week. You can subscribe wherever you get your podcasts. If you want to write to us, our email address is hibtnpr.org. If you want to follow us on Twitter, we're @howibuiltthis or I'm @giraz. Also on Instagram, you can follow me @gy.raz. This episode was produced by Rachel Faulkner with music composed by Rumine Arablouie. Thanks also to Liz Mezer, Dereth Gails, JC Howard, Julia Carney, Neva Grant, and Jeff Rogers. Our intern is Farah Safari. I'm Guy Raz, and you've been listening to How I Built This. This is NPR.

Patreon: Jack Conte and Sam Yam

About Jack Conte