The "OnlyFans" Cash Machine

What we think a cash machine is, is relatively bootstrapped, small ownership, maybe just the founders and some angels, let's say. So OnlyFans does actually qualify for this because the ownership was condensed largely to Leo, and the amount raised again was relatively small. He's actually rumored to own around 100% of the $600 million cash flow stream. That's not revenue, that's cash flow that OnlyFans is producing. Okay team, hello and welcome to this episode of Cash Machines. And we have a big one for you today. We've kind of in the last few episodes been focusing on, I guess, slightly smaller companies. Like we've done a couple of media companies, Acquired and Entrepreneurs on Fire. We've also done Software Finder, which is an epic episode. All of those are around the, between 5 and 50 million in revenue. Now we've got a big one, and it's actually quite a topical one because rest in peace, the founder of this company passed away in the time between when we published a newsletter that was about a month ago and now the recording of this show. So we must say RIP to the founder of OnlyFans, Leo Radwinski. Now what I will say before we get into this episode is that we're not here to cast judgment on the business, whether it's F-core or not. That isn't really something that I'm probably qualified to talk about. What we are here to do is talk about this business making money, this business or Leo building arguably one of the biggest cash machines of all time, not to talk about the morals of the business. So before we jump into this episode, we must give a massive shout out to Fame, which is the cash machine that I'm in the process of building, for producing this show. So head to famed.so and request a proposal if you'd like a show like this. Let's jump in right now. Okay, so for those of you that don't know what OnlyFans does, it's essentially an online platform where adult creators can produce content and then have their subscribers essentially pay to access different levels of content. And so as I mentioned, we've been covering small firms in the tens of millions of revenue up to this point in the Cash Machines journey. We haven't touched the billions, and OnlyFans has revenues in the billions. Typically, when you have these much larger companies, the ownership is spread around many different people. They probably raised a lot of money, and therefore it wouldn't qualify as a cash machine. What we think a cash machine is, is relatively bootstrapped, small ownership, maybe just the founders and some angels, let's say. So OnlyFans does actually qualify for this because the ownership was condensed largely to Leo. And the amount raised again was relatively small. He's actually rumored to own around 100% of the $600 million cash flow stream. That's not revenue, that's cash flow, uh, that OnlyFans is producing. So let's jump into some numbers so I can give you a bit of context. The 2024 numbers were $7.2 billion in revenue and $1.4 billion in net revenue. So the difference between those two numbers is the amount that's paid out to creators. So there we're having $5.8, my maths is correct, billion paid out to creators in that year, leaving the platform at the take rate, I think around 20%, to pull in $1.4 billion in revenue. And the pre-tax profit on that in 2024 was $684 million. So after paying 25% corporation tax to the UK government because they're registered in the UK, leaves Leo and potentially some other small shareholders. I don't think there are many. Maybe an employee share options pool, for example, would leave Leo with approximately $500 million he's able to pull out. If we understand like the context or, or the growth of this, and this episode will link to the blog post, which will have this chart. If we go back to 2019, there was $60 million in net revenue, which was delivering actually close to zero profit. I think around $6 million in profit. That was 2019. Jump forward post-COVID, couple of years, epic growth, $400 million in profits on around a billion dollars in net revenue. Then now they mentioned in 2024, got up to $1.4 billion in net revenue for their $600 million in profit. So essentially not a lot was happening pre-COVID and there was really a COVID boom, which almost 10x revenue and it actually got really profitable. So $400 million in 2021, and that is relatively flat over those years. So 2021 to 2024, the net profits only grew from $400 million to $600 million. And Elio's dividends, again, in those 4 years ranged between $300 million and $500 million. So each year he was taking out between $200 and $500 million each year. So a real cash machine for Leo. But let's understand why he was able to do this, or how he was able to do this. In my view, there was at this time a limited competition for this, a fae, essentially niche content platform. Limited competition because I guess a large proportion of the population believe this business to be immoral, which therefore would obviously have much less people actually try and start this company. And in the blog posts that we have on site, we have a screenshot of the homepage, which you'll see is pretty horrendous in terms of usability. Essentially, it seems like they're able to get away with a lot of stuff that if the space was fully regulated, no moral issues, they wouldn't be able to because competition would be higher. So this is a lesson. I'm not saying try and create a cash machine in a business that loads of people think it's immoral, but just go and build a cash machine with less competition is probably the lesson. Obviously, during COVID this is the second point, there was a massive COVID boost. During COVID the traditional adult industry stopped. You maybe couldn't do that socially distanced. This is ideal for OnlyFans because COVID essentially couldn't spread through screens. And then the third reason why we think that OnlyFans was able to grow and sustain that level of profit is the fit between Leo and the business. First off, he's pretty comfortable in, or he was pretty comfortable in, gray areas. He was actually previously sued by Amazon and Microsoft for spamming, so sending too many emails, and also allegedly ran a website selling hacked passwords. So he's like very comfortable in these gray areas. So other founder investors would have run away from any type of business like this. Leo had experience. He also had deeper experience in the specific niche. His first few million dollars that he made himself was from a business called MyFreeCams, where users could come and consume content for free, but then would have to pay with tokens for creators to do things. And so that wasn't in the adult niche, that was in any niche. And then obviously token revenue split between the creators and the platform. So essentially had that business, or had the OnlyFans business before OnlyFans, but it was a more general platform. The business was actually found by, I think, a father-son pair, based in the UK, and it was generating, I think, a few million dollars in revenue when Leo came in, bought them out, and then essentially scaled OnlyFans. So he had experience with gray areas, but also experience in the niche. And so it was really like the perfect storm, let's say. COVID happening at the same time, or shortly after he bought it, that enabled this company to grow. And then of course, what is the cash flow being used for? Typical billionaire stuff. So donations to open source projects, so respect for that. Setting up a VC firm— we'll link to it below— but a VC firm in his own name called Leo. Political donations. And then also, he— interesting— he bought 4 out of 5 penthouses on the 81st floor of the Aqua skyscraper in Chicago. It's very tall, very luxurious. So he bought 4 out of the 5 penthouses for $9.2 million. But what is the number one learning that maybe we can use to increase our ability to create cash machines? For me, it's go where other people don't. One way I like to think about business is that in reality, you're just in a big competition for who can create the most value for a specific type of customer. And obviously, by definition, if there's a lot more competition fighting for that customer, then you just have to be better. So your level of skill and effort is going to result in less output because you have other people who are also trying to give more value competing with you. Whereas if you had, let's say, 5% of the competition in a niche, then with your level of skill and effort, it's going to be 20 times easier. And therefore, you you could be able to get 20 times more results. It's a very high-leverage way, I think, to increase the size and scale and ultimately profitability of the cash machine that you're building. And so I'm not saying Leo wasn't a great entrepreneur. He clearly was a genius, but he was operating in an arena that had few, probably not so good competitors, because he was in a space that no one, or not that many people, wanted to go. He also chose an opportunity that he's well suited for. So go where other people won't, and also choose an opportunity that you have the best possible unique natural advantage for, because that's what Leo did. So less competition, including ideal founder-to-business fit, ultimately results in more cash flow. And that is what we're here for in this podcast, in this movement that we're trying to— although we are pushing forward into the world of cash machine creation. Okay, thank you so much for listening to this episode of Cash Machines. We appreciate it. I hope it was valuable. If you have any feedback on the structure, again, for solo episodes and for interview episodes, I try to follow the same structure, which is essentially understanding what the business does, understanding what the revenue and profit is, how that's trending over time, then understanding how they're doing it, ideally 2 to 3 things, and then understanding what they're doing with the excess cash, and then finally the number one learning. So any feedback on that, let me know. DM me on LinkedIn or send an email to tom@tomahunt.io. Thank you. Thanks so much and rest in peace to Leo for building very big and epic cash machine, the biggest one we've covered on the show so far. Thanks to Fame for producing this show. If you'd like a show like this, head to fame.so and request a proposal. Say that Tom sent you, and thanks to you for listening.