According to people with decision-making knowledge, Substack is an exaggerated newsletter platform that has attracted prominent writers by promising to take advantage of reader relationships, and the venture investment market has cooled in recent months. After that, I stopped trying to raise funds.
Substack has talked with potential investors in the last few months about raising $ 75 million to $ 100 million to fund business growth, only anonymously because the talks were private. Not people said. Some of the funding debates have valued the company between $ 750 million and $ 1 billion, they said.
This decision comes from the free-flowing cash of the recent Go-Go year for young start-ups, especially those for vibrant consumers like Substack, which has raised at least $ 86 million in three rounds of funding. Another sign of significant change. According to PitchBook, which tracks funding.
Investors are now preaching austerity and are suspending new deals, especially for companies that have been aggressive in growing without signs of profit. Substacks are still being adopted, but other companies are working on layoffs and low ratings. Comparison This recession spans several years after the 2008 financial crisis or the 2000 dot-com bubble.
Lulu Cheng Meservey, a sub-stack spokeswoman, declined to comment on the company’s finance and funding conversations. She said the company remains in growth mode and points to a web page with more than 12 job listings, including those responsible for growth.
“My comment is www.substack.com/jobs,” she said.
The investment terms being discussed for the substack are a leap in the valuation of the company, which was said to reach $ 650 million last year after completing a $ 65 million round of funding from investors, including Andreessen Horowitz. Would have represented.
Substack told investors that it would make about $ 9 million in 2021. Those who knew the funding talks said. In other words, the discussion evaluated a significant premium compared to the company’s performance. In the second half of 2021, when the stock market was booming and ventures were more bullish on start-ups, such high ratings for relatively low-earning companies were more common.
The company has marketed itself as an alternative to the well-established publishers of news articles, graphic novels and books. Substack says it gives writers a fairer share of the income from their work. The company has reduced 10% of the total revenue paid to writers by newsletter subscribers. Stripe, Substack’s payment processor, costs an additional 3 percent.
The company has acquired influential writers, including journalists Matthew Yglesias and Glenn Greenwald, and American history professor Heather Cox Richardson. Company executives say more than one million people pay to subscribe to the newsletter on the platform, and more than $ 20 million annually to subscribe to Substack’s 10 most popular writers.
However, some writers who first won the substack pitch eventually decided to leave the platform and preferred to open a courtroom directly to their audience without paying the company for that cut. .. Some were fascinated by the company’s practical approach to moderating content on the platform. Last month, the New York Times reported that some newsletter writers were looking for alternatives such as: ghost, A platform that provides services similar to substacks. Ghost’s open source publishing platform does not moderate content, but paid hosting services have some restrictions on content that demands violence or violates the law.
Substack also faces fierce competition with major tech companies, along with many media companies trying to compete. Twitter, LinkedIn, The Atlantic, and Puck, a startup founded by former Vanity Fair editor Jon Kelly, all use email magazines as a channel to attract viewers and make money.
Substack is one of a group of start-ups that have begun to thrive in a pandemic, and investors have begun to fight to pour money into them with soaring valuations. But so-called pandemic winners, such as the audio app Clubhouse and the grocery delivery service Instacart, have seen explosive growth begin to slow as people return to their daily lives.
Broader economic power, including rising interest rates, rising inflation, and falling stock markets, exacerbated the darkness.
Erin Griffith Report that contributed.
