Substack, the high hype newsletter platform, has abandoned plans for Series C – TechCrunch
Substacks5-year-old newsletter platform that has actively positioned itself as a disruptive force in the media industry, has abandoned efforts to raise a Series C round, the New York Times reports. Report today. According to its sources, Substack has held discussions with potential investors in recent months about raising $75 million to $100 million at a valuation between $750 million and $1 billion. dollars.
Substack, based in San Francisco, was most recently valued at 650 million dollars after closing a $65 million Series B round last March led by previous investor Andreessen Horowitz (a16z). It previously raised $15.3 million in a Series A round led by a16z in 2019.
Substack originally launched as a way to turn newsletters into a paid subscription business, inviting anyone interested in the platform to start writing at the price they wanted to charge their readers. Writers were – and still are – encouraged to write for free; those who charge a subscription fee pay 10% of what they collect to Substack, with Stripe, its payment processor, collecting an additional 3%.
The company later added support for podcasts and only this month, it rolled out its own podcast player, along with new moderation tools, leaderboard categories, and more. As CEO Chris Best told TechCrunch a few years ago, the goal of Substack has always been to allow users to create “personal media empire. ”
While that ambition has made Substack an attraction for traditional media companies – aside from the Times, Substack has attracted extensive coverage in Vanity Fair, the New Yorker and many others for several years – Investors may be wondering if this business is capable of generating meaningful revenue.
Substacks tell Axios At the end of last year, the top 10 writers on the platform together generated $20 million in annual revenue. According to the Times, Substack privately told investors that it hit $9 million in revenue last year. (It told the Times in a story last month that it has hundreds of thousands Paid newsletters are available on the platform.)
That’s not a lot of revenue for a company that boasts a $650 million valuation. Substack has also faced turmoil, with some writers leaving the platform due to Substack’s overly strict content moderation policies or competing platforms taking smaller cuts. Other writers find economics unappealing or simply exhausting.
The Times notes that Substack is one of many outfits currently facing headwinds as investors close their checkbooks amid rising interest rates that have severely impacted tech stocks and slowing growth in the US and global economies.
However, if Substack’s broader fortunes change, it will be the second, highly hyped consumer company in a16z’s portfolio to truly capture the public imagination, then lose gradually motivated.
Like Substack, the audio-based social network Clubhouse has obtained most of its funding on multiple rounds led by a16z. Like Substack, Clubhouse has also dominated headlines during the pandemic, thanks in part to the presence on the platform of Elon Musk, Mark Zuckerberg, and a16z partners. However, with the worst of Covid seemingly over and those who were once attracted to the service returning to face-to-face social interaction, Clubhouse is said to have seen registrations lead.
Andrew Chen, a general partner focused on consumer technology for the a16z, led both deals.
He shared his vision for both companies with TechCrunch last yearsays that each category will “light up, vertically” categories ranging from cooking to graphic novels, making them “stronger and more appealing to more people”.
Time will answer.
According to PitchBook, Substack has raised $86 million in three funding rounds. In addition to a16z, it is also backed by Fifty Years, Y Combinator and entrepreneur Audrey Gelman, who co-founded startup The Wing.
Substack declined to comment when reached earlier this afternoon. In the meantime, a company spokesperson told the New York Times that the change in the company’s fundraising strategy does not affect its hiring plans. “My comment is www.substack.com/jobs‘ she told the store.