![]() ![]() ![]() It’s…democratizing…shareholder capitalism? Ok. There are legal caps on investment amounts, and normies who are not accredited investors and don’t have a income or net worth over $124,000 3 can invest up to $2,500. Great question, person I made up in my head!Įnjoying this essay? Subscribe to Think Piece for more deep thinks direct to your inbox □ If you’re at all familiar with venture funding and investing in businesses, you may be squinting again: why, if Substack is raising a community round, don’t we know much money they’re making? And their burn rate? And how long their cash-on-hand will last? Definitely fine.Īll of this raises a huge red flag to me: how fast is Substack spending that trying to raise $2 million was worth the effort after failing to get together a proper round in 2022? The only other major player using a percentage model is Patreon, and things are definitely going fine there. Literally, why would I give Substack 10% if I don’t have to? 2 Competitors such as Ghost, Beehiiv, ConvertKit and even good ol’ WordPress make it easy to do the same thing at a flat rate. However, only 2 million out of their 35 million active subscriptions are paying, and since for writers the platform fees only kick in when they set-up subscriptions, there is an inventive to never do so. The number of paid subscriptions has doubled since 2021, and is sitting at around 2 million, so it’s likely that most of that revenue is recent and that revenue is growing. This puts, in the best case scenario, Substack at a lifetime revenue of $30 million over the course of 5 years. This sounds good until you realize that the $300 million number is cumulative over the lifetime of the business, 1 that Substack’s portion of that subscription revenue is 10%, and that many of the top earners on the platform were paid by Substack to be there. ![]() The company has processed $300 million in newsletter subscription payments for the authors on their platform. I’m on the record as hating Substack’s business model, and the information we have so far seems to support my opinion. They were also apparently seeking an increase in their valuation with that raise, which presumably was a sticking point with investors since tech valuations were significantly down in 2022. Substack tried to put together a raise of $75 million to $100 million in spring 2022 according to The New York Times, but decided not to move forward as the tech economy started to, ya know, crash. Well, it’s because the professional investors wouldn’t give it to them. If you’re squinting at those numbers (seeking $2 million? from writers? huh?) feeling something is off, you’re right: why does Substack, after raising $65 million in venture capital in 2021, need your pocket change? This will bring Substack’s total amount raised from their seed round onward to $87 million assuming they take the full $5 million allowed through the WeFunder arrangement. ![]() The crowdfund is technically an extension of their $65 million Series B led by Andreessen Horowitz in 2021, and is selling the same Series B Preferred Stock from that raise. The commitments quickly blew past that number and Substack now has pledges of over $6.6 million, well over the legal limit of $5 million for crowdfunding. On Tuesday, newsletter subscription platform Substack announced that they were opening a community investment round via WeFunder with a target of raising $2 million from their writers, users, and fans. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |