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Is Big Entertainment funding great work in podcasting or gentrifying the ecosystem?
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July 16, 2019, 12:52 p.m.
Business Models
LINK: on.substack.com  ➚   |   Posted by: Laura Hazard Owen   |   July 16, 2019

The email newsletter platform Substack, which has become home to an increasing number of personal and professional newsletters as creators phase out their use of TinyLetter, announced Tuesday that it’s raised $15.3 million in Series A funding. The round was led by Andreessen Horowitz, with participation from Y Combinator.

Since its launch in 2017, Substack has grown: It says it now has 50,000 paying subscribers across all of the newsletters in its network, up from 11,000 a couple of years ago. Creators can choose to make their newsletters free or paid, with Substack taking 10 percent of revenue from paid subs. As of February, Substack also began allowing users to monetize podcasts.

As of Tuesday, Bill Bishop’s newsletter Sinocism, which is about China and is $15 a month, was the top paid publication on Substack; others among the paid top 10 include Robert Cottrell’s The Browser ($5/month), a newsletter about restructuring and bankruptcy called PETITION ($29/month), Judd Legum’s Popular Information ($6/month), Nicole Cliffe’s Nicole Knows ($5/month), and Daniel Ortberg’s The Shatner Chatner ($5/month). (Disclosure: I host a free newsletter on Substack.)

The mixing of journalism and venture capital has often not benefited writers, and it’s wise to be skeptical about media companies that rely heavily on VC money for growth (see: the implosions of Mic and Mashable, and layoffs at BuzzFeed, Vox Media, and Vice). Substack acknowledged this in its funding announcement, but vowed that, unlike the aforementioned companies, it will never be ad-based:

We know that Silicon Valley venture capital and the media have often not mixed well, but we are committed to getting this right. We have a business model that works and that aligns our incentives with the writer’s. One of our founders, Hamish, is a journalist and author himself. We will never build ad tech into Substack, and we know that the media can’t be saved by algorithm. This Series A will help us to make substantial investments in our product, team, and network of readers and writers. It will allow us to build critical infrastructure, from get-togethers to fellowships, to help writers succeed and readers get the best possible media experiences. And it will let us continue to democratize the tools that writers need to create independent businesses.

To all the writers who have put their trust in us: thank you. You are what makes Substack what it is, and we are determined to do right by you. Our focus remains the same as it was on day one: building a sustainable company based on a model that’s simple and fair.

Substack said that it plans to use the funding to hire more staffers (it currently consists of three people — cofounders Chris Best, Hamish McKenzie, and Jairaj Sethi) and look “for more ways to help writers get started and continue to grow.” (Coincidentally or not, Patreon also announced $60 million in a new round of funding on Tuesday.)

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