Substack is laying off 14% of its staff

Some more details: &quot;Substack laid off 13 of its 90 employees on Wednesday, part of an effort to conserve cash amid an industrywide funding crunch for start-ups.<p>Substack’s chief executive, Chris Best, told employees that the cuts affected staff members responsible for human resources and writer support functions, among others, according to a person familiar with the discussion.<p>Mr. Best told employees on Wednesday that Substack had decided to cut jobs so it could fund its operations from its own revenue without raising additional financing in a difficult market, according to the person with knowledge of the discussion.&quot;<p>So to be fair to Substack, while their valuation is crazy it&#x27;s not like they are burning through VC money with wild abandon. Nice to see some restraint instead of a CEO feeding delusional hype.

$9M in annual revenue with possible fundraising valuing Substack at $750M-1B? Wow, even when the markets were hot and valued growth, that&#x27;s a <i>really</i> aggressive valuation. We&#x27;re talking 100x revenue, which is <i>insane</i> to me. Sounds like they&#x27;re doing what they should be by trying to run off revenue, plus some cash in the bank. I think the days of hyper-growth startups are over — at least until markets improve and&#x2F;or the Fed returns to QE policies.

Not surprised. A ton of political writers who got slurped up into Substack all compete over the same niche audience who definitely aren&#x27;t paying $10&#x2F;month or whatever for 15 different writers doing basically the same &quot;heterodox&quot; takes. That swarm effect works on &quot;free&quot; mediums like the blogosphere back in the day or Twitter, but it doesn&#x27;t really scale to paywalled newsletters.

On a recent episode of the Odd Lots podcast [1], they discussed an interesting phenomenon where hot startups won’t want to raise when markets are down, even if funding is available, because they don’t want to do a down round. Doing a down round marks the company to market and shows up as a materialized loss in the VC’s fund, whereas they can keep the old valuation if they don’t raise.<p>[1] <a href="https:&#x2F;&#x2F;www.bloomberg.com&#x2F;news&#x2F;articles&#x2F;2022-06-23&#x2F;the-behind-the-scenes-mess-now-facing-the-vc-industry?srnd=oddlots-podcast" rel="nofollow">https:&#x2F;&#x2F;www.bloomberg.com&#x2F;news&#x2F;articles&#x2F;2022-06-23&#x2F;the-behin...</a>

damn..I thought they were doing well.<p>Substack faces a lot of possible problems, imho: does not scale that well, limited audience size, writer burnout <a href="https:&#x2F;&#x2F;greyenlightenment.com&#x2F;2022&#x2F;06&#x2F;22&#x2F;substack-worth-1-billion-likely-not&#x2F;" rel="nofollow">https:&#x2F;&#x2F;greyenlightenment.com&#x2F;2022&#x2F;06&#x2F;22&#x2F;substack-worth-1-bi...</a><p>I think what substack needs is better content&#x2F;writer discovery. There seems to be no good way to find related substack blogs adjacent to the ones I already follow. Medium .com at least got that part right. I can go to the home page of Medium and find huge assortment of articles that interest me. That&#x27;s not the same with Substack.<p>Also, the the pop-up prompt to subscribe on mobile is annoying and does not go away. It should be disabled via cookies if you decline to subscribe.

&gt; Substack, which takes a cut of its writers’ subscription fees, generated about $9 million in revenue last year, The New York Times reported. That means the funding discussions valued the company at a hefty premium relative to its financial results. Substack was said to be valued at $650 million last year after the company closed a $65 million funding round.<p>By any yardstick, a price&#x2F;sales ratio of 72 is ludicrous. It&#x27;s the kind of thing that can only happen within the safety of a financial bubble.

re &quot;reading some wanker&#x27;s opinions&quot;:<p>I keep waiting for someone at Substack to start an <i>aggregate</i> of a whole bunch of wankers (some of whom are good), with consistent editing, advertising, and publish dates. Sell it at one reasonable price.<p>They could call it, I don&#x27;t know... A &quot;magazine&quot; [tm]

How could a company with $9M revenue, that I would guess isn’t profitable, ever be valued at $650M?

Coinbase, Bird, Redfin, Netflix, Tesla, Unity, Niantic and now Substack have announced layoffs in just the past few weeks, and Meta and Intel are in a hiring freeze. I think the next tech winter might be upon us. Is the return of FuckedCompany next?<p><a href="https:&#x2F;&#x2F;en.m.wikipedia.org&#x2F;wiki&#x2F;Fucked_Company" rel="nofollow">https:&#x2F;&#x2F;en.m.wikipedia.org&#x2F;wiki&#x2F;Fucked_Company</a>

To the folks saying the revenue multiple is crazy: remember that the $9MM revenue is substack&#x27;s cut, not GMV (gross merchandise value: the amount subscribers paid).<p>If you&#x27;re comparing substack with a non-marketplace business, you probably want to compare gross profit between the two, or compare substack&#x27;s GMV with the other company&#x27;s revenue.<p>Also consider growth expectations.

They have lost some prominent and apparently successful publications to competitors with lower fees and apparently better service (I can think of two at least who have moved to Ghost). Will be hard to build scale and profitability when your best writers have an incentive to move elsewhere.

$9M in revenue in a year when many people had plenty of time to read? Oof.

Substack is close to an amazing business model, but literally one or two engineers can make this.<p>What&#x27;s their to scale ? It feels like a really over engineered solution to a basic problem.

Interesting to note that a decent chunk of this 9M goes directly to Stripe. SS has all these writers and subscribers but is making peanuts.

I wonder what the future of Substack looks like, I have seen that they have been trying to push into the podcast space recently. I wonder if they continue to broaden the content they support and just slowly morph into a Patreon type site where instead of featuring just newsletters it is built for any type of content that allows paid subscriptions.

They probably overpaid for bunch of ppl to join

<a href="https:&#x2F;&#x2F;archive.ph&#x2F;UB59U" rel="nofollow">https:&#x2F;&#x2F;archive.ph&#x2F;UB59U</a> obligatory paywall bypass

I&#x27;m sure the NYT editors were cackling at this story. It wasn&#x27;t too long ago that there was a huge worry that paid newsletters were going to subsume a huge portion of the subscription market for professional newsrooms. Substack was offering guaranteed contracts to writers worth more than their subscription revenue could justify in order to bootstrap a network effect. The classic VC strategy of selling dollars for fifty cents. That ultimately backfired because they were indiscriminate about who they let on their platform which raised hackles from some writers who saw it as a platform for unsavory opinions.

Substack is the Medium of newsletters; the content is neither rare nor well-done. I&#x27;m not surprised they need to dump staff; their business model was never sustainable. Why should I pay to read some wanker&#x27;s opinions in my inbox when I can read a whole bunch of other wankers&#x27; opinions for free using their RSS feeds, without having to worry about whether any of these wankers are selling their mailing lists to make a little extra cash on the side?<p>Real writers have day jobs.

They must still be hiring engineers because I had a recruiter hounding me Monday

What&#x27;s the value of their subscriber list?

Subreply is laying off its only employee. :)

What a terrible business name. &quot;substack&quot; -&gt; &quot;subscription stack&quot;, a cool product to help people sell subscriptions. OK, that&#x27;s great. But then to go to the paying customers with that name?<p>It&#x27;s like Walmart calling themselves &quot;Efficient Logistics&quot;, or Microsoft calling themselves &quot;StableABI&quot;

Sad to feel sorry for a company that smugly told people from Twitter not to apply

I am trying to care, but despite thinking Substack sounded like a great idea when first launched I have sadly not been able to read their articles since they reject my browser and choice of privacy technologies for read-only access.