Substack is opening up a community fundraising round, letting writers invest in and own a piece of the company. The company announced on Tuesday that writers can make an investment, of at least $100, starting today via Substack’s Wefunder page. According to the page, Substack’s funding goal is $2 million. The company’s pre-money valuation is $585 million. As of Thursday morning, Substack has $6,686,954 in pledges.
The company says it’s on a mission to build a new “economic engine” for culture, and that to do this, it needs to build a kind of network that is based on principles that give control to writers and readers. Substack is focused on building a subscription network founded on creator ownership.
The company revealed that readers have paid writers more than $300 million through Substack, and that the platform now has more than 35 million active subscriptions, including two million paid subscriptions. Substack also revealed that more than 17,000 writers are earning money on Substack, with the top 10 publishers on Substack collectively making more than $25 million annually.
“As Substack grows to accommodate more writers, podcasters, videomakers, musicians, scientists—and culture-makers of all kinds—we see a path to hundreds of millions of subscriptions and a significant cultural impact, which will in turn provide ample financial opportunity,” the company wrote. “We are at the dawn of the era of the subscription network. This work will be ambitious and exciting, and it will be meaningful. We’d love to have you by our side as we build this new economic engine for culture together.”
Substack believes that subscription networks represent a step forward from social networks, and that while social networks are associated with advertising and attention, subscription networks are about direct payments and trust.
The company explained in a blog post that after closing its $65 million Series B funding round in 2021, it explored ways to make it possible for writers to invest alongside traditional investors, but found that it was too complex, especially when trying to include people who weren’t already accredited investors. Substack says opening a community round is now more viable, especially due to crowdfunding platforms like Wefunder.
“We are serious about building Substack with writers, and this community round is one way to concretize that ideal,” the company wrote in a blog post. “We’re doing this because the dynamics of a platform like Substack change if the people who are building their businesses on it are owners of it too. And we’re doing it because it not only provides something good for our company but also presents an opportunity for the people who use Substack to participate in the benefits that come from building this network—including the financial upside.”
Substack notes that just because you’re able to invest in the company, doesn’t mean that you should. The company says potential investors should be aware that there is no guarantee that you will make your money back, noting that you shouldn’t invest any funds in the community round unless you can afford to lose the entire investment.
The company’s Wefunder page indicates that unaccredited investors can legally invest a maximum of $2,200. Substack says if the round if oversubscribed, it may not be able to accept all investments and may reduce individual investments, in which case users will be refunded the difference. If the round is oversubscribed, the company will prioritize Substack writers who have turned on paid subscriptions and paying subscribers.
The launch of the new community fundraising round comes as it was revealed in May 2022 that Substack had abandoned efforts to raise a Series C round after holding discussions with potential investors about raising $75 million to $100 million at a valuation of between $750 million and $1 billion, as reported by The New York Times. The decision to drop its funding efforts occurred amid an industrywide downturn as the market for venture investments cooled. In June 2022, the company then cut 13 jobs, representing 14% of its workforce.
Substack has raised $86 million over three rounds of funding, according to PitchBook. In addition to a16z, it is backed by Fifty Years, Y Combinator and entrepreneur Audrey Gelman. Given Substack’s current trajectory, it’s possible that the company is focused on working for its customers (i.e. writers) instead of its investors and looking at becoming self-sustaining.
Update 30/03/2023 11:40 AM ET: Article was updated to include the current amount of money raised.