Substack, the five-year-old newsletter platform that has aggressively positioned itself as a disruptive force in media, has abandoned efforts to raise a Series C round, the New York Times is reporting today. According to its sources, Substack held discussions with potential investors in recent months about raising $75 million to $100 million at a valuation of between $750 million and $1 billion.
Substack, based in San Francisco, was most recently valued at $650 million by its investors after closing a $65 million Series B round in March of last year led by earlier investor Andreessen Horowitz (a16z). It had earlier raised a $15.3 million Series A round led by a16z in 2019.
Substack originally launched as a way to turn newsletters into a paid subscription business, inviting anyone with an interest to hop on the platform and start writing for however much they want to charge their readers. Writers were — and still are — encouraged to write for free; those who charge a subscription pay 10% of what they collect to Substack.
The company later added support for podcasts and just this month rolled out its own podcast player, in addition to new moderation tools, leaderboard categories and more. As CEO Chris Best told TechCrunch several years ago, Substack’s goal has always been to allow its users to create their own “personal media empire.”
Whether the business is capable of generating meaningful revenue despite these bells and whistles is the question investors might have been asking themselves. According to the Times report, Substack told investors that it had revenue of about $9 million last year.
The Times notes that Substack is one of many outfits right now facing new headwinds, as investors snap shut their checkbooks amid rising interest rates that have severely dented stock stocks and and slowed growth in the U.S. and global economies.
If Substack’s overall fortunes should change, it would be the second, highly hyped consumer company in Andreessen Horowitz’s portfolio to have dominated the headlines, then lost momentum.
Clubhouse, the audio-based social network that was the talk of the tech world toward the end of 2020 and, like Substack, has gathered the bulk of its funding across numerous rounds led by a16z, has seemingly become an afterthought over the last six to 12 months, as the worst of Covid passes and people who were drawn to the service during the height of the pandemic resume socializing in person. Clubhouse has also faced increased pressure from copycats, including Twitter Spaces.
Andrew Chen, a general partner at the firm, led both deals.
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, who cofounded The Wing, per Crunchbase data.
We’ve reached out to Substack for comment. In the meantime, a spokesperson for the company told the New York Times that the change in the company’s fundraising plans doesn’t impact its hiring plans, telling the outlet, ““My comment is www.substack.com/jobs.”