October 2, 2022

Newsletter platform Substack laid off 13 employees today, mostly in HR support roles and writer.

Co-founder and CEO Chris Best informed the company after holding meetings with affected employees, which also included founders Hamish McKenzie and Jayraj Sethi. This is probably a better way to get the news out than some of the other companies (Cough, Coinbase), but the news is still tough for a company that raised $65 million from Andreessen Horowitz (a16z) just last year. Until then, we were skeptical about how the company would be able to earn a $650 million valuation soon.

Like many other companies that thrived at a time when venture capital was flowing more freely, Substack must figure out how to survive in a hostile economic time.

Reportedly Substack try to raise Another adventure round as recently as last month, but the platform chose not to receive further funding. According to the New York Times, Substack has earned about 9 million dollars in revenue in 2021, which comes from the 10% reduction in book subscriptions. Aside from a 3% credit card processing fee, that means Substack writers earn about $90 million a year, even though the top 10 earn $20 million from that cash pile. Those numbers would have made it difficult for the company to win at a higher valuation than its last round.

“Our goal is to make Substack strong even in the toughest economic market conditions, and to prepare the company for long-term success without relying on raising money — or, at least, doing so only on our time and terms,” Best wrote in a letter to employees posted on Twitter.

Substack is still hiring, but at a slower pace. Currently, his job site lists three roles as Engineering, Sales Representative, Head of Growth, and Head of Human Resources. As the company matured, it also saw significant competition: Twitter even promotes long-running products and newsletter products now.

“I am so sorry. Not long ago, I told you all that our plan is to grow the team, not lay off workers,” Best wrote.

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