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They raised a ton of money on a high valuation, spent 25mil to make 1 mil last year and are now scrambling to raise a new crowd sourced round because they don't
by m_ke 4y ago
They raised a ton of money on a high valuation, spent 25mil to make 1 mil last year and are now scrambling to raise a new crowd sourced round because they don't want to get wiped out in a down round.
This notes thing looks like an attempt to pivot to an advertising based business model and I'm guessing they think they have "influencers" on their platform to bring in a decent audience.
- v0idzer0 4y agoIt still blows my mind they can’t run this tiny operation profitably taking 10% of many multimillion dollar writers’ revenue. Is it a requirement that YC companies raise way too much money and then proceed to torch it any way possible?
- laratiede 4y ago[dead]
- te_chris 4y agoZIRP picking off its victims one by one
- deleted 4y ago[deleted]
- blitzar 4y agoYou are not a victim in any real sense if they cut you a fat cheque first then take away the toys.
- spaceman_2020 4y agoOnly victims are the pension funds and sovereign funds and HNIs who fund VCs. Everyone else made money. Founders made money at every raise, employees made money with fat salaries, users “made” money with fat discounts.
- blitzar 4y agoThey got to make more than 0.00% return for the last 10 years, their only mistake (for those that made it) was thinking the party would last forever and trees would grow all the way to the sky.
- pornel 4y agoLosing only 24 million sounds like a bargain. Imagine spending 40 billion to pay 1 billion more in interest each year.
- yifanl 4y agoI mean consider also: Imagine being in a position where you can spend 40 billion and it doesn't wipe you out.
- nicenewtemp84 4y agoImagine spending only 30% of your net worth and getting to experiment with buying and growing one of the most used and talked about sites on the internet. If I spent 30% of my net worth I could buy a condo in the bay, possibly. Although odds are it would be worth close to that if I needed to sell it. But many people spend 30% of their net worth trying to start businesses with almost no traction. Musk spent 30% to buy something known internationally.
- deleted 4y ago[deleted]
- nr2x 4y agoI mean I could buy a very expensive Mercedes and drive it straight into the Bay at high speed. That doesn’t make it a good idea.
- nicenewtemp84 4y agoDefinitely doesn't make it a good idea. But it's still interesting that he's playing with one of the most talked about sites on the internet without really affecting his finances at all. Of all the random things to do with your money, it's not even that bad of an experiment.
- nr2x 4y ago
- LordDragonfang 4y ago>This notes thing looks like an attempt to pivot to an advertising based business model The announcement for the feature on twitter[1] literally emphasizes the lack of ads, pointing out subs are their revenue source, so that would be some 4D enshittification chess. [1] https://twitter.com/hamishmckenzie/status/1643629953026596867 https://twitter.com/hamishmckenzie/status/164362995302659686...
- JumpCrisscross 4y ago> announcement for the feature on twitter literally emphasizes the lack of ads Guessing that’s now how they’ll pitch it to an acquirer once it takes off.
- ghiculescu 4y agoWhere is the 1M number from? They take 10% of subscriptions and https://sellcoursesonline.com/substack-statistics https://sellcoursesonline.com/substack-statistics says that just the top writers made 20M in 2021. I bet there’s a long tail. (I don’t think you’re wrong by a factor of 10, just curious where you got your number from.)
- bolanyo 4y agoA lot of the top writers have large guaranteed incomes and related incentive structures. The 20M is not all revenue, some of it is a cost for Substack.
- m_ke 4y agoI couldn’t reply sooner because I have noprocast on but my numbers were a bit off, I was repeating what I heard on a tech podcast. According to the numbers they had to release it was a bit higher https://www.axios.com/2023/04/07/substack-gets-writers-to-invest-but-doesnt-share-new-financial-info https://www.axios.com/2023/04/07/substack-gets-writers-to-in...
- rchaud 4y agoNext on the product roadmap: - Infinite scrolling feed w/ ads - Video Substacks - Infinite scrolling video Substacks w/ ads
- sourcecodeplz 4y agoBut teh videoz need be shoorts
- kubectl_h 4y agoDon't forget the chumboxes.
- gimme_treefiddy 4y ago> They raised a ton of money on a high valuation, spent 25mil to make 1 mil last year and are now scrambling to raise a new crowd sourced round because they don't want to get wiped out in a down round. Sorry to get off-topic, but is there a read/book to understand funding, VCs, etc., from a holistic POV. I totally didn't expect that consequence of having to raise a crowd sourced round due to initial high valuation.
- drusepth 4y agoI don't have a resource for you (and will probably read whatever you get linked), but one intuitive way to think about it is that VCs/investors (and most of the startup ecosystem) are generally focused on "growth", not "performance". You can be a stable, profitable, money-making machine with 90+% margins and amazing reviews, but unless you're doubling something (users, engagement, profits, etc) every single year, you go to the back of the potential-investment line. A high initial valuation might be great for performance relative to other companies (or whatever reasonable metric you want to insert here), but it also makes it way more difficult to show "growth" YOY compared to a lower initial valuation.
- brewdad 4y agoWhy would a company like that want VC money? They can go to a bank if their numbers are that good and keep their equity for themselves.
- hackitup7 4y ago- Their valuation is high because they raised during the recent bubble - If you raise more money at a lower valuation than your last fundraise, it's highly dilutive. Investors paid $10 for 10% of a $100 valued company last round during the bubble. Vs. given current market conditions, new investors would only pay $10 for 20% of a $50 valued company this round. This second round would dilute existing investors, except... - If you crowd source the funding, now you can raise at a $100 valuation again (less dilution), because these crowdsourcing investors don't know what they're doing
- alephnerd 4y ago
- rosywoozlechan 4y agoWhat did they spend their $25 million on? What's the tech they have that costs this much to build? Their hard problems are a building a CMS or are otherwise solved by using fastly and sendgrid?
- yoran 4y agoFor most startups that raise money, tech is hardly a big cost. Most of the money goes towards fueling growth through paid marketing and so on.
- j45 4y agoPeople and office space are traditionally two major contributors
- dnissley 4y agoJust to mention one thing that isn't user facing (and therefore not so obvious): Social media companies dealing with user-generated content have to build their own enforcement mechanisms (abuse, copyright infringement, etc.), which is at least an order of magnitude harder than the user facing content engine itself.
- Fomite 4y agoThey threw money at some big name early adopters.
- lapcat 4y ago> This notes thing looks like an attempt to pivot to an advertising based business model It's not. Substack is very clear about that. https://on.substack.com/p/notes-faq https://on.substack.com/p/notes-faq "The ultimate goal on Substack is to convert casual readers into paying subscribers. Because the Substack network runs on paid subscriptions, writers are rewarded for respecting the trust and attention of their audiences, not exploiting it like with ad-based social media." "While Notes may look similar to social media feeds, the key difference is in what you don’t see. The Substack network runs on paid subscriptions, not ads. It’s social media with a heart transplant."
- Incipient 4y agoBecause no company would ever lie about their intentions, or at the very least pivot to the exact opposite of their original point without a second thought. Would they?
- s3p 4y agoAaaah someone disagrees with my point of view so they must be lying!
- k_pres 4y agoClearly not. No company would ever betray their original principles for the opportunity to make more money in the short term
- deleted 4y ago[deleted]
- shanebellone 4y ago"Because no company would ever lie about their intentions, or at the very least pivot to the exact opposite of their original point without a second thought." No business would pivot to a dying monetization model unless it was their last option. Advertising is not a solution for Substack; but rather a Trojan Horse.
- 4y ago
- neural_thing 4y agoTheir 2021 revenue is $12M. We don't know their 2022 revenue. Your numbers are just wrong. Source: https://www.sec.gov/Archives/edgar/data/1783191/000167025423000297/document_6.pdf https://www.sec.gov/Archives/edgar/data/1783191/000167025423...
- deleted 4y ago[deleted]
- chrisbolt 4y agoFrom your source, their 2021 net profit was -$6.5M and their 2020 net profit was $1M. They seem to be mixing the $24.6M in negative cash flow for 2021 with the $1M in net profit in 2020? Doesn’t make any sense.
- Gareth321 4y agoValuations in tech haven't been based on profit for 25 years now. It's all revenue and user growth.
- m_ke 4y agoYeah sorry about that, I was just repeating something I heard on a podcast and it looks like they assumed that was top line revenue and took 10% of it. I’d edit the post but it’s too late to do so. https://news.ycombinator.com/item?id=35534035 https://news.ycombinator.com/item?id=35534035
- quaintdev 4y agoI remember there was a time when people were excited about medium. Then medium needed some money so they started blocking readers behind login dialog boxes. Then come substack and everyone got excited about it. Sooner or later it will be on same path that medium took. When will we realise that blogging websites (not personal blogs) are not sustainable in long run.
- spaceman_2020 4y agoImo, a blogging software company really does not need to be valued in the billions or make a ton of money. The tech can be maintained by a relatively small team of people - see all the independent blogging platforms and open source tools. This is a classic case of VCs corrupting an industry with money that’s really not needed at valuations that really can’t be supported.
- amadeuspagel 4y agoPeople will realize that once there's some easy-to-self-host blogging software with support for comments and newsletters.
- rchaud 4y agoEasy to self host? We live in a world where Mastodon had to change their signup screen to de-emphasize "pick a server" because people had no idea what that meant.
- lapcat 4y ago> Then come substack and everyone got excited about it. Sooner or later it will be on same path that medium took. Substack is already far, far more paywalled than Medium ever was. Subscriptions are the business model.
- nkozyra 4y agoYeah, it appears their growth strategy is the inverse of Medium's.
- 4y ago