Substack turns its face to the crowd

Yesterday, Substack announced a $2 million community fundraising round to help the company “build a new economic engine for culture,” which both sounds cool and like a mad lib of Silicon Valley jargon.

In plain English, Substack wants to be a new type of social network where you can support your favorite writers and find new writers to support, too (which by the looks of the data the company shared, it’s well on its way).

🤔 But why raise money from your own customers?... To put it simply, because that may be the only (and best) option Substack has.

In 2021, the company raised $65 million at a $650 million valuation. Then last year it tried and failed to raise an additional $75-$100 million at a $750 million–$1 billion valuation – and as any Patagonia-wearing bro will tell you, fundraising hasn’t gotten any easier since then.

💰 Bottom line: According to some back-of-the-napkin math by The Verge’s Elizabeth Lopatto, the company made around $18.5 million in revenue last year (against a black box of expenses). That’s ~32x its current pre-money valuation on Wefunder, which comes in at $585 million.

But that hasn’t turned away Substack’s supporters. Since going live on Monday evening, the campaign has not only reached its $2 million goal, but also hit the updated goal of $5 million, the maximum a company can raise via crowdfunding in a 12-month period.