The newsletter platform Substack laid off 13 employees today, mostly in HR and writer support roles.
Co-founder and CEO Chris Best informed the company after holding meetings with the affected employees. The meetings also included founders Hamish McKenzie and Jairaj Sethi. That’s probably a better way to deliver the news than some other companies’ approaches (cough, Coinbase), but the news is still rough for a company that raised $65 million from Andreessen Horowitz (a16z) just last year. Even then, we were skeptical about how the company managed to earn a $650 million valuation so soon.
Like several other companies that boomed in a time when venture capital flowed more freely, Substack must figure out how to survive in a hostile economic time.
Substack reportedly tried to raise another venture round as recently as last month, but the platform chose not to take on more funding. According to The New York Times, Substack earned about $9 million in revenue in 2021, which comes from the 10% cut it takes from writer subscriptions. Aside from a 3% credit card processing fee, that means that Substack writers are earning around $90 million a year — though the top 10 writers earn $20 million of that pile of cash. These figures would have made it challenging for the company to raise at a higher valuation than its last round.
“Our goal is to make Substack robust even in the toughest economic market conditions, and to set the company up for long-term success without relying on raising money — or, at least, doing so only on our time and our terms,” Best wrote in a letter to employees, which he made public on Twitter.
Substack is still hiring, but at a slower pace. Currently, its jobs site lists three engineering roles, a sales rep, a head of growth and a head of HR. As the company matures, it’s also seen great competition: even Twitter is pushing long-form and newsletter products now.
“I’m very sorry. Not long ago, I told you all that our plan was to grow the team and not do layoffs,” Best wrote.