Newsletter startup Substack, which has captivated prominent writers such as George Saunders and Salman Rushdie, fired 13 of its 90 employees on Wednesday. This is part of an effort to save cash in the face of industry-wide funding shortages for start-ups.
Substack CEO Chris Best told employees That cut According to those who are familiar with the discussion, the affected staff are in charge of human resources and writer support functions.
Cuts are a blow to companies that say they are opening up a new era in the media. There, people who write stories and make videos are more empowered and receive direct payments from readers for what they make, rather than being paid for by publications. Or the site where their work appears.
According to someone with controversial knowledge, Mr. Best will be able to fund employees on Wednesday so that substacks can fund their businesses from their own income without raising additional funding in difficult markets. He said he had decided to reduce employment. He said he wants the company to raise money from a strong position if the company decides to raise it again.
In a statement to employees, Best said the company’s bottom line is increasing. He said the sub-stack still had money in the bank and, albeit late, continued to hire. Best said the reduction would allow the company to sharpen its focus on products and engineering.
A few months ago, Substack abandoned plans to raise additional funding after the venture investment market had cooled. The company talked about raising $ 75 million to $ 100 million to drive growth, and some funding talks rated the company between $ 750 million and $ 1 billion. was.
According to The New York Times, the sub-stack, which cuts author subscription fees, generated about $ 9 million in revenue last year. In other words, the funding debate means that we valued the company at a higher premium than the company’s performance. The substack is said to have been valued at $ 650 million last year after completing a $ 65 million funding round.
Many media companies expect headwinds in the coming months as the broader economy shows signs of tension. When a company cuts its marketing budget to save cash, it can run out of advertising revenue, and if consumers spend less on news and entertainment, subscriber churn rates can increase.