Substack, a newsletter startup that has attracted prominent writers including George Sanders and Salman Rushdie, fired 13 of its 90 employees on Wednesday, an industry-wide start-up Part of the cash savings for businesses during a cash crunch.
Substack CEO Chris Best told employees that the layoffs affected staff in human resources and writer support functions, among others, according to people familiar with the matter.
The cuts are a blow to a company that says it is ushering in a new era of media in which people will have greater power to write stories and make videos, getting paid directly from readers for what they produce rather than being paid by publications . Or the website where their work appears.
Best told Substack employees on Wednesday that the company decided to cut jobs so it could fund its operations from its own revenue without having to raise additional capital in a difficult market, according to people familiar with the matter. If the company decides to raise money again, he said, he expects the company to seek funding from a strong position.
In his address to employees, Mr Best said the company’s revenue was increasing. He noted that Substack still has money in the bank and is continuing to hire, albeit at a slower pace, the person said. Mr Best said the layoffs would allow the company to focus on product and engineering.
Substack made the cut months after scrapping plans to raise additional capital after the venture capital market cooled. The company has discussed raising between $75 million and $100 million to fuel its growth, with some funding discussions valuing the company at between $750 million and $1 billion.
Substack, which takes a cut of writer subscription fees, generated about $9 million in revenue last year, according to The New York Times. This means that financing discussions value the company higher than its financial performance. Substack is said to be valued at $650 million after the company closed a $65 million funding round last year.
Many media companies are anticipating headwinds in the coming months as the broader economy shows signs of strain. Advertising revenue could dry up as companies cut marketing budgets to save cash, and subscriber churn could increase if consumers spend fewer dollars on news and entertainment.
