Substack, the newsletter startup that has brought in famous writers including George Saunders and Salman Rushdie, laid off 13 of its 90 employees on Wednesday as part of a cash-saving effort amid an industry-wide startup funding crisis.
Substack CEO Chris Best told employees what cuts affected staff responsible for human resources and author support functions, among others, according to a person familiar with the discussion.
The cuts are a blow to a company that says it is ushering in a new era of media in which people who write stories and make videos will be more empowered by receiving direct payments from readers for what they produce, rather than from publications. or sites where their work appears.
mr. Best told employees on Wednesday that Substack has decided to cut jobs to fund its operations with its own revenue without raising additional funding in difficult market conditions, according to a person familiar with the discussion. He said he wants the company to seek funding from a position of strength if it decides to raise funds again.
In his address to employees, Mr. Best said the company’s revenues are on the rise. He noted that Substack still had money in the bank and continued to hire employees, albeit at a slower pace. mr. Best said the cuts would allow the company to focus on product and development.
Months earlier, Podstek canceled the plan attract additional funding after the cooling of the venture investment market. The company was in talks to raise between $75 million and $100 million to spur its growth, with some of the fundraising discussions valuing the company at $750 to $1 billion.
Substack, which takes care of some of its writers’ subscription fees, brought in about $9 million in revenue last year, according to The New York Times. informed. This means that during the financing negotiations the company was valued at a huge premium compared to its financial results. Substack is said to have been valued at $650 million last year after it closed a $65 million funding round.
Many media companies expect headwinds in the coming months as the broader economy shows signs of strain. Advertising revenue could dry up as companies slash their marketing budgets to save money, and subscriber churn could increase if consumers have fewer dollars to spend on news and entertainment.