Substack, the newsletter startup that has attracted prominent writers including George Saunders and Salman Rushdie, laid off 13 of its 90 employees on Wednesday, part of an effort to conserve cash amid an industrywide funding crunch for startups.
Substack CEO Chris Best told employees that the cuts affected staff members responsible for human resources and writer support functions, among others, according to a person familiar with the discussion.
The cuts are a blow to a company that has said it was opening up a new era of media, in which people writing stories and making videos would be more empowered, getting direct payments from readers for what they produce instead of being paid by the publications or sites where their work appears.
Best told employees Wednesday that Substack decided to cut jobs so it could fund its operations from its own revenue without raising additional financing in a difficult market, according to the person with knowledge of the discussion. He said he wanted the company to seek funding from a position of strength if it decided to raise again.
In his remarks to employees, Best said the company’s revenues were increasing. He noted that Substack still had money in the bank and was continuing to hire, albeit at a slower place, the person said. Best said the cuts would allow the company to hone its focus on product and engineering.
Months earlier, Substack scrapped a plan to raise additional funding after the market for venture investments cooled. The company had discussions about raising $75 million to $100 million to fuel its growth, and some of the fundraising discussions valued the company between $750 million and $1 billion.
Substack, which takes a cut of its writers’ subscription fees, generated about $9 million in revenue last year, The New York Times reported. That means the funding discussions valued the company at a hefty premium relative to its financial results. Substack was said to be valued at $650 million last year after it closed a $65 million funding round.
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 their marketing budgets to conserve cash, and subscriber churn could increase if consumers have fewer dollars to spend on news and entertainment.
This article originally appeared in The New York Times.By Benjamin Mullin