Q2 Featured Founder | Substack
1 of the Top 10 New Majority founders currently fundraising from YOU this quarter
Hello New Majority Investor Circle!
Welcome to Q2! April is a big month for equity crowdfunding campaigns and we wanted to highlight 1 in particular that closes in 1 day and is oversubscribed (investors have contributed more than the target raise).
We’ll be back later in the quarter with the rest of our Top 10 list, but until then, if you’re interested in becoming an investor in the leading newsletter platform, scroll down.
As a reminder, Investor Circle members get access to the full top 10 list. Free subscribers see the top 3. We also include a few bonus tidbits for accredited investors at the bottom of the list. These are founders who would love to see New Majority investors on their cap table and are actively raising pre-seed and seed rounds today.
Substack
First, some context:
🙋♀️ You want genuine, real content direct from your favorite independent writers and creators.
Calling all writers - You want an easy platform to publish, connect with and grow your audience, and monetize! ✍🏽🗞️✔️
Tell me more
Substack is a subscription-based newsletter publishing platform offering independent writers and publishers a place to own their content and relationship with subscribers.
We’d also like to note that as you read this, you are currently using Substack. We publish The New Majority Investor Circle on Substack.
The details
Industry: Media & tech ✍️
Impact: Decent work & economic growth (SDG 8)
Team Diversity: BIPOC co-founder
HQ: San Francisco, CA
Company size: 75
Year founded: 2017
Key investors: Not to name drop, but…
$2M raised in seed funding from Niwa Capital (Kenji Niwa, Angel Investor) and UpHonest Capital (past investments include Instacart, lime, hims&hers) following Y Combinator in 2018
$15M was raised in 2019 in a Series A round, led by Andreessen Horowitz (past investment successes include Airbnb, Asana, Box, Facebook, Groupon, Lyft, Pinterest, Robinhood, Zynga, Slack, caviar, Instagram)
$65M Series B was raised in 2021, again led by Andreessen Horowitz - this raise is an extension of the Series B
Investment type: Series B Preferred Stock
about $26 / share
Deadline: April 20, 2023
Investor Perks: None
Early traction:
Raised a total of $82.4M in funding over 4 rounds, including investments from Andreessen Horowitz
35M active subscriptions, including 2M paid subscriptions on Substack
💰💰💰 Readers have paid writers more than $300M through Substack
Founders
Chris Best: Co-founder and CEO, prev. co-founder and CTO of the mobile messenger app Kik
Hamish McKenzie: Co-founder and Chief Writing Officer, prev. at Kik, and a lead writer at Tesla, author of the book "Insane Mode: How Elon Musk's Tesla Sparked an Electric Revolution to End the Age of Oil"
Jairaj Sethi: Co-founder and CTO, prev. Head of Platform of Kik
Due diligence
Pros:
Experienced leadership: all the founders have a strong track record in the tech industry with a focus on networks and journalism
👩💻 Part of the growing industry to help content creators monetize
🌎 Contribute to a more open and accessible landscape for writers: monetization options, editorial support, easy-to-use platform.
Subscription-based business model with incentive alignment
86% writer share
4% payment fees
10% Substack revenue
📈 Built in product feature to help writers grow. The Substack Network drives more than 40% of all subscriptions across the platform and 15% of paid subscriptions.
Millions of readers with email addresses and credit card information already in the Substack system, making them 3x more likely to pay for a subscription to a publication on Substack.
Potential risks:
🔥💸 Significant burn to acquire writers: To attract writers, Substack entered into Partnership agreements where the writer is paid a minimum guarantee in exchange for an increased take rate by Substack on each future paid subscription generated by the writer.
In 2021, this generated $5.5M in revenue, but cost Substack $16.6M in expenses (Substack mentions this is amortized over the term of the generally 12 months of the agreement) aka each Partnership dollar cost $3
📱 The downside of a network: Substack has expanded from newsletters to podcasts and “other forms of culture-making,” but with any network, you depend on the individual contributors and if they leave, they will take their subscribers with them. Hard to tell if Substack has crossed the point into a self-sustaining network.
🏟 Competitive space with newcomers like Beehiiv and the below fighting hard for market share
Competitors
Patreon: a membership platform for creators to offer exclusive content and perks to subscribers.
Medium: an online publishing platform that offers a built-in audience and a paid subscription service
Ghost: an open-source publishing platform for blogs and websites
Buttondown: an email newsletter platform with a user-friendly interface and a free plan for up to 1,000 subscribers.
Why Substack: Substack is a platform that enables writers and journalists to start their email newsletters, build direct relationships with their audience, and earn money through a built-in payment system. It provides a user-friendly interface, easy-to-use tools, and greater control over content, making it an attractive option for writers who want to bypass traditional media outlets and grow an audience.
Made my investment!