Breakout Companies Memo #4- Substack

The Startup which is making newsletters cool again

Ankit Kumar Singh
Aug 2 · 8 min read

“If you join a company, my general advice is to join a company on a breakout trajectory.” — Sam Altman, President at Y Combinator

In this third edition of Breakout Jobs Memos, we are profiling Substack, a subscription platform for independent writers to publish newsletters.

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What is a Breakout Job?

A Breakout Job is that one role that helps you get discovered. The best examples which hit my mind are Andrew Chen at Uber and Erik Torenberg at Product Hunt.

What is Substack?

Substack is an all in one platform equipped with proper design, subscription tools, publishing procedures which connects with bank accounts to help independent writers start their paid newsletters.

Why Do We Need Substack?

To understand why Substack is important, read this:

……the internet has opened up new opportunities for media producers. A writer, streamer, or podcaster can now reach an audience of millions. Powerful tools have been created to make it easier to self-publish any format of content. Social media has allowed people to amass large followings of dedicated fans, creating a new class of jobs never thought possible: professional gamer, professional travel influencer, professional fan-fiction author, and much more.

But most of this is driven by advertising-based business models from the 1800s — the technology may have changed, yet the economic model is largely the same. And while advertising-based models will continue to be huge businesses, what if, in an alternate universe, Day’s experiment had not worked? What if individual writers had had the opportunity to figure out how to make a living selling their novellas, newspapers, and pamphlets directly to their readers?

This might not have been possible back then. But today, a direct relationship between creators and audiences can unlock a new generation of professional writers and content creators. That’s where Substack — which is building the leading subscription platform for independent writers to publish newsletters, podcasts, and more — comes in. [Source: a16z]

How Substack Looks From Inside

1. Newsletter Landing Page

2. About Page

3. Community Features

4. Podcasts

5. Payments

PS: We are proud users of ❤️Substack❤️ with Breakout Jobs 😄

Team

Substack HQ aka Chris’s Living Room
  1. Chris Best: CEO and co-founder of Substack, formerly co-founder and CTO of messaging app company Kik, messaging app with over 300 million users.
  2. Jairaj Sethi: CTO and co-founder of Substack, Previously Head of Platform at Kik.
  3. Hamish McKenzie: co-founder of Substack, Former Writer at Tesla and Kik, Author of “Insane Mode: How Elon Musk’s Tesla Sparked an Electric Revolution to End the Age of Oil

Strengths

  1. Newsletters are cool, again!

Thanks to the ease with which you can start a newsletter with the help of Substack, every interesting person I know is starting a newsletter.

Source

2. Twitter-Substack Loop

The writers on Substack platform are leveraging their Twitter followings to get paid subscribers thereby increasing revenue for both the writer and Substack.

Source

3. Strong Founding Team

The team carries a strong background of building products that have gone on to reach millions of people. Chris and Jairaj worked on Kik, the messenger platform with over 300M users.

Hamish is a prominent writer and author of Insane Mode: How Elon Musk’s Tesla Sparked an Electric Revolution to End the Age of Oil (November 2018). He also worked as the lead writer for Tesla, an advisor to Kik, a tech reporter, and a freelance journalist.

4. No Ad Approach

The company has pledged to never put ads in newsletters and this is a very powerful indicator of how we are going for an ad-free experience on good content. With over 50k paying subscribers on the platform already, the company has shown that the subscription model works and works well 😄

Source

5. Helping Independent Writers Make More Money

Thanks to Substack, many independent writers are able to fund themselves entirely through Substack subscriptions. And, helping people make more money is always a good idea. As Paul Graham says it,

Source

Concerns

  1. Competition

Substack is very much responsible for kicking off the Personal Newsletter revolution. However, we have seen in the past that it’s not always the first mover who wins the market.

But, credit to Substack, for coming in and leaving a mark in the industry where players like Tinyletter, Revue already existed.

Nothing explains this better than these lines in the a16z announcement:-

I also soon began to see Substack everywhere. People were promoting it in their Twitter profiles. I heard about it at dinners from people who were using Substack to build their first newsletters and discover audiences for their words. It was amazing to see the success Substack was having, with writers well beyond the tech industry.

2. Newsletters are a Fad?

Personal Newsletters are at a high right now and Substack is very much responsible for it.

In a Vanity Fair article, Claire Landsbaum wrote

The boom has been driven in part by Substack, a platform founded by developers Chris Best and Jairaj Sethi, and journalist Hamish McKenzie in 2017. Substack was created with the ostensible goal of helping writers earn money, making tiered subscription services for personal newsletters easy and accessible. It debuted with MarketWatch cofounder Bill Bishop’s Sinocism, and has since added people like Nicole Cliffe and Ortberg to its ranks. Griswold’s Oversharing is on Substack, as is Fitzgerald’s Griefbacon and Cai’s Deez Links.

However, as acknowledged by Chris Best, we are in the Newsletter Bubble[Substack is partly/very much responsible for this😄]

“The newsletter bubble’s about to crash! We’re gonna go through a newsletter depression!” [Source]

Interesting to see how see how Substack fares when newsletters aren’t a fad. My prediction is that it’ll work out well whene

Funding

  1. Till date, Substack has raised a total of $17.5M.

2. The company’s investors consist of marquee names such as Y Combinator, Andreessen Horowitz(led by Andrew Chen) among several others. You can read more about it below 👇

Further Funding Potential

The company has been able to keep its burn rate very low so far. Infact, the company only consistw of founders and were working out of Chris’s apartment in San Francisco.

At the point of time given momentum and number of publishers rapidly shifting to Substack as their default mailing platform, the company stands in a good position to capitalize on the momentum and increase its revenue.

On Substack’s recent growth, read the Most Important Metric section below. [Spoiler Alert: It’s impressive]

If company can maintain same growth, funding won’t remain a challenge.

**Most Important Metric**

  1. The most important metric, the number of paying subscribers on the platform currently stands at over 50000.
  2. By July 2018, Substack had just over 11,000 paid subscribers who shelled out on average nearly $80 a year. The company has been able to almost 5x this number till date, so they definitely have growth on their side.
  3. Substack’s 12 top-earning writers make an average of more than $160,000 each. [Source]

Recent Product Updates

  1. Podcasts

The company launched a launched a feature for people to share podcasts with their email newsletters. Anthony Pompilano was the first user.

2. Substack Threads

The company also came up with threads, where the writers can better engage with their audience.

Here’s an example of how it works:-

Source

Competition

  • Buttondown, a recently launched service looks very much like TinyLetter. Subscription integrations forthcoming (similar to the Substack).
  • TinyLetter, founded in 2010, was the old darling that rekindled a general interest in the newsletter genre. It was acquired by MailChimp in 2011.
  • A similar product is Memberful, which is a generalized subscription service allowing one to roll their own paid newsletter with a bit more flexibility.
  • Revue, an editorial newsletter tool for writers and publishers used by companies such as Fast Company, VOX, VentureBeat and several others.

Things to Note/Look Forward To In Future

  1. Substack team only consists of the founding team i.e Chris, Hamish and Jairaj till date. The founders and doing everything from development and writer on-boarding to customer service. In fact, Chris said in a recent interview,

“It’s gotten to the point where honestly, it’s a little bit ridiculous that there’s three of us in the company. [Co-founders Hamish McKenzie, Jairaj Sethi, and I] are the people that are developing the core product, and we also do all the customer support.”

2. Competition with Medium may be on the cards? Medium was one of the first movers when it came to pioneering subscription model for content? People have already started Substack as a place to share their blogs. Here’s how the company defines itself 😄

3. In October 2017, the company’s first user, Bill Bishop, publisher of Sinocism, brought in six figures of revenue on his first day with Substack for his previously free newsletter.

Jobs at Substack


The Spectrum

Thoughts of Prism Labs

Ankit Kumar Singh

Written by

20, Core Team @prism_io (YC S17)

The Spectrum

Thoughts of Prism Labs

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