The start-up newsletter company Substack, which has attracted notable authors such as George Saunders and Salman Rushdie, terminated the employment of 13 of its 90 employees on Wednesday as part of an effort to conserve cash in the midst of a funding crunch that is affecting start-ups across the industry as a whole.
According to a person who was involved with the talk, the chief executive of Substack, Chris Best, explained to workers that the staff members responsible for services such as human resources and writer assistance were among those impacted by the layoffs.
The layoffs are a blow to an organisation that has asserted that it was ushering in a new era of media, one in which people who write stories and make videos would have more autonomy, receiving direct payments from readers for what they produce rather than being paid by the publications or websites where their work appears.
According to the information provided by the individual with knowledge of the discussion, Mr. Best informed employees on Wednesday that Substack had made the decision to cut jobs in order for the company to be able to fund its operations from its own revenue and avoid raising additional financing in a difficult market. He expressed his desire for the firm, should it want to raise capital once again, to do so from a position of strength in the marketplace.
Mr. Best, in his address to the staff of the firm, said that the business’s income was on the rise. According to the individual who spoke with him, he said that Substack still had money in the bank and was continuing to employ people, but at a slower speed. Mr. Best said that the firm will be able to sharpen its emphasis on product and engineering as a result of the layoffs.
Following the slowdown in the market for venture capital investments many months earlier, Substack decided to abandon a plan to obtain more funds. The firm was valued at between $750 million and $1 billion during part of the fund-raising conversations, and there were discussions about obtaining anywhere from $75 million to $100 million to fuel the company’s expansion.
According to reports from The New York Times and other publications, the income earned by Substack in 2016 was around $9 million. The company profits from the membership fees paid by its authors. This indicates that the firm was valued at a significant premium in the fundraising negotiations in comparison to its financial outcomes. After completing a fundraising round of $65 million the previous year, it was reported that Substack had a valuation of $650 million.
As the wider economy continues to show signs of pressure, many organisations in the media industry are preparing for challenging times in the months ahead. If businesses reduce their marketing expenditures in an effort to save money, advertising income may dry up. Additionally, the number of subscribers who cancel their subscriptions may rise if customers have less money to spend on entertainment and information.