Substack Sparks Debate After Asking Creators To Invest in the Company

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Substack is stirring up controversy with its latest business proposal: allowing writers to invest in and own a piece of the popular newsletter company. In light of last year’s struggles to fundraise in more traditional ways, Substack is looking to its own writers to help them out financially—specifically to raise $5 million. 

In a blog post sent to creators, Substack’s founders explained to its community that they were asking for investments because they are “serious about building Substack with writers” and “it not only provides something good for our company but also presents an opportunity for the people who use Substack to participate in the benefits that come from building this network.”

The company also notes “the past couple decades of the internet have created a media system in which writing has been economically devalued and advertisers have been served above all others.”

Internet users have seen this occur with Facebook and Instagram and recently, Twitter. These platforms seem to be privileging video feeds and advertisements for consumer goods, while writing and creator content is getting lost in the fray of luxury handbags and dance videos.

Substack tried to raise money last year but had to abandon those plans because the financial environment was too hostile. As a result, the company has tried to become more self-sustaining by cutting costs and now asking for investments. 

Many content creators who have had positive experiences with Substack as a platform for sharing personal writing and opinion pieces, see this kind of equity as positive. A few well-known creators have already joined the investment round, such as Bill Bishop, Heather Havrilesky, and Anthony Pompliano. 

In response to a request for comment from Passionfruit, Substack pointed to notable creator investors like Emma Gannon, Polina Pompalino, and Ted Gioia who shared their positive commentary on Substack.

On Twitter, writer Charlotte Clymer shared why she was participating: “Glad to see Substack doing this! It’s a platform that’s helped countless writers develop a platform for our work — grateful for the doors it’s opened for me. I’m excited to invest and have a piece of the company moving forward.”

In an email to Passionfruit, Clymer further praised the platform, saying, “Substack is the only platform that has allowed me to write things I feel need to be out in the world and pay my bills while doing so. I’ve had several major outlets either reject or kill pieces, particularly on trans rights, no matter how good they were, due to fear or a lack of caring.”

Co-host of the New York Times podcast Hard Fork Casey Newton cautiously praised the plan even if he said he would not invest: “Substack is about to generate $5 million in 24 hours by selling shares to its community. Not a bad way to extend its runway, even if I wouldn’t invest myself,” he tweeted alongside a longer explanation. 

“I’m not investing in Substack, for reasons both editorial and financial. On the editorial side, owning a piece of the company feels like it would be mixing business and journalism in a way that makes me uncomfortable. If I’m going to write about platforms without fear or favor, I don’t want to have a direct financial stake in any of them,” he continued.

Writer Elizabeth Lopatto of the Verge, however, was more skeptical. 

“You may already be a newsletter writer using Substack for your income. Increasing your exposure to Substack by investing means that if the company folds, first, you gotta figure out how to move your newsletter to keep the money coming in, and second, you lose your investment,” she noted. 

Substack asserts that it is a special kind of company in an increasingly homogenous landscape of social media, articulated in the email as a content creator and disseminator posed to save social media from itself.

“While social networks are associated with advertising and attention, subscription networks are about direct payments and trust,” it said in its email to potential investors. “While social networks facilitate shallow connections, subscription networks foster deep relationships. While social networks are about lock-in and platform ownership, subscription networks are about freedom to move and creator ownership.”

For many content creators, Substack has been a positive way for them to share op-eds and personal writing tailored to audiences who care about their work. Authors can decide whether or not to charge readers for access to this content, which is a nice way to allow writers control over how they want their work to be consumed. 

But as Lopatto notes in the conclusion of her article for the Verge, writers are notoriously bad at stuff related to money (An unfair stereotype, or a brutal truth?) and maybe this is all a “cynical ploy to rope people into identifying as helping writers in the absence of real financial information.” Other creators are speculating whether or not this might be a bad investment.

In Substack’s blog post, it acknowledges the risk involved with investing: “There’s no guarantee you’ll make your money back, even if you’re investing in well-known companies and well-established industries. The risks are much greater when it comes to investing in startups, which have a habit of dying, pivoting, or simply not making enough money. Startups are high-risk, high-reward.”

A Substack spokesperson provided Passionfruit with more information about investments, pointing to a website where writers can place “reservations,” or non-binding pledges to invest.

“We’re finishing up the legal paperwork for this community round, which will be filed in the next 1-2 weeks. Once that’s done, all interested investors will receive a prompt to confirm their investment and they’ll have access to two years of audited financial statements,” a spokesperson told Passionfruit.

According to Substack’s fundraising page, there are over 17,000 writers currently utilizing Substack for their needs and earning money. Readers have paid writers more than $300 million through such subscriptions. Whether or not investing is a viable way for content creators to exert more control over their audiences and material, as well as make more money, though, is something we will have to wait to see. 

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