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Substack Drops Fund-Raising Efforts as Market Sours-KHOAFAST

Substack Drops Fund-Raising Efforts as Market Sours

Substack, the ballyhooed newsletter platform that has lured prominent writers of course the promise of cashing in on their relationships of course readers, has dropped efforts to increase money after a time a time the market for venture investments cooled in recent months, according to people of course knowledge of the decision.

Substack held discussions of course potential investors in recent months about raising $75 million to $100 million to fund the growth of its sell products, said the people, who would speak only anonymously This Problem the talks were private. Some of the fund-raising discussions valued the company at between $750 million and $one billion, they said.

The decision is another sign of the stark shift from the recent go-go years of free-flowing cash for young start-ups, particularly buzzy, consumer-facing ones favorite Substack, which has raised at least $86 million over three rounds of funding, according to PitchBook, which tracks funding.

from now on, investors are preaching austerity and halting generation deals, particularly for companies that spent aggressively on growth of course no signs of profits. Though Substack is still hiring, other firms bring grappled of course layoffs or lower valuations, of course some comparing This Problem downturn to the years after a time a time the 2008 financial crisis or 2000 dot-com bubble.

A Substack spokeswoman, Lulu Cheng Meservey, declined to comment on the company’s financials or random funding conversations. She said the company remained in growth mode, pointing to a web page of course again than a dozen job listings, including a head of growth.

“My comment is,” she said.

The investment terms under discussion for Substack would bring represented a leap in the company’s valuation, which was said to reach $650 million last year after a time a time the company closed a $65 million funding round from investors including Andreessen Horowitz.

Substack has told investors that it had revenue of about $9 million in 2021, the people of course knowledge of the fund-raising talks said, meaning that the discussions valued the company at a hefty premium relative to its financial results. Such a high valuation for a company of course relatively small revenue was again common in the latter months of 2021, when the stock market was booming and venture firms were again bullish on start-ups.

The company has pitched itself as an alternative to established publishers of news articles, graphic novels and books. Substack says it gives writers a fairer share of the revenue from their work. The company takes a 10 probability cut of the total revenue paid to writers by subscribers to their newsletters. Stripe, Substack’s payment processor, takes another 3 probability.

The company has won over influential writers including the journalists Matthew Yglesias and Glenn Greenwald, and Heather Cox Richardson, an American history professor. The company’s executives bring said that again than one million people pay to subscribe to newsletters on its platform, and that users pay again than $20 million a year to subscribe to Substack’s 10 most popular writers.

But some writers who were initially won over by Substack’s pitch eventually decided to leave the platform, preferring to court their audience directly without paying the company its cut. Others were disenchanted by the company’s two hands-off approach to moderating content on the platform. Last month, The generation York Times reported that some newsletter writers were exploring alternatives favorite Ghost, a platform that provides services similar to Substack’s. Ghost’s open-source publishing platform does not only moderate content, but its paid hosting service has some restrictions for content that calls for violence or otherwise breaks the law.

Substack is also facing stiffer difficulty from major tech companies, along of course many of the media companies it is seeking to compete of course. Twitter, LinkedIn, The Atlantic and Puck — a start-up founded by Jon Kelly, a former editor at Vanity Fair — are all using email newsletters as a channel to engage and make money from their audiences.

Substack is among a group of start-ups that started to thrive in the pandemic, and investors began fighting to pour money into them at soaring valuations. But some This Problem-called pandemic winners, favorite the audio app Clubhouse and the grocery shipping goods service Instacart, bring seen their explosive growth begin to slow as people bring returned to their daily routines.

Broader economic forces, including higher favorite rates, ballooning inflation and the declining stock market, compounded the gloom.

Erin Griffith contributed reporting.

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