Substack, the newsletter startup that has attracted top writers including George Saunders and Salman Rushdie, laid off 13 of its 90 employees on Wednesday, part of an effort to save money amid industry-wide funding crisis for start-ups.
Substack chief executive Chris Best told employees than the cuts relevant staff members responsible for human resources and editor support functions, among others, according to a person familiar with the discussion.
The cuts are a blow to a company that said it was ushering in a new era of media, in which people writing stories and making videos would be more empowered, getting direct payments from readers for what they produce at the instead of being paid for by the publications. or sites where their work appears.
Mr. Best told employees on Wednesday that Substack had decided to cut jobs so it could fund its operations from its own revenue without raising additional funding in a tough market, according to the person with knowledge of the discussion. He said he wanted the company to seek financing from a position of strength if it decided to relaunch.
In his remarks to employees, Mr Best said the company’s revenue was growing. He noted that Substack still had money in the bank and was continuing to hire, albeit at a slower location, the person said. Mr Best said the cuts would allow the company to focus on products and engineering.
Months earlier, Substack scrapped a plan to raise additional funds after the venture capital market cooled. The company has had talks of raising $75-100 million to fuel its growth, and some of the fundraising talks valued the company at $750-1 billion.
Substack, which takes a cut in subscription fees from its writers, generated about $9 million in revenue last year, The New York Times reported. This means that financing discussions have valued the company at a high premium to its financial results. Substack was reportedly valued at $650 million last year after closing a $65 million funding round.
Many media companies are anticipating headwinds in the coming months as the broader economy shows signs of strain. Ad revenue could dry up as companies cut marketing budgets to save money, and subscriber churn could rise if consumers have less money to spend on news and entertainment.