The Substack model turns writers into investment opportunities


  • The e-newsletter platform Substack lately introduced the winners of its Substack Fellowship program, awarding 15 writers over $355,000 in funding for his or her newsletters.
  • Because Substack prices a 10% service charge on monetized accounts, the funding acts like an investment.
  • The program exhibits how platform’s know-how turns particular person writers into small companies, on which buyers (on this case, Substack) can seed with capital in trade for a revenue-share association.
  • Right now, solely Substack itself has taken benefit of the brand new enterprise model, but when the idea works different buyers may observe swimsuit.
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On Monday, the e-newsletter platform Substack introduced the winners of its latest batch of fellowships: 15 recipients in complete, divided into one senior fellow, 9 fellows and 5 honorable mentions. All advised, the corporate awarded $355,000 in funds.

Unlike in a standard arts grant, Substack levies a 10% service charge on the income generated by its fellows’ newsletters. Substack prices this charge on all its paid e-newsletter providers, permitting writers to maintain 90% of the income they generate and sending the remaining 10% to assist Substack preserve the lights on. Charging such a charge is commonplace observe for a free-to-use platform.

Where it will get fascinating, although, is that as a result of Substack earnings off the potential success of those newsletters, the corporate is actually investing within the e-newsletter merchandise — and by extension the writers — as in the event that they had been tiny startups.

The author as small enterprise

This total premise is made doable by Substack’s know-how stack, which permits writers to monetize their output by placing it behind an easy-to-use paywall. It turns a author’s expertise and physique of labor into an asset.

Imagine a well-liked author determined to begin a Substack e-newsletter. They know that, over time, the variety of subscribers to their e-newsletter will develop, which is able to improve their income each month. 

But maybe they might use an infusion of capital instantly, to repay a invoice. Or maybe a big sum of cash would assist the author focus extra absolutely on their e-newsletter, expediting its development. Maybe the author is just not certain their e-newsletter will succeed, leaving them extra amenable to the concept of accepting a lump sum cost in trade for a part of their “company,” i.e. the e-newsletter.

These hypotheticals open the door for an out of doors investor to supply this newsletter-writer capital in trade for both fairness of their “company,” or an ongoing revenue-share settlement, which is what Substack presently does.

The author will get entry to capital that they will both maintain on to or use to supercharge their e-newsletter. The investor will get in early on a possible monetary payoff if the e-newsletter proves profitable. It’s investing as common, apart from this time the “company” being invested in is a e-newsletter author.

Safe, small-scale bets

Peter Rojas

Investor Peter Rojas says that the Substack model resembles a small enterprise investment.

Peter Rojas


Peter Rojas, a accomplice on the enterprise capital agency Betaworks Ventures, says the premise is intriguing, however the restricted alternative for scale narrows its attraction.

“From a venture capital standpoint, I wouldn’t invest in a Substack newsletter because it won’t generate a big enough return,” mentioned Rojas. “A newsletter is not going to turn into a $100 million business and IPO.”

But, says Rojas, who co-founded the know-how blogs Gizmodo and Engadget, the model provides ample alternative for smaller, however nonetheless sizable investments which are safer than enterprise capital.

“You can think of it like a small business: I’ll give you $50,000 for a share in future revenue. It’s a helpful investment tool for a project that you want to see succeed, though not necessarily one that is a financial powerhouse,” mentioned Rojas.

A e-newsletter portfolio

Investing in a e-newsletter may nonetheless be profitable. If an investor had a 10% income share in a e-newsletter that reached three,000 subscribers paying $10 a month, they’d web $36,000 a yr, assuming that the subscription numbers did not develop.

While such a return is small potatoes for a enterprise capitalist, it is a tidy sum for a person investor. Plus, if an investor seeded a number of newsletters and created a portfolio, they might simply up their returns into the six-figure space, which is precisely what Substack is doing.

The firm’s total enterprise model relies on the 10% service cost, so the revenue-sharing idea is just not new. But Substack investing cash in its newsletters, then cashing in on its income share? That’s an investment portfolio within the making.

Right now, solely Substack itself understands the potential investment opportunities afforded by this new model. They are the one ones investing within the newsletters and the one ones benefiting from their subscription revenues.

But if Substack’s new fellows flip a revenue with their freshly financed newsletters, it won’t be lengthy earlier than different buyers come knocking.



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