Andreessen Horowitz is betting that theres still a big opportunity in newsletters the venture capital firm is leading a $15.3 million Series A in Substack.To be clear, although Substack started two years ago as a way turn newsletters into a paid subscription business, its since added support for podcasts and discussion threads.
As CEO Chris Best put it, the goal is to allow writers and creators to run their own personal media empire.Writers using Substack include Nicole Cliffe, Daniel Ortberg, Judd Legum, Heather HavrileskyandMatt Taibbi.
The startup says that newsletters on the platform have now amassed a total of 50,000 paying subscribers (up from 25,000 in October), and that the most popular Substack authors are already making hundreds of thousands of dollars a year.Also, a16zs Andrew Chen a blogger and newsletter writer himself is joining the Substack board of directors.
In Chens view, the startup represents the combination of the old and the new, allowing writers to reach longstanding passionate online communities while also pursuing a new way of doing micro-entrepreneurship, where they make money directly from their audience.When you combine the two wow, this is something special, Chen said.Y Combinator, where Substack was incubated, is also participating in the funding.Best told me the team consists entirely of the three co-founders CTO Jairaj Sethi, COO Hamish McKenzie and Best himself working out of my living room.
(The three of them are pictured above.) Even with the new funding, Best and McKenzie said they want to grow cautiously.Were conscious of the writers depending on a reliable and stable Substack for their income, McKenzie said.
We dont want to go out there and do a bunch of crazy startup stuff.Still, they will be moving out of that living room and hiring a bigger team.
Best also said they have plans to build more writer success tools that help creators get the most out of the platform, and to expand into other formats, like video.Even as Substack grows, McKenzie said it will maintain a focus on subscription products for people who are attracted to the idea of owning their relationship with their audience.
Best argued that this approach avoids the incentives that have pushed online news in the direction of cheap outrage, attention and addiction.He added, Its just a better model for creating culture.As for whether the newsletter boom might eventually reach a saturation point, making it harder for new titles to find an audience, Best acknowledged that theres probably some finite limit to the number of newsletters that most readers will subscribe to, but he said, Even if thats the case, it can still be a very successful model.
The magical thing about paid subscriptions is that you dont need to have millions of people in your audience.