i got excited — terribly excited — when I learned that Substack’s equity crowdfunding effort would result in the release of financial results.
Unfortunately, due to rules and fundraising timing, Substack is not required to specify financials for 2022, and so the boot released hard data for 2020 and 2021 along with some user-specific stats for last year. This paints an interesting, if incomplete, picture of the company’s health.
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I expected to spend some time this morning weighing in on the morality of Substack’s choice not to share audited results for 2022, but Dan Primack nailed that argument this morning in Pro Rata. Since I can’t improve on his words, we can leave that point to Axios and focus our fire on parsing the data instead.
So to pass the time while we bask in our post-Y Combinator demo day hangovers, we take a closer look at Substack’s growth model (including the most recent non-financial data), reflect on the company’s current financial health, and compare its upcoming capital raise with its potential money needs.
This will be fun. Think of it as a quick look at a partial S-1 filing, but for a Series B company. Sounds good? To work!
There is a lot of data, but not enough
You can read all of Substack’s released financial results here in case you want to play along.
To begin with, let’s note that the company raised a lot of money up to and including 2021 to invest in its platform and expand its user base. So as we look at the results through 2021, it’s wise to remember that the company was focused on growth at the time. How did that turn out?
Substack’s growth model is expensive, if effective
Substack’s gross revenue increased more than 400% to $11.9 million in 2021, compared to $2.4 million in 2020. That’s exactly the kind of revenue expansion venture backers want to see from a startup in its investment cycle. The company had announced its massive $65 million Series B in early 2021, meaning it had access to that money in that year.
