It turns out that if you have an active customer base invested in the long-term viability and success of your platform, you can crowdfund a company-sized expansion round.
Substack, an enterprise-backed subscription media platform popular with writers and known for its email service, has raised more than $5 million in pledges for its Series B expansion from its community and the Internet at large. The amount pales in comparison to the amount it raised in its $65 million early 2021 funding round, but it’s still real money and capital for a startup that has reportedly stalled its Series C hunt .
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Company plans to share more financial data before equity crowdfunding actually raises money from his new investor group, numbers that could shake up the amount of capital it can raise; Worse-than-expected numbers could deter some checks, while stronger-than-expected numbers could see the large number of commitments materialize in the form of capital in the bank.
I’ve covered a single crowdfund before, including Juked.gg’s first and successful round of curating it on Republic; a later attempt by the same company to raise more has failed, but the model has juice. Honestly, Substack’s rapid success in attracting more than the legal annual limit for equity crowdfunding in the form of pledges indicates that the fundraising method remains viable.
At least for some companies. Substack envisions its crowdfunding as a way for its users (customers really) to buy into the platform they are using. That’s pretty cool, honestly, and it will give the active users a stake in their own platform.
The sticky part is the price.
When Substack wanted to go out and raise its next round of venture capital, it had to go through a pricing process. Reporting from the time indicated expectations were between $750 million and $1 billion. That price was not clear, given that the fundraiser was called off. After that, the company tightened its cost structure and continued to grow.
