Substack, the newsletter startup that has attracted prominent writers including George Saunders and Salman Rushdie, laid off 13 of its 90 employees on Wednesday, as part of an effort to save money amid an industry-wide startup financing crisis.
Substack chief executive Chris Best told employees: that the cuts affected staff members responsible for human resources and writer support functions, among others, according to a person familiar with the discussion.
The cuts are a blow to a company that has said it is opening a new media era where people who write stories and make videos are given more power, receiving direct payments from readers for what they produce rather than being paid 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 revenues without raising additional funding in a tough market, the person with knowledge of the discussion said. He said he wanted the company to seek funding from a strong position if it decided to raise again.
In his comments to employees, Mr. Best said the company’s revenues were increasing. He noted that Substack still had money in the bank and continued to rent, albeit at a slower spot, the person said. Mr. Best said the cuts would allow the company to sharpen its focus on product and engineering.
Months earlier, Substack scrapped a plan to raise additional funding after the venture investment market cooled. The company had discussions about raising $75 million to $100 million to drive growth, and some of the fundraising talks valued the company between $750 million and $1 billion.
Substack, which is taking a cut in its writers’ subscription fees, generated about $9 million in revenue last year, DailyExpertNews reported. That means the financing talks have valued the company at a hefty premium to its financial results. Substack was valued at $650 million last year after closing a $65 million financing round.
Many media companies are anticipating headwinds in the coming months as the broader economy shows signs of tension. Advertising revenue could dry up if companies cut their marketing budgets to save money, and subscriber numbers could increase if consumers have fewer dollars to spend on news and entertainment.