I got excited – very Excited – when I found out that Substack’s capital crowdfunding efforts would lead to them reporting financial results.
Unfortunately, due to the rules and timing of the fundraiser, Substack is not required to disclose its financials for 2022, and so the startup released flat data for 2020 and 2021 along with some user metrics for the past year. This provides an interesting, if incomplete, picture of the company’s health.
The exchange explores startups, markets and money.
Read it every morning on TechCrunch+ or catch The Exchange newsletter every Saturday.
I was expecting to spend some time this morning reflecting on the ethics of Substack choosing not to share its audited 2022 results, but Dan Primack let that argument out this morning on Pro Rata. Since I can’t improve on his words, we can leave this point to Axios and instead focus our fire on data analysis.
So, to kill time while we nurse the remnants of the post-Y Combinator beta day, let’s dive into Substack’s growth model (including its most recent non-financial data), reflect on the company’s current financial condition, and then compare the upcoming capital raise with its potential cash needs.
This will be fun. Think of it as a partial S-1 glimpse, but for a Series B. Sounds good? for work!
There is a lot of data, but it is not enough
You can read all of Substack’s financial results here in case you want to play.
To start, let’s note that the company has raised a lot of money through 2021 to invest in its platform and grow its user base. So as we look at its results through 2021, it would be wise to remember that the company was growth-oriented at that time. How do you work it out?
Substack’s growth model is costly, if effective
Substack’s total revenue increased more than 400% to $11.9 million in 2021 from $2.4 million in 2020. And that’s exactly the kind of top-line expansion that venture backers want to see from a startup in the investment cycle. The company announced its $65 million Series B blockbuster in early 2021, which means it had access to that cash in the year.