Substack Launches Community Round on Wefunder in Major Win for Equity Crowdfunding

Substack has taken the next big step in dominating the fast-growing online digital newsletter space. 

The company announced today that individuals can invest in the company via Wefunder for as little as $100. Despite an original funding goal of $2 million, with a pre-money valuation of $585 million, the community fundraising round reached $2,623,927 by 3 p.m. EST. Due to the demand, the company extended it to a $5 million maximum, which is quickly filling up.

This arguably marks a turning point in the world of equity crowdfunding. Equity Crowdfunding is a relatively new funding model allowing companies to launched a ‘community round’ where they raise investment funds from their community. This creates an army of hundreds, or potentially even tens of thousands of brand ambassadors as startups look to turn customers into investors. 

Typically, high-profile companies like Substack would raise these rounds through venture capital while retail investors have to wait for an IPO before being able to purchase shares. But Substack has taking the leap as arguably one of the most prominent companies to raise through equity crowdfunding.

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What’s the deal with Substack?

Substack’s mission is simple: to build a new economic engine for culture. And if the numbers to date are any indication, the company is well on its way to reaching its goal.

Substack has more than 35 million active subscriptions, which includes two million paid subscribers. Even more impressive is that readers have paid writers more than $300 million through its platform. 

The company also noted that more than 17,000 writers are earning money on its platform, and the top 10 publishers are collectively earning more than $25 million per year. 

The pool of talent on Substack is ever-growing, with big names such as Andrew Sullivan, Bari Weiss, Chuck Palahniuk, Kareem Abdul-Jabba, and Michael Moore using it to reach massive audiences. 

Incredible growth in five years

The company has made incredible strides in five short years. Consider the following:

• 2017: Substack was founded by Chris Best, Hamish McKenzie, and Jairaj Sethi. 
• 2018: Graduated from Y Combinator and raised $2 million in seed funding. 
• 2019: Raised a $15 million Series A round led by Andreessen Horowitz.
• 2020: Reached the 100,000 paid subscription milestone. 
• 2021: Reached the one million paid subscription milestone, and raised a $65 million Series B round led by Andreessen Horowitz. 
• 2022: Added support for additional content forms including chat, podcasts, and video.

“Substack’s simple publishing tools have helped thousands of writers start thriving businesses that wouldn’t otherwise have existed, and its network effects are driving the development of a media economy unlike any the world has ever known—an economy where value is measured not only in dollars but also in quality, in good-faith discourse, and in creating an internet that celebrates and supports humanity,” the company shared on its Wefunder page.

Investing details

According to its Wefunder page, unaccredited investors are legally permitted to invest a maximum of $2,200. In the event that the investment round becomes oversubscribed (which it’s likely to do), Substack warns that it may not be able to accept all investments and could decrease individual investments.

Also, should the round become oversubscribed, the company plans to give priority to Substack writers who have activated paid subscriptions and have paying subscribers. 

Last year, The New York Times reported that Substack had given up on its attempt to raise a Series C round, which aimed to bring in $75 million to $100 million at a valuation of $750 million to $1 billion. 

Rather than revisit this route, the company decided on equity crowdfunding, perhaps intending to show that it's dedicated to “doing right” by its customers. This could mark a turning point as brands kick the stress of venture capital in favor of equity crowdfunding. 

For investors looking to learn more, you can Substacks investment page here. 

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