Substack takes a different approach to raising more capital

As it turns out, if you have an audience of active customers who invest in the long-term profitability and success of your platform, you can fund a company-sized renovation round.

Substack, a corporate-backed subscription media platform popular with authors and known for its email service, has received more than $5 million in pledges from its community and the Internet at large for an expansion of its Series B. The total pales in comparison to compared to what it raised in its $65 million funding round in early 2021, but it’s still real money and equity for a startup that has reportedly stopped pursuing Series C.

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Company plans to share more financial data before your equity crowdfunding actually raises money from his new group of investors, numbers that could shake the amount of capital you can raise; Lower-than-expected numbers may deter some scrutiny, while stronger-than-expected numbers may ensure that your large commitment amount finds its way to the bank in the form of equity.

I’ve covered a few crowdfunding projects before, including Juked.gg’s successful first round that he put together at Republic; A later attempt by the same company to raise more didn’t work, but the model has juice. Frankly, Substack’s rapid success in raising more than the annual legal limit for crowdfunding capital in the form of pledges shows that the method of fundraising is still viable.

At least for some companies. Substack designs its crowdfunding as a way for its users (actually customers) to purchase the platform they are using. This is honestly great and gives the active users ownership of their own platform.

The trick 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. Reports at the time indicated their expectations were between $750 million and $1 billion. This prize was not removed because the fundraiser was cancelled. The company then streamlined its cost structure and continued to grow.