Commentary

Is Substack As Valuable As Tribune Publishing?

Substack raised $65 million in a second fundraising round led by venture capital firm Andreessen Horowitz, according to a blog post from the email newsletter platform. The deal values Substack at $650 million, Axios reported, citing a source familiar with the matter.

The valuation suggests that investors see Substack as about equal to Tribune Publishing Co., the publisher of newspapers including the Chicago Tribune, New York Daily News and Baltimore Sun. Tribune's current market capitalization is about $650 million amid a bidding war between hedge fund Alden Global Capital and Stewart Bainum, the chairman of Choice Hotels, to take the publisher private.

The parity in valuations for a storied newspaper publisher and an email publishing platform makes sense, considering that Tribune's revenue has steadily declined for years, while Substack is a high-growth startup without any legacy costs or debt.

Substack has gained greater attention as a growing number of journalists leave their jobs at more traditional publishers to try their hands at self-publishing. Andrew Sullivan, Glenn Greenwald, Casey Newton, Matt Taibbi and Matthew Yglesias are among the  recent converts to the platform, which started in 2017.

With the new funding, Substack plans to build out its platform, provide more first-year financing to writers, support local news and develop more publishing tools "to help more writers go independent and run their own media empires," the company said. It also acknowledged the threat from social-media giants Facebook and Twitter, which are in different stages of moving into paid newsletters.

Of course, it's hard to compare Substack to Tribune without more insights into the startup's finances. As a closely held company, Substack rarely publicizes much operating information aside from a handful of metrics.

Substack's top 10 publishers gross more than $15 million a year in paid subscriptions, according to its blog post. The company typically lets writers keep 90% of their proceeds, though that percentage can vary if Substack provides seed financing -- as it did for Yglesias' Slow Boring newsletter.

More than 500,000 people subscribe to a paid newsletter on Substack, up from 50,000 two years ago, when it raised $15.3 million in a first round also led by Andreessen Horowitz. That 10-fold growth in two years indicates there is demand for paid email newsletters, and it’s still too early to tell whether the subscription economy has reached a saturation point.

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