What is the TAM for paid newsletters? – Tech Crunch

The news fell yesterday that Substack, the popular newsletter publishing tool, canceled fundraising plans for a Series C after an increase to its target price failed to materialize. The company’s revenue base, relative to its hoped-for valuation, was too small to support the numbers the startup had in mind.

It’s not a single story. Many startups that rose at high prices last year will face difficulties when trying to attract capital at new higher valuations. The Why in this case has been the topic of conversation in tech circles for months now. In short, the market conditions that led to a VC bonanza last year have slowed or reversed, leaving many startups sitting at private market valuations that no longer translate to the current appetite for investors. investors.


TechCrunch+ is hosting a Memorial Day sale. You can save 50% on annual subscriptions for a limited time.


Substack strikes a combative tone with media coverage of its fundraising exploits, telling The New York Times – which broke the news of the company’s Series C attempt – that its commentary on the story was its back page. jobs. Admittedly, Substack still has capital and hiring, but the fact that it wanted to raise more funds is also illustrative.

The Substack Series C saga is a good time to refresh ourselves on just how much the market has changed. Additionally, we can go back in time and check our previous coverage of the company’s finances, noting what we calculated during the last increase. Everyone is going to look a little silly, so let’s go!

Evaluation mechanics

Recall that Substack last raised a $65 million Series B at what PitchBook described as a post-money valuation of $675 million. Here’s the latest from The Times on what the company wanted to increase in a Series C:

Substack has been in discussions with potential investors in recent months about raising $75 million to $100 million to fund the growth of its business, the people said, who would speak only anonymously because the discussions were private. Some of the fundraising talks valued the company between $750 million and $1 billion, they said.

Notably, if Substack had raised $75 million at a post-money valuation of $750 million, it would have effectively been a flat round of its Series B. The fact that this valuation seems out of reach today implies that the only way for Substack to raise a new round of equity financing would be with a valuation drop. Downward rounds aren’t popular, so it’s no surprise that the company has put its fundraising plans on hold, at least for now.

Why has Substack struggled to attract eight to nine figures of capital at a nine to ten figure valuation? Because it had seven-figure revenue last year, the Times reports, writing that “Substack told investors it had revenue of around $9 million in 2021.”

This nugget allows us to make interesting calculations:

Harry L. Blanchard