The crowdfunding campaign worked. At least for Substack.
What none of those new investors knew, however, were Substack's recent financials. They still don't. And won't.Substack is raising the money via a platform called Wefunder, which relies on crowdfunding rules that became law in 2016. Per Wefunder's"If your offering is in the first 120 days of the fiscal year, financials may be for the 2 fiscal years prior to the most recently complete year .
"We're a private company, so we're releasing what we're required to release," explains Substack co-founder and CEO Chris Best.Zoom out: Substack's basic investment pitch to newsletter writers, which some of them regurgitated to me, was aligning interests and supporting a platform that's supported them.If Substack's primary goal was to align interests, it could have found other ways. Particularly given Best's contention that the company doesn't actually need the money, despite failing to raise a planned venture round last year .
Moreover, if Substack doesn't need the money, how is a writer investing an average of $1,100 really supporting the company?Substack could have offered to increase a writer's cut of subscription revenue or providing cash bonuses if the company hit certain metrics.Or stick with the crowdfunding, but provide 2022 data that would have let writers make an informed decision. Particularly at such a nosebleed valuation.
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