Is Substack really worth $650M?

Substack didn't invent the paid newsletter, but the startup's early success with the model is enticing previous backers to more than double down on the media startup.

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Last evening, Axios reported that Substack is raising $65 million in new venture capital" at a valuation of around $650 million." As you've already guessed, Axios goes on to report that Andreessen Horowitz (a16z) will likely lead the investment.

That we're seeing a16z pour more capital into what we could call the alt-media space is not a surprise. The investing group is ladling even more cash into its in-house media efforts and has put a small archipelago of capital into audio-based social media app Clubhouse. Its internal publishing schedule is in part an attempt to get around traditional media; the Clubhouse universe is an inverted one in which tech investors are celebrities, producers and gatekeepers. And Substack is a place where publications have bled some well-known talent, shifting the center of gravity in media.

You can detect the theme.

Regardless, Substack's new valuation and investment are eye-catching. This morning, I want to collect all that we can regarding Substack's historical growth so that we can chew on its new valuation from the best vantage point. Let's go!

$650 million?

A little history to kick us off. Crunchbase counts Substack's total funding to date at $17.4 million. PitchBook puts the number at $21.21 million, inclusive of debt. Both sources agree that the company's most recent round came in July 2019. PitchBook pegs the company's valuation at $48.65 million at that date.

Raising $17 million in cash around 20 months ago, regardless of debt, is an amount of capital that the company could easily have burned through by now. Raising more funds is therefore not a surprise.

But the size of the new round is notable, as is its constituent valuation. Series A and B rounds have been growing in size in recent years. But a $65 million Series B would stand out, even by 2021 standards. Not shockingly so, but enough that any company raising that sum at its implied level of maturity would demand our attention. That we're all familiar with Substack only makes the sum more curious.