3 takeaways from Substack’s recently released financial results

I got excited — very excited – when I found out that Substack’s crowdfunding effort would result in the release of financial results.

Unfortunately, due to fundraising rules and timing, Substack is not required to detail its finances for 2022, so the startup has released hard data for 2020 and 2021 as well as some user-specific metrics. for last year. This gives an interesting, if incomplete, picture of the health of the company.

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I expected to spend some time this morning weighing in on the morality of Substack’s choice not to share its 2022 audited results, but Dan Primack nailed that argument this morning in Pro Rata. Since I can’t improve on what he said, we can leave that to Axios and focus our fire on data analysis.

So to kill some time while we feed our hangovers after the Y Combinator demo day, let’s dig into Substack’s growth model (including its most recent non-financial data), reflect on the current financial health of company, then compare its next capital increase to its potential cash flow needs.

It’ll be fun. Think of it as a quick look at a partial S-1 filing, but for a Series B company. Sound good? To work!

Lots of data, but not enough

You can read all of the financial results released by Substack here in case you want to play along.

To start, note that the company has raised a lot of money until 2021 to invest in its platform and grow its user base. So, as we look at its results through 2021, it would be wise to remember that the company was focused on growth back then. How did it work?

Substack’s growth model is expensive, if effective

Substack’s gross revenue grew over 400% to $11.9 million in 2021 from $2.4 million in 2020. This is precisely the type of high-profile expansion that investors venture capitalists want to see a startup through its investment cycle. The company had announced its massive $65 million Series B in early 2021, meaning it had access to that money within the year.