Why I invested in Substack | #58

My thesis for why more writers will choose Substack over alternatives

Last month, Substack announced its plans to raise $5 million from its users in a community round that valued the company at $600 million. The announcement was taken positively by the community and 6,918 people committed $7.98 million to the round in a matter of several days.

When I saw the opportunity, I jumped on board and decided to make a small investment in the company. There were several reasons why I invested in the company, but today I want to focus on the product. On a core level, I believe that more writers will choose Substack over alternatives because it’s a great tool that simplifies the publishing process, it’s a destination that helps writers to get discovered, and it’s a network that helps them grow. Let’s break down each point.

Substack is a great tool

At a fundamental level, Substack is a tool. Whether you are a writer or a podcaster, Substack lets you focus on your content while it takes care of the rest. That's why I chose Substack in the first place.

When starting Atomic Learnings, I was looking for a tool that simplifies a lot of the complexities associated with newsletters - setting up email templates, creating a landing page, tracking analytics, etc. While tools like MailChimp offer more functionality, they are hard to get started and are costly when your audience grows. Substack, on the other hand, is dead simple. You can get started in minutes and send out your first edition of the newsletter. You can get started with a default template or customize your page to your liking.

Beyond getting started, Substack provides tools to track the performance of your posts, convert readers into paid subscribers, and communicate with subscribers through chat. Anybody who uses the product can understand it without having to watch tutorials and walkthroughs.

The best part is, you get all this powerful functionality for free. And because it's free, more people will try out the product. And most people who try the product, end up staying.

I chose to go with Substack because it's a powerful yet easy-to-use tool to get my work out there. I think a lot more creators will pick Substack when starting their newsletter or podcast.

Substack helps writers to get discovered

On top of being a great tool, Substack is also a destination in itself largely thanks to its elegant app on iOS and Android.

The Substack app offers a superior way to read articles, browse notes, listen to podcasts, and chat with writers. Because Substack focuses on writers and podcasters, it builds a product experience that's great for reading and listening. The Substack app allows you to not only read the publication you subscribed to but also discover new publications. The app is a destination for people who seek knowledge, information, or inspiration.

Substack solidified its strategy to become a destination by introducing the Notes feature. Notes allow writers to share small snippets of their work, highlight the work of other writers, and share interesting things with their audience. Readers get even more interesting content from their writers while creators get to connect more with their audience.

The Substack app and Notes allow writers to get discovered. Since readers usually subscribe to less than 20 publications, most of the notes posted by writers get seen by subscribers. So anytime a writer shares a snippet from another writer's post, it's like to result in more views and subscriptions.

The fact that Substack is a destination in itself allows writers to get noticed by a new audience and grow their following.

Substack helps writers grow

Substack is not just a great tool and a destination, it's also a powerful network that creators can use to collaborate and grow their audience.

One of the features that has been a game changer for many publications is the recommendation feature. In a few clicks, a writer can recommend another publication to their audience. Every time a new person signs up for a newsletter, they see a list of other newsletters the writer recommends. The list also appears on the publication page and users get emails when publications make a new recommendation.

Although a simple feature at a glance, it has resulted in a huge growth of Substack publications. According to the company, this single feature drivers 40% of free subscriptions and 15% of paid ones. Big publications like

Lenny's Newsletter

with 400k+ subscribers and

The Pragmatic Engineer

with 200k+ subs credited this feature as the reason for their exponential growth.

On top of the recommendation feature, Substack also makes it easy to cross-post other articles, mention writers or publications in the posts, and discover new publications through rankings. The Notes feature takes this recommendation to the next level. Now writers can recommend specific posts from writers in the network and help those publications grow.

The growth factor is going to be the reason why writers will stay with Substack. Email newsletter businesses are unique in that publications can switch to another product by exporting their subscriber lists. My bet is that Substack writers will stay with the platform because it helps them grow more than any other product.

Lenny’s Newsletter reached 400k subscribers. The hockey stick growth started after the launch of the recommendation feature.

Substack succeeds when writers succeed

Substack generates revenue by taking a 10% cut from paid subscriptions. This means that Substack succeeds when writers succeed. It creates a powerful incentive for the company to create more tools and features to help publications grow. As long as Substack delivers more value to its writers than the 10% cut that it takes, they will keep sticking with the product.

Substack is a media company but unlike other media giants like the New York Times or the Wall Street Journal, it doesn’t need to hire writers or produce more stories to grow. It just needs to convince more writers to join the platform and start their own publications. My thesis is that it will succeed in doing that because it’s a great tool, a destination, and a network bundled in one simple and elegant offering. That’s why I invested in Substack.

Disclosure: this is not investment advice, for informational purposes only.