Substack was founded on the idea that there is, as Vox put it, "a deceptively simple way to make it in the media business: Write a newsletter and convince thousands of people to pay you for it."
In a strange way, charging money for a good or service is a genuine innovation in the tech industry. Tech is notorious for making things no one actually wants to pay for, or that cannot work for some reason or another, resulting in the obvious yet constant tension between the high valuations of startups and their "pre-revenue" status.
And yet, even by the standards of tech, Substack is remarkable. That description from Vox quoted above, written shortly after Substack's 2017 founding, is one of the dumbest lines I have ever read in a puff piece. The idea that one could write words down and then sell the resulting work to readers predates the printing press; that one could start a business facilitating that process for writers is similarly banal. The rest of the short puff piece is no better, telling us a story about how the founders were "inspired" by "the model Ben Thompson pioneered with his Stratechery newsletter a few years ago." Having heard of the concept of newspapers, but not of Ben Thompson, I can't help but ask myself the obvious question: Why is Vox, a publication that makes its money by writing words and charging money to read them, acting like the very thing they do for a living is somehow also an innovative tech idea?
Like so many other obviously stupid things in our world, it all starts with tech investors. Aspiring entrepreneurs that require venture capital have to sit down and tell investors what they think their budding venture's future value could be. This is a highly rigorous process scrutinized by very serious people. Founders must make a spreadsheet with projected revenue, expenses, etc., and then they arrive at a number. That number is then multiplied by an industry specific multiplier that represents how much capital markets value that industry. If you have a tech company and a laundromat chain whose details are otherwise identical, the infallible wisdom of the market tells us that the tech company is worth a whole lot more.
This means tech companies (and those claiming to be tech companies; put a pin in that) can raise a lot of money — enough money that in different hands could solve entire humanitarian crises — on a whitepaper and a firm handshake. These companies don't usually need a lot of capital to buy equipment or do R&D. Most tech companies these days are just making a website where they resell goods someone else is making, whether those goods be physical goods or other people's writing. When these companies get a lot of money, since they don't need that cash to really do anything, they use their cash to offer whatever good they're selling artificially cheap, eventually becoming a pointless middleman in an industry that they've now cornered.
This should be a familiar model to anyone who listens to podcasts with ads. The companies advertised always offer a platform for content, or subscriptions to products, or marketplaces that use AI to match your taste to products; they never seem to actually do anything themselves. They are trying to convince investors that they are a tech company. BetterHelp isn't a therapy company; Quip isn't a toothbrush company; Hello Fresh isn't a grocery company. They all want to be the next Uber, which isn't a cab company. Bright Cellars doesn't sell wine; they're "the monthly wine club that matches you to delicious wines, tailored to your tastes." All these companies are rent-seeking enterprises. They raise gobs of money, then they offer a whole two weeks free when you sign up with the offer code. It's the tech company model of acquiring users and figuring out how to make money later.
In a way, Substack is the purest version of this. They are just the internet as a service.
Substack has raised more than $80 million. What does substack do that requires that much capital? They aren't building factories or doing any R&D. They have raised that money to take over as much of the internet as possible as fast as possible. They will offer big names undisclosed sums of money to write on their site. They'll let writers monetize their substack at a subsidized rate. In short, they'll burn through their capital to attract people to their platform, but they won't actually do anything. Substack is an attempt to make a small internet within the bigger internet, lure everyone inside with free stuff, and eventually charge them rent for being there. They are doing nothing worthwhile.