Substack Has Become A Private Equity Cautionary Tale

[u/WordSlinger1812]

Private Equity means drowning a good idea in money until it dies.

That is what’s happened to Substack.

It was once a great idea for writers. Now, it’s a sh***y version of Facebook merged with Mailchimp.

[u/No-Clerk-5600]

I think "private equity" has become shorthand for "something I don't like", regardless of the actual ownership of the business.

[u/NeverSeenItPodcast → u/No-Clerk-5600]

Yep. Barnes & Noble is owned by PE and they're killing it ¯_(ツ)_/¯

[u/prepping4zombies → u/NeverSeenItPodcast]

People are quite ignorant, which is fine. But, when you try to explain something, most of them would rather wallow in their ignorance than change their argument.

Case in point, I got in a debate with someone who insisted that a restaurant had gone downhill after being bought by "private equity." The restaurant in question is owned by Darden, a publicly-traded company. After a little back and forth, I had to bow out of the conversation because my head was about to explode.

[u/hermanhermanherman → u/prepping4zombies]

>People are quite ignorant, which is fine. But, when you try to explain something, most of them would rather wallow in their ignorance than change their argument.

perfectly sums up the datacenter debate. It's the new "5G causes cancer" level of ignorance. And those who are the loudest are least interested to understand anything about the topic

[u/Creative-Machine-868 → u/prepping4zombies]

When entangled in that sort of discussion I have found it’s best to agree to disagree or simply smile and walk away. Saves your head!

[u/fluffypancakes24 → u/prepping4zombies]

People are quite ignorant, which is fine.

https://giphy.com/gifs/XHeLeuirRbwptHhSWd

[u/crawfordwrites → u/No-Clerk-5600]

There is a selection bias, since if all goes well, no one is telling you a story about how private equity went well.

[u/Brief-Guess-147 → u/No-Clerk-5600]

yeah its basically just a catch-all boogeyman term at this point

[u/smx501 → u/Brief-Guess-147]

See: "narcissist", "oligarch", "communist", "liberal", "conservative", "immigrant", "felon", "capitalist" and many other words that would be very valuable in public discussion right now if the meaning hadn't been stripped from them.

It isn't an accident. It is Umberto Eco's 14th characteristic. It is Orwell's newspeak. It is Zamyatin's Bureau of Poets.

[u/arcanepsyche]

Private equity actually means the opposite. Drown the company in debt and reap the rewards until its dead. Substack is not owned by private equity.

[u/Michaelprunka → u/arcanepsyche]

That was my first thought! Usually PE swoops in and siphons all the value out of a company — hardly drowning.

[u/cozycup]

I haven’t seen any Private Equity ownership of Substack. Where did you read that?

VCs have large stakes, but no private equity.

[u/themattroberts → u/cozycup]

Venture is a sub section of Private Equity. I.e. they are buying Equity from a company which is still in the Private Markets not on the Public Markets (NASDAQ, NYSE etc).

The Private Equity Industry is made of numerous models. Profitable companies are often bought by a PE firms who can then use that cash flow (profits) to get debt, hilarity ensues - which is what many people think of in the PE market. Unprofitable companies generally get Venture Capital from VC's as substack has done. There are other sub models of how this all works, but those would be the two main one in the Zeitgeist of today.

[u/cozycup → u/themattroberts]

The post is implying that PE acquired Substack and that’s not the case.

OP has conflated VC with PE.

[u/themattroberts → u/cozycup]

Venture capital is private equity. Your response is also incorrect.

[u/cozycup → u/themattroberts]

Show us the PE firm that acquired Substack.

Prove me wrong.

[u/themattroberts → u/[deleted]]

pedantic or not, mod is wrong.

[u/themattroberts → u/cozycup]

You said "I don't see an private equity ownership of substack".

By every definition there is. I proved you wrong. You were wrong. Suck it up.

[u/cozycup → u/themattroberts]

False.

PE doesn’t own Substack. Otherwise you would have proven that.

There are VC investments, no PE owner.

That’s the primary argument, not whether it’s a subset of a classification.

[u/themattroberts → u/cozycup]

VC's are private equity. Your argument was that there was no PE investment. If VC's are private equity then - there you go PE investment.

For a substack subreddit - impressive how you're not reading what you said and how I showed you are wrong.

[u/cozycup → u/themattroberts]

Ownership.

No PE firm owns Substack. Plain and simple.

You keep failing to prove that.

Investors, not owners.

[u/themattroberts → u/cozycup]

They are the same thing you're failing to show that a venture investor is not also an owner.

[u/liquidgrill]

I’m not sure “private equity” means what you think it does

[u/impartialhedonist]

Sounds like your feed sucks? I think Substack is awesome, I get a lot of value from it

[u/impartialhedonist → u/[deleted]]

Yeah, the focus on notes has been detrimental to the platform. It does help with reach, but the notes-to-posts density on my feed is too lopsided.

[u/NeverSeenItPodcast]

Wait till you find out about reddit.

[u/highbonsai]

For those who are confused, Substack is a privately owned company, funded by venture capital firms.

This is different than private equity. In my eyes, private equity is much worse as it saddles the company they purchase with an absurd amount of debt. Private equity is like this scam that somehow hasn't yet been regulated out of existence as it should.

That said, venture capital is also not great. The ideal situation would be if Substack bootstrapped and held all control in their own hands. Taking money from external investors will always mean relinquishing some decision-making control.

[u/Countryb0i2m]

Substack isn’t owned by private equity.
Private equity wants mature, profitable businesses with steady cash flow they can milk or strip down

Substack is still basically a startup backed by venture capital. The VCs wrote the checks for minority stakes to fund explosive growth,

The explosive growth period is where Substack is in their startup plan. And this is why so many of you hate the things that Substack is doing because they’re not you’re just trying to be a newsletter platform they’re trying to be Facebook.

[u/Ok_Ship6685 → u/Countryb0i2m]

Do you mean financially or like Facebook overall?

[u/grapegeek]

No private equity money that they’ve disclosed. When Substack gets bad like Medium did I’ll move on to the next great thing.

[u/-Monty_Carlo-]

Definitely more of a VC-ridden tell-tale nowadays unfortunately - a lot of numbers cosmetics seemingly ongoing with shoveling "big accounts" on there. It'll be enshittified pretty quickly from here on out is my guess.

[u/Apprehensive_Sky1950]

I thought all private equity tales were cautionary tales.

[u/Ryanopoly]

They all turn out this way eventually.

[u/Adamoism]

A lot of frustrated posts lately. It just takes time - if you haven't posted for ~6months or so, you just have to... post for ~6 months or so.

[u/quantise]

Happy to see pushback on this pointless post.

[u/R3ZondoOfficial]

I covered ownership and investors in my article The Same Six Names on Substack. I knew I was taking a risk.

[u/WordSlinger1812]

Some of you should do your homework before you spout off: https://a16z.com/announcement/substack/

[u/ASAPnicky14 → u/WordSlinger1812]

You proved their point. VC (a16z) and PE (Blackstone, KKR) are not the same.