Is Substack an incubator for writers?
5 min read

Is Substack an incubator for writers?

The newsletter platform's grant program lays the groundwork for an intriguing new business model: investing in writers like they were startups.
Is Substack an incubator for writers?

A song to read by: “Schmetterling,” by Holy Wave

What I’m reading: “The Autobiography of Malcolm X,” by Malcolm X and Alex Haley


I hesitate to admit this, because I have a high school drama-esque fear of being “figured out” and “predictable” and therefore “pigeon-hole-able” (don’t read too deeply into that portmanteau), but you and I can both agree that there are a few topics that I particularly like to write about.

The first is the food industry and food media. I make no apologies for this.

The second is subscriptions. Of all the subjects I could obsess over, it’s one of the least interesting but also one of the most harmless, so I figure it’s essentially a wash.

The third is Substack. I have a Substack, I’ve written about Substack for Business Insider, I follow a lot of Substack newsletters, I’ve written about Substack here before, a few times — sue me, but it’s a fascinating concept.

And as a fan of Substack, Monday was a big day. Earlier this week Substack announced the winners of its newest batch of Substack fellowships. To read the full announcement, put your mouse icon over these three words and then use one of your fingers to click your mouse.

In short, though: Substack announced one senior fellow, nine fellows and five honorable mentions. The senior fellow received a $100,000 grant; the fellows received $25,000 advances and a no-strings-attached $3,000 stipend; and the honorable mentions each received the similarly stringless $3,000 stipend. All the fellows will receive coaching, legal help, access to a Getty library and some other perks.

In general, the idea behind the advances and the grants is to give a select group of talented writers the financial freedom they need to dive into their Substack project.

Money, money, money

The fellowship fact sheet explains the rules of the contest, including the financial details.

For instance, it explains why the senior fellow received a grant, which is paid out in parcels, while the fellows received advances, which they receive in full upfront.

Also included is an explanation of how Substack recoups its advances by levying an additional, temporary 40% fee on fellows’ newsletters, though no such charge affects the senior fellow’s newsletter.

But most interesting of all is the confirmation that all grant-winning and advance-winning newsletters will still be subject to Substack’s 10% service fee.

Grant ... or investment?

Substack gets a 10% revenue cut from all its paid newsletters, so it makes sense that those of the fellows and senior fellow would be no exception.

But here’s where it gets interesting: If these Substack-capital-backed newsletters succeed at all, Substack will make its money back, maybe even quickly. If the newsletters succeed wildly, Substack will turn a profit off of the program. In fact, unless the newsletters nosedive, Substack is almost guaranteed to eventually make back its investment and turn a profit from these fellows.

And typically, when you give money to a venture in exchange for a share of its future successes, that’s called an investment.

Like a venture capitalist, Substack is providing a handful of promising young enterprises an upfront sum of money with hopes that the ventures succeed and the investment pays dividends.

Indeed, like a venture capitalist, Substack is also offering legal services, coaching, technical know-how and heaps of other miscellaneous support. The company is providing more than capital for a reason; they want the newsletters to succeed because Substack stands to make a chunk of money if they do.

As a result, Substack’s role as cheerleader and patron of the arts is not driven by pure altruism — it’s supplemented by good business sense. A mutualistic relationship, where Substack benefits from its fellows’ success, is healthy because both parties have the same end goal.

Of course, on top of all of this is the fact that Substack will not only reap tangible financial benefit from its fellows’ success, the Substack name will reach new audiences, generate loads of earned press (like this!) and generally act as free marketing and publicity for the newsletter product. The whole thing is, in a word, smart.

Investor … or incubator?

Okay hear me out. If Substack sees any significant ROI from these grants/advances, it creates an entirely supplemental business model for the company. Instead of sitting back, waiting passively for various newsletter to succeed, grow and generate profit, Substack gets involved.

It makes its own luck. It’s the captain of its own fate. It parses through its newsletters, supercharging the most promising ones with capital and then making more money when they succeed.

This is, more or less, how a startup incubator works. In exchange for capital or resources or mentorship or office space or whatever the incubator is offering, it gets a slice of the startup’s equity. If that startup hits pay dirt, the incubator profits.

Same thing with Substack. They infuse promising newsletter writers with capital, allowing them to focus more intently on their Substack projects, and then share in a part of the future successes of those newsletters.

If this works, then Substack has created an incubator for writers.

Anyone can create a Substack newsletter. In time, the more promising ones will always rise to the top and draw the attention of the company itself. Substack then invests in these newsletters, and once the newsletter starts making serious money, Substack recoups its investment and benefits from all the increased brand awareness.

Then, with the money generated — which will keep coming and coming, by the way, and compounding as class after class of fellows find success — Substack can invest in more fellows, more programs and better infrastructure. It’s a beautiful business model.

Incubator … or brand-new business model?

This whole plan stems from the core offering of Substack: Through a simple subscription architecture, it helps writers make money off their writing more easily. The grant program doesn’t divert from this at all, it just puts the idea on steroids by giving the most promising newsletter products capital and mentorship.

It’s still the subscriptions, though, that are the magic. Prior to Substack, the only time someone “invested” in a writer was when a book publisher gave an author an advance. Now, because Substack’s subscription architecture can monetize a writer’s online writing, anyone can “invest” in a writer.

Anyone, of course, being the operative word there.

What’s to stop an angel investor from giving a Substack-newsletter writer $100,000 in exchange for a 20% cut of their revenue? Of course, the writer and the investor would have to account for Substack’s 10% as well, but the duo could still turn a tidy profit.

This, in turn, extrapolates very easily into various hypotheticals. Wealthy investors could float hungry writers sums of money to focus on their newsletters, and when the newsletters take off and generate money through their growing subscription base, the writer, the investor and Substack all profit.

But the main point is this: By creating a simple subscription architecture for writers, Substack turns the writer into a commodity. Into a startup. Into something that can be invested in and then monetized.

It sounds decidedly “corporate overlordish” when I type it, but there are a lot of starving writers who would be willing to overlook the Orwellian vibes for a chance to make a living off of their writing.

That’s the kind of opportunity that Substack has created. Right now, they’re the only investors in the game, but if this program succeeds, who knows who might want to invest next?

Some good readin’

— Another worker-owned media company rises from the ashes in Defector Media. (New York Times)

— This great review of Monday’s episode of “I May Destroy You,” which you should be watching. (AV Club)

— I finally read the scary longform piece about the earthquake and ensuing tsunami that will — definitively — one day soon hit the Pacific Northwest and kill everyone here. And oh yeah I live in Seattle now! (New Yorker)

Remote work might not be that great! Maybe … there was a reason why we weren’t doing it constantly before we were forced to? (Wall Street Journal)