20VC Substack Founder Chris Best on The Future of Public Journalism, Why The Economics Of Attention Have Been Flipped & Why Micropayments For Content Will Not Work

In a conversation on "20 Minutes VC," Harry Stebbings interviews Chris Best, CEO of Substack, about the platform's impact on the writing industry and its business model, which empowers writers with direct reader revenue. Best reflects on his journey from co-founder and CTO at Kik to CEO at Substack, emphasizing the importance of product thoughtfulness and the direct relationship between creators and consumers. He discusses the challenges traditional media face, the potential of bundling in the creator economy, the significance of trust in content, and the shift in the economics of attention. Best also shares insights on leadership growth, the value of investors beyond capital, and his vision for Substack's future in enriching culture and supporting creators.

• Substack is a platform that allows writers to start paid newsletters.
• Chris Best is the founder and CEO of Substack.
• Substack has raised over $17 million in funding from notable investors.
• Chris Best was previously the co-founder and CTO of Kik, a messaging app.
• Kik raised over $220 million from investors such as Spark, Tencent, and USV.

"Now, I've probably given it away with that, but I'm thrilled to welcome Chris Best, founder and CEO at Substack, to the hot seat."

This quote introduces Chris Best and his company, Substack, highlighting its impact on the writing industry and its successful funding.

• Chris Best started his tech journey as a co-founder of Kik.
• He was involved in building the original BlackBerry and Android apps for Kik.
• Chris Best experienced the growth of Kik from a dorm room project to a company with a billion-dollar valuation.
• He learned the influence of online communication tools on human interaction and wider culture.

"I was the sort of co-founder and CTO, grew the engineering team, sort of shifted into product over time."

This quote explains Chris Best's role at Kik, showcasing his progression from engineering to product management.

• Chris Best took a break after Kik to explore writing, which led to the idea behind Substack.
• He wrote an essay about the state of the media ecosystem, which was critiqued by his friend Hamish.
• Hamish's feedback prompted Chris to think about solutions to the problems he identified in the media industry.
• This led to the conversation that eventually became Substack.

"And that sort of started the conversation that eventually ended up becoming Substack."

This quote describes the moment of inspiration that led to the creation of Substack.

• Chris Best values the hard work of building thoughtful products for people.
• The success of Kik was partly due to the thoughtful product development process.
• At Substack, there is a focus on having a clear business model from the start, unlike Kik.
• Substack is based in Silicon Valley, which differs from Kik's location in Waterloo, Ontario.

"I think something that I took from Kik and that I got from probably Ted in particular, is a respect for the hard work of building a thoughtful product for people."

This quote highlights the importance of creating products with the user in mind, a principle Chris Best carried over from his experience at Kik to Substack.

• Traditional media publications have been hit hard by COVID-19.
• Substack's growth has accelerated during the pandemic.
• People are spending more time at home, leading to an increase in both writing and reading activities.
• The growth of Substack is seen as a privileged position during the pandemic.

"And I think there's sort of two parts to it. One part is sort of a transient effect where all of a sudden people are at home."

This quote acknowledges the impact of COVID-19 on people's behaviors, which has inadvertently benefited Substack's growth.## Structural Changes in Media

• The decline of existing media companies is part of a long-term trend.
• COVID-19 has accelerated this trend, which is irreversible.
• Substack's creation is partly based on the belief that these structural changes in media are significant.

"So a lot of the things that are the sort of decline of existing media companies is this trend that's been going on for a long time."

This quote explains the ongoing trend of traditional media companies losing ground, which has been happening for years and has been hastened by the pandemic.

• Substack allows writers to choose between free or paid content for each piece they publish.
• The advice to writers is to publish their most impactful work for free.
• Free content serves as a top-of-the-funnel strategy to attract paying subscribers.
• Substack can support a free public record while offering a sustainable business model for writers.
• Trust in sources is a significant issue in the current media landscape, which Substack aims to address.

"And it's actually a core part of the model that you continue to publish stuff for free."

This quote highlights Substack's flexibility in allowing writers to publish both free and paid content, which is central to its business model.

• The proliferation of content has led to a discovery problem.
• The challenge is finding content that is valuable and trustworthy.
• Substack is in a position to potentially help with content discovery, though no definitive solution is presented.

"The problem, again is how do I find the thing that's actually going to be valuable, that I can actually trust, or that it is actually worth my time and attention?"

This quote addresses the difficulty readers face in finding high-quality, reliable content among the vast amounts of available information.

• The Internet creates a global marketplace where one must be the best at something.
• Success in media will either come from being a major publication or being the best in a specific niche.
• There's no room for mediocrity; content must cater to either a broad or a highly targeted audience.
• The Substack model supports niche creators who can provide significant value to a small, dedicated audience.

"You either have to make something that's so good for the masses that it continues. It's like the best in the world, or that's very good for a targeted audience."

This quote emphasizes the need for excellence in content creation, either by appealing to a wide audience or by focusing on a specific niche to succeed in the competitive media landscape.

• Micro payments are not considered a viable solution for journalism.
• The decision-making pain in micro transactions outweighs the financial pain, leading to an unpleasant experience for users.
• Substack's business model differs from micro payments, focusing on recurring revenue from subscribers.

"I think that micro payments, as we sort of traditionally think of them as like, I'm going to quickly decide whether I want to spend $0.20 unlocking this thing, just don't work on sort of a fundamental product level."

This quote explains the inefficiency of micro payments in journalism, highlighting the disproportionate impact of decision-making pain in small transactions.

• Substack has a broad range of potential areas to explore.
• The company's focus is on improving the core product for writers and readers.
• Expansion into other areas will follow only after perfecting the core Substack experience.

"I feel like there's a big frontier of opportunity for us."

This quote expresses the vast potential for Substack to grow and diversify its offerings, with a focus on creating value for writers and readers.

• Incentive design shapes user behavior significantly.
• Platforms without deliberate incentive design may inadvertently create a system that rewards certain behaviors.
• Substack is aware of the importance of incentives and aims to create a positive incentive structure.

"When you have a system where people are communicating, there's going to be an incentive structure."

This quote acknowledges the role of incentives in user engagement and the necessity for platforms like Substack to consider the effects of their incentive structures on user behavior.## Engagement Algorithms and Content Quality

• The underlying algorithm of a platform, if designed to maximize for engagement, will inherently produce more of the type of content that drives engagement, such as clickbait.
• Simply adjusting algorithmic rules to discourage "bad content" is insufficient for a lasting solution.
• The solution lies in changing the fundamental rules of the game, shifting away from ad revenue-driven attention capture to value-driven content that readers willingly pay for.
• Direct payment models incentivize the creation of more trustworthy and valuable content.

"If your underlying algorithm is maximizing for engagement, you're not going to be able to turn up the don't make bad content dial in the algorithm and have a permanent fix for that."

This quote emphasizes the limitation of attempting to solve content quality issues through algorithmic tweaks alone when the core algorithm prioritizes engagement over quality.

"A system where people are paying directly to writers they trust is going to create better, more trustworthy content, more trustworthy relationships, more valuable culture at the end of the day than a system where people are trying to game the engagement algorithm."

This quote highlights the benefits of a direct payment model, where the incentives for content creators align with producing high-quality, trustworthy content that readers find valuable enough to pay for.

• Direct payment to writers creates a system of accountability, where writers are incentivized to maintain quality and cadence to satisfy paying subscribers.
• The value attributed to individual writers can be significant, leading to readers paying more for a subscription to a single writer than for a service like Netflix.
• This monetization strategy centralizes the individual writer-reader relationship, reinforcing the importance of maintaining quality content.

"Yeah, no, I think it's absolutely key."

This quote underscores the importance of the direct payment mechanism in ensuring writers are accountable to their subscribers for the content they produce.

"People are willing to pay more to subscribe to one writer on substack than they'll pay for Netflix, because this sort of relationship that they've built up over time, reading somebody has so much value to them."

This quote reveals the high value readers place on the relationships they build with individual writers, which can translate into a willingness to pay a premium for access to that writer's work.

• The economics of attention have shifted from a surplus of attention to a scarcity, where the focus is on improving the quality of content consumed rather than the quantity.
• In the past, there was an abundance of attention with limited content, but now, with smartphones and algorithmic feeds, every moment can be filled with engaging media.
• The new goal is to provide better, more trustworthy content that readers are willing to pay for, as attention has become the last scarce resource.

"You never have to have a moment of your day. There's not a second that you couldn't fill with some really sort of compelling diversion."

This quote illustrates the current state of constant media consumption, where there's no shortage of content to occupy every moment.

"Now your attention is actually the last scarce resource, right? You can fill up every second, every sort of possible time you have to spend consuming media."

This quote clarifies the concept of attention as a scarce resource in the modern age, where the challenge is to consume better quality content, not just more content.

• There is likely a limit to the number of content creators an individual can subscribe to, but most people have not reached that limit yet.
• The focus should be on creating high-value culture and content that people are willing to pay for, rather than worrying about subscription limits at this stage.
• In the future, solutions like bundling may become relevant to address the potential issue of subscription saturation.

"There are people who subscribe to 25 substacs, you'll be surprised to know."

This quote indicates that while some individuals may subscribe to a large number of creators, it is not the norm, and the market has not yet reached a saturation point.

"It starts to become interesting. Like, do you start to want to have bundling of some sort?"

This quote suggests that bundling could be a future solution to manage the limitations on the number of subscriptions a person can maintain.

• Bundle economics can create a win-win situation for consumers and creators by providing a surplus of value to both parties.
• Consumers benefit from paying a single price for access to multiple publications, while creators benefit from the collective revenue.
• Bundling must be done intelligently to preserve the direct relationship between readers and writers, which is central to the value proposition of platforms like Substack.

"So bundle economics is kind of okay. If you have a set of publications that are interesting to you, and they all sort of have their own disparate values, and then they're trying to get as much money as possible from a variety of people, you can construct that in such a way where if you bundle them all together... it ends up being a win-win for both the consumer and the creator."

This quote explains the concept of bundle economics and how it can benefit both creators and consumers when executed properly.

• Transitioning from a CTO to a CEO role requires finding a skilled replacement for the CTO position and being open to learning and adapting to new responsibilities.
• Building a strong team is a critical focus for a CEO, and the ability to recruit effectively in a competitive talent market is essential.
• A CEO's growth involves gaining confidence and experience in leading a company and addressing challenges specific to leadership, such as morale maintenance and fundraising.

"Get good co-founders. Find someone that is a better CTO than I could ever be."

This quote emphasizes the importance of building a strong founding team where each member excels in their respective role, allowing for a successful transition from CTO to CEO.

"Focusing on building a great team, it's something that I spend a lot of my time and effort doing and I feel like is the most important thing to continue to improve at."

This quote reflects the CEO's recognition of team building as a crucial skill and priority for the success and growth of the company.## Hiring Philosophy at Substack

• Substack prioritizes hiring individuals who align with the company's mission and values—those who are passionate about reading, writing, and the company's vision.
• The competitive job market acts as a natural filter for attracting candidates who are genuinely interested in Substack's goals, as opposed to those just seeking employment.

"We really want to hire people at Substac that get what we're doing and care about it and value reading and writing and see the vision for the way that we want to change the world."

This quote emphasizes the importance Substack places on hiring individuals who are not only skilled but also share the company's passion for impacting the world through reading and writing.

• Chris Best found the advice and knowledge from Y Combinator invaluable during Substack's fundraising efforts.
• He believes that being a competent fundraiser is important, but it's more crucial to focus on building a successful business.

"I found the Y combinator going through Y combinator very valuable, and early on, I just sort of took a lot of their advice, fairly wholesale, on how to think about fundraising, how to approach it in general."

Chris Best highlights the significant role that Y Combinator played in shaping his approach to fundraising and the importance of their advice in the early stages of Substack's growth.

• Perspective and outside views from investors are highly valued, as they provide insights from someone who has seen many companies.
• Beyond funding, investors can offer tactical support through their networks and introductions.

"Perspective is a good thing. Just being able to sort of see things from the outside and be able to just have the perspective of seeing a bunch of different companies, having an outside perspective that you can really trust is something that we have in many of our investors and is very valuable."

Chris Best explains that investors bring a valuable outside perspective to the company, which is beneficial for growth and decision-making.

• Chris Best does not have a single favorite book but appreciates "The Death and Life of Great American Cities" by Jane Jacobs for its parallels between city planning and crafting human ecosystems on the Internet.
• The book provides practical ideas and combines them with a sense of liberty, which resonates with Chris Best's interests.

"I think the reason I find it so fascinating is because sort of the idea of city craft and what makes a great city has so many parallels in the thoughtful crafting of sort of human ecosystems on the Internet."

The quote reflects Chris Best's fascination with the similarities between urban planning and the development of online communities, which is relevant to his work at Substack.

• Chris Best aspires to balance the 'art' of design and empathy with the 'science' of data and metrics in product and company development.
• He acknowledges a personal weakness in decisiveness, preferring to agonize over decisions rather than making quick ones.

"I think of my superpower, or the superpower that I aspire to, is kind of the respect for both art and science in creating good products and a good company."

Chris Best sees his ability to blend the creative and analytical aspects as a strength in building a successful company and product.

• The first external funds for Substack came from personal connections, specifically Julian Frackman and Ted Livingston.
• Chris Best highlights the value of investing in friends' ventures and the positive sentiment behind supporting their success.

"The first outside money was Julian Frackman, who's a friend of Hamish's, and Ted Livingston, who's a friend and my old co founder at kick."

This quote reveals the origins of Substack's funding and underscores the importance of leveraging personal networks for initial investment.

• Substack aims to revolutionize the business model for culture, believing that society underinvests in creative work.
• Chris Best envisions Substack as a platform that enables writers and creators to thrive professionally and contribute to cultural richness.

"At the broadest, most grandiose level, I think what we're doing is helping to reinvent the business model for culture."

Chris Best articulates a grand vision for Substack's future, focusing on enhancing cultural investment and supporting creators in producing significant work.

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