Medium CEO Tony Stubblebine announced Friday that the publishing platform has remained profitable since August last year, when it first achieved the milestone. In the post, Stubblebine detailed what it takes to achieve this goal. This includes a combination of product changes, investor restructuring, renegotiation loans, office space removal, layoffs and other difficult cost-saving measures.
His posts delve deep into what a startup needs to achieve a transformation and the tough choices it has to make.
According to Stubblebine, the company lost $2.6 million a month when it joined in 2022. They also lost subscribers, lost investors' funds, and lacked acquirers.
He said that the company had only one option to “enhance medium profitability or close it down.”
The platform's difficulties stem from its business model, offering a single bundle subscription that writers can share. The company has also experimented with bringing high quality, specialized editorial content.
When he joined CEO, Medium's membership exceeded 760,000, but lost money every month. Stubblebine had to dig out the company from the hole, he said. On the product side, Medium introduced ways to add human expertise to recommendations in Boost, allowing partner program incentives to reward thoughtful writing, and added featured tools that allow publications to curate and promote other stories of interest.
In terms of finances, the medium owed a $37 million loan, with the investor holding a $225 million liquidation appetite (which means investors will get their money back before employees see the return). Its governance was also overly complicated, and it had to obtain investor approval from five separate tranches before making decisions from key companies.
To fix these issues and get the ship right, medium renegotiations renegotiated the loan, eliminated the preference for liquidation, and simplified its governance to only one investor tranche. They also sold two of the acquisitions and shut down a third.
Seriously, Medium worked to clean up the cap table by renegotiating with investors. But a year after the idea was first raised, the CEO realized that it was something that was necessary to save the company.
“The investor restructuring required a bit of sweet spot. The business had to look good enough to save money, but not as good as there are other options,” he pointed out.
“If I went to a loan holder, it was to convert the loan to fair or management, then create sufficient ownership by bringing terms to the remaining investors for a summary,” explained Stubblebine. Six of the 113 investors participated in the summary. There, investors' investments were diluted, and special rights such as liquidation preferences and governance roles were abandoned. (He also cried out to VCS, who can easily cooperate as partners, including XYZ's Ross Fubini, Mark Suster, Frooth, Greylock, Spark, and A16z.)
Medium had to cut costs through both layoffs (from 250 to just 77) and engineering optimizations, reducing cloud costs from $1.5 million to $900,000. And eventually he got out of an office lease where he could pay $145,000 a month for a 120-desk office space in San Francisco. Employees were recognized for new shares as they likely won't be worth the existing shares after the “Crum Down Round.”
The platform was once valued at $600 million, but as a result of all these changes, it didn't share a new rating, but of course it's pretty low.
“…I have no ego as to what our current assessment is,” writes Stubblebine. “But I'm not going to tell you because I don't want to use it as a comparison point with other startups. We're beneficial and not. That's a comparison point that's more useful to us,” he said.