Why Substack?

As you’ve probably heard by now, Caffeine has switched to Substack. You can read more about how we made that decision here.

But to help explain why we chose Substack, we thought there was no better person to enlist than Substack co-founder and ex-pat Kiwi, Hamish McKenzie.

I caught up with him over Zoom last week and started by asking the same question every startup needs to answer: what problem did he found his company to solve? 

“The thing with journalism is there’s not a reduced demand for it,” he said.  

“People have to consume it more than ever and want it more than ever, and there’s not a reduced supply. There are as many great practitioners around as ever - so what’s the problem? The problem is with the business model. It kind of has a physical illness. It just can’t support its own body anymore.” 

Symptoms of that illness aren’t hard to find. Today, the number of journalists working in New Zealand is less than half what it was in 2006.  

Over 200 lost their jobs in 2024 alone, following Newshub’s closure and deep cuts at TVNZ. (I was one of them; I moved to Caffeine when Newshub’s owner, WBD, shuttered the newsroom in July.)

With digital giants hoovering up a diminishing stock of advertising revenue and audiences inexorably shifting away from legacy media, McKenzie explains that Substack’s solution works by balancing the relationship between platforms, publishers and readers.    

“Substack’s real product is its business model. It’s one built on direct relationships, direct subscriptions where the publisher owns everything that matters: the content, the mailing list, the payments. They can take it with them any time,” said McKenzie. 

Unlike a lot of founders, McKenzie doesn’t claim to have invented a new technology to solve a novel problem.  

He says this approach isn’t flashy or even overly innovative (he points out Paradise Lost published under a subscription model back in 1667) but stresses how it is immensely impactful in the modern media environment and for publications like ours in particular.   

“It’s especially good for niche publications where the audience doesn’t have to be huge, but devotion and level of intensity matter, and they can help the publications survive or even thrive.”

Particularly attractive for Caffeine is the ability for our readers to use Substack’s chat and public Notes functionality (which McKenzie describes as ‘like Twitter but with better incentives’) to organically grow the community and connect with other founders both here in New Zealand and across the globe.

As Substack only generates revenue through a 10% cut of subscriptions, it ensures that publications like us and our readers are always customers rather than products to sell to advertisers. 

McKenzie says Substack only survives by servicing the publications on its platform, and in turn, those publications only survive by proving their value to their readers. 

He contrasts this approach to how media is forced to survive in a market dominated by social media and advertising, where the quality of content is secondary to the number of clicks. 

“To get a paid subscription, you have to prove that you’re worthy of someone’s trust and that you’re going to reward their attention and respect their trust over a period of time. To win an attention economy game, to win at Twitter, you don’t have to respect anyone’s attention.” 

“The way to win at Substack is to keep showing up and proving over time to people who are paying you directly with their money that you’re saying things that are worth sticking around for and the end result of that dynamic, they just couldn’t be more opposite.” 

This is exactly what we plan to do at Caffeine. We will be in your inbox each day, showing how we can serve the startup community of Aotearoa.  

There’ll be a longer feature in our Friday newsletter with more from my conversation with Hamish, including his thoughts on Elon Musk, the one historical figure he wishes was on Substack and the hardest but least public thing he faced as a founder.