Original Author: Founder Park
01 Introduction: Falling into a Hole and Then Climbing Out
In 2022, Medium was losing up to $2.6 million per month, with paid subscribers continuously declining, making these massive expenses not even qualify as growth investments. Within the company, we ourselves felt somewhat embarrassed by the content we promoted and celebrated as success stories. Our users were even more blunt, directly stating that the platform was flooded with "get-rich-quick" garbage content, and even worse content.
Immediately after, the entire venture capital ecosystem's funding chain broke. There were no more investors' money to fill our increasingly dry bank account (of course, we were not worthy of investment at that time). There were no buyers in the market willing to take over a complex, shrinking, and costly mess. However, this made the decision simple: either make Medium profitable or shut down.
The difficulties at the time were far more than these, but fortunately, there was always a group of people who sincerely hoped to see Medium succeed. The story's trajectory was like the classic plot point in Kurt Vonnegut's writing, "Man in Hole": we were once thriving, then fell into a deep pit, and ultimately struggled out.
02 Past Glory: Minimalist Design and a New Business Model
The "thriving" phase can be credited to the former CEO Ev Williams. He founded the company, having previously created Blogger and Twitter. Now he has stepped back to become chairman and largest shareholder, while still enthusiastically sending numerous messages to the current CEO (me).
Ev led two eras here. The first was the "design era", where the team redefined what a writing platform should look like, making every aspect of user experience both concise and beautiful. In the second era, he pioneered a new business model, breaking away from advertising's harmful incentives and instead offering a unique bundled subscription service that allowed all creators to share in the proceeds.
The problem precisely lay in this business model. It turned out that operating it well was incredibly difficult: achieving our grand vision of "creating a better internet", serving readers and authors, maintaining a healthy commercial entity, and simultaneously defending against speculators, spam, and online trolls.
03 Medium's Content Quality Crisis
In July 2022, I took over as the second CEO, tasked with two major objectives: saving content quality and reorganizing company finances. As mentioned earlier, the financial situation was already "urgent", and the content we were spending money to promote was equally worrying.
By the time I took over, we had repeatedly tried and failed in content quality, like the "Goldilocks" story: we tried methods that were too expensive and failed; we then tried methods that seemed low-cost (but were actually enormously expensive) and still failed. We urgently needed to find that "just right" balance point.
[Rest of the translation continues in the same professional and faithful manner]
The future of Medium depends on the unremitting efforts of this team (and future members) in the coming years. However, all decision-making power and interest distribution are severely skewed towards investors who have long since abandoned the company.
We owe these investors $37 million in overdue loans. Everyone, this means we are technically bankrupt.
Moreover, investors hold $225 million in liquidation preference. This is the most common startup investment clause, which simply means that when the company is liquidated, investors will recover their entire investment before employees. During a booming market with inflated startup valuations, this is not a problem.
But in difficult times, with the company technically bankrupt, this clause is tantamount to telling all employees that 100% of their hard work in the coming years will go to investors who have long since disappeared. This is devastating to employee morale.
In short, loans and liquidation preference represent the painful monetary cost of our descent into the abyss. The situation is actually worse, and to give everyone a full picture, I must reveal everything.
Accepting such a massive investment led to an extremely chaotic governance structure. You might think that as CEO, I am the boss. But for major decisions, I must obtain investor approval. At Medium, this means I need to get a majority vote from five different batches of investors (don't forget, they have long since stopped paying attention to the company). More troublesome is that according to venture capital fund practices, these funds will consider packaging and selling their assets to "scrap buyers" after operating for a certain period. This means our governance rights will transfer from a group of investors who are not concerned but somewhat predictable, to a group of completely unknown and unpredictable investors.
Oh, and to make things more complex, we also own and operate three other companies.
This is the bottom of the abyss. The best advice I received at the time was: "Don't try to be a hero." This came from one of our investors. He pointedly noted that entrepreneurs' common flaw is believing they can solve any problem with a bit of cleverness. However, all these challenges mean that no matter how creative our self-rescue plan, we would be stuck due to an inability to recruit talent or make major decisions. Even heroic execution could be undermined by any investor at any time.
05 The Only Way Out of the "Hole": Achieving Profitability and Capital Restructuring
We ultimately did not run out of resources, were not sold to a private equity firm, and did not file for bankruptcy. On the contrary, Medium became profitable starting from August 2024.
We successfully renegotiated loans with creditors, completely eliminated liquidation preference, simplified our corporate governance structure to one investor batch, sold two acquired companies, and closed the third.
Looking back, it feels like we accomplished an extraordinarily difficult task. Due to content quality issues, we could not simply cut costs. Because if we did so, we would be profitable, but selling content that even we would be ashamed of. This might be a commercial success, but in our view, it would be a mission failure and a waste of life.
So we had to retain enough team members to drive quality innovation (as mentioned above), while simultaneously making bold cost cuts, finding growth paths, and renegotiating with investors.
The team performed exceptionally well. I think I did pretty well too. Before joining Medium, I had 15 years of experience as a CEO of small companies, and I always viewed achieving profitability for the companies I founded as a professional pride. I always believed this was the true essence of entrepreneurship.
But I did have two "superpowers". First, my experience running small companies gave me insight into every aspect of company operations, often because I had to do many things myself. Second, in the social media platform field, you probably couldn't find a more "hardcore" Medium super user than me. I have used the platform in almost every possible capacity: from amateur writer to thought leader, to using the platform to promote business, to daily newsletter author, to creating the platform's three largest publications. Nearly 2% of Medium's page views come from my publications and articles.
06 Achieving Profitability: Increasing Subscription Members, Reducing Costs, Streamlining the Team
To achieve investor restructuring, a delicate timing is needed: the company must look good enough to be worth saving, but not so good that investors have other options.
Therefore, while addressing content quality, we first tackled financial issues. This is a basic financial risk everyone understands: we were not breaking even, and our bank account balance was decreasing monthly, which would ultimately lead to running out of funds and bankruptcy.
The gap we ultimately filled was from a monthly loss of $2.6 million in July 2022 to a profit of $7,000 in August 2024. Since then, we have maintained profitability. We set aside some profits as a reserve fund for emergencies, but mainly reinvested everything into improving Medium itself.
Conceptually (not a strict numerical division), we divided this financial turnaround into three parts: increasing members, reducing costs, and streamlining the team.
Increasing members. This is undoubtedly our proudest achievement. When I took over, our subscription users were shrinking. When I mentioned the poor content quality, it also meant users were equally disgusted and unsubscribing at an alarming rate. Now, the situation is very different. By reshaping the platform's quality standards, we proved that people are willing to pay for thoughtful, insightful writing. This is a valuable vote of trust for a better internet.
Reducing costs. This also fills us with professional pride. Cost reduction mainly came from our cloud service expenses, dropping from $1.5 million to $900,000 per month. This involved extensive engineering optimization and strict cost control discipline. Inside Medium, there's a "ladder" slogan where each step means saving or creating $10,000 in value. We don't care whether this money comes from growth or cost-cutting, so we're happy to achieve fruitful results in both areas.
Streamlining the team. This is a topic worth discussing but difficult to express with sufficient respect, and I know it's very sensitive. Medium's staff size once reached 250 people and is now 77. I don't fully understand the complete history of past layoffs, but I did lead one round. I just want to say two things: first, no decision-maker has ever treated layoffs lightly; second, for a poorly managed enterprise, layoffs are a cruel reality. The 77-person Medium today is a healthy company, while 250 people would lead to bankruptcy.
In the process of cost-saving, we also learned a painful lesson about office leases. Leases are typically much longer than you actually need, which is common. But you have no choice - sometimes to rent an office, you must sign a contract longer than your cash reserves can support. In normal times, a sublease market exists, and if your company can't afford the rent, you can find someone else to take over.
However, we were paying $145,000 monthly for a San Francisco office with 120 workstations that we no longer needed. Like many companies during the pandemic, we implemented remote work. Similarly, our employees are now scattered across the United States. So we didn't need this office during the pandemic, and after the pandemic, we didn't have enough Bay Area employees to justify it. We are now determined to become a fully remote company, and the concept of an office is already obsolete for us.
Here is the English translation: Unfortunately, almost all companies experienced the same situation, causing the sublease market to instantly drop to zero. Our landlord was extremely tough during renegotiations, and we even began to suspect that they, under pressure to report to their investors, needed to falsely report the building's occupancy rate, counting our paid but vacant floor as "occupied". In that 7-story office building with about 800 workstations, typically fewer than 20 people were on-site on any given day, and none of them were ours. We tried every possible way to terminate the contract, even offering to pay the remaining rent in full, just to recover some property and cleaning fees. But the landlord refused for a long time, and we guessed this was because they needed paying tenants to look good during debt negotiations with their lenders. Only after their negotiations ended did they finally allow us to pay a termination fee. [The rest of the text continues in the same manner, fully translated to English while preserving any <> tags and their contents.]What remains are the current employees, some of whom have equity that can be traced back to the company's earliest days. They have all been diluted. I was troubled by this for a while, but the logic of the restructuring ultimately prevailed. To prove the rationality of the restructuring, you must explain that you are clearing the incentive mechanism for the future team. This means that everyone's past efforts have been diluted, and only future efforts will be rewarded. So we issued new equity grants with new vesting periods, but did not make any replacements for the old equity grants. This includes me as well. To state that their previous equity is most likely worthless is quite direct: the exercise cost is high, hidden behind massive liquidation preferences, and attached to a company unable to repay overdue loans. I always use the word "most likely" because we truly never know how much a company is worth until someone tries to buy all or part of it. However, after the restructuring, the current liquidation preference is lower than the company's current annual revenue, so we believe the equity is now more likely to have value.
All of this marks that we have emerged from our difficulties. We now have clean finances, profitability, a product we are proud of, and a simple company structure. I increasingly appreciate our lawyer pointing out that we are making a completely fresh start.
Now we often remind ourselves why we do this work. I cannot say there is any rational reason to do this work, except that I love reading and writing, fell in love with this company years ago because it also loves reading and writing, and now want to see what we can build on a solid foundation. I have been CEO here for three years, but have loved Medium itself for 13 years. So for me, no matter how commercially impractical, saving this company feels worthwhile.
08 Appendix
I am just recording some things that are not quite suitable to include in the story, which is already quite long.
To bridge the gap between our decision to conduct a capital restructuring and our actual restructuring, we issued a "Change in Control (CIC)" plan to benefit employees. This is like a contractual equivalent of equity, a fairly rare tool that I am willing to share the documents we used with any entrepreneur who might need such a tool. It was ultimately replaced by the capital restructuring but filled a gap to ensure that employees here could benefit from their work if the restructuring failed.
I completely overlooked the team's psychology. This is an important part of turning things around, as the starting point was a team that had experienced a series of failures and was unclear why the new guy (me) would not just be the next failure. I ultimately relied on the "find your allies" advice from the book "The First 90 Days" and the overall theme that we needed to build confidence in the plan. I seem to have read the last part in an HBR article, but I can never remember which one.
There was also a $12 million loan that was not overdue. This loan was converted into equity as part of the capital restructuring.
Startup valuations sometimes have a lot of vanity. Our highest valuation reached $600 million, and I have no vanity about our current valuation. But I also won't tell you because I don't want it to be used as a basis for comparison with other startups. We are profitable, and they are not. This comparison point is more favorable to us!
