From losing $2.6 million a month to achieving profitability, how did Medium “cut off its arm to survive”?

Reposted original headline: “CEO Retrospective: From $2.6 Million in Monthly Losses to Profitability—How Medium Battled Back from the Brink”

Substack’s prominence often overshadows the fact that Medium is still very much alive.

Medium has, in truth, struggled over recent years—though few outside the company understand just how difficult things became.

The company underwent numerous funding rounds, yet investors ultimately lost interest. Medium came dangerously close to bankruptcy and liquidation. However, through a series of bold, survival-driven actions led by its new CEO, the company returned to profitability last year.

This retrospective explores how Medium survived a dual crisis of quality and debt, charting its journey back to sustainable profitability.

CEO Tony Stubblebine describes this journey as “falling into a hole, then clawing your way out.” In this case study, Stubblebine hopes to offer an insider’s perspective on what it’s like when a startup is in crisis—and, critically, how the company fought to recover across finance, brand, product, and community levels.

For entrepreneurs, this article reads as actionable, real-world guidance. The foremost lesson Medium’s experience offers is that cash flow and profitability are any company’s true foundation. Profitability equals independence—making a company less reliant on outside capital and giving it leverage to say “no” to investors, landlords, and suppliers. That’s ultimately how Medium survived: by generating real revenue.

The full article follows.

Original source: https://medium.com/the-coach-life/fell-in-a-hole-got-out-381356ec8d7f

I set out to write an account of how Medium returned to profitability—a story that’s a bit unconventional. Honestly, I’m not sure a company should ever be this candid about its struggles. But transparency is core to Medium: if you experience something meaningful, you ought to share it.

So my aim is to provide an insider’s view—what it’s like when a startup is in real trouble, and how we fought to reverse course across all fronts: financial, brand, product, and community.

At the end, I’ll also include a thorough recap of our investor restructuring. I want to make one thing clear to the Medium community: the “cleanup work” is behind us. Today, we’re fully focused on providing readers and writers with the best possible experience.

01 Introduction

Into the Hole—Then Out Again

In 2022, Medium was bleeding $2.6 million every month. Paid subscribers kept churning, so these enormous losses weren’t even investments in future growth. Internally, we felt embarrassed by the content we promoted as success stories. Our users were even less forgiving, bluntly labeling the platform as “full of get-rich-quick garbage”—and worse.

Then, the venture capital market dried up. There wasn’t any more investor capital to plug our dwindling bank account (not that our situation warranted anyone’s investment). No acquirer wanted a complicated, shrinking, high-cost operation. This forced a stark choice: Medium had to become profitable, or it would close its doors.

There were deeper problems still—but, fortunately, a committed core still wanted to see Medium succeed. This story played out much like Kurt Vonnegut’s famous “Man in Hole” plotline: we enjoyed success, fell into a deep pit, and ultimately fought our way out.

02 The Glory Days

Minimalist Design and a Novel Business Model

Medium’s “good times” are rooted in the work of former CEO Ev Williams, who previously founded both Blogger and Twitter. Today, he’s chairman and major shareholder—and still frequently messages me, the current CEO.

Ev shaped two distinct eras. The first was a “design era”: the team reimagined what a writing platform could be, striving for a user experience that was both elegant and simple. The second was the launch of an entirely new business model. He discarded the toxic incentives of advertising for a unique bundled subscription, enabling all creators to share in the platform’s success.

But this business model turned out to be the company’s central challenge. Running it well required delivering on our “better internet” vision, serving readers and writers, sustaining a healthy business, and fending off opportunists, spam, and trolls. It was an extraordinarily tough balancing act.

03 Medium’s Content Quality Crisis

In July 2022, I assumed the CEO role with two urgent mandates: fix content quality and overhaul the financials. As noted, cash was running out, but the real concern was the shaky quality of the content we were actively promoting.

By the time I took over, we’d cycled through failed approaches to content quality—much like the “Goldilocks” story: first, we tried overly expensive strategies (they failed); then, seemingly cheap (but actually costly) moves (those failed too). We were desperate to find the “just right” balance.

Note: The “Goldilocks” story stems from a classic British fairy tale, “Goldilocks and the Three Bears,” used here to illustrate that every system has an optimal, balanced point—avoiding both extreme pitfalls.

To be fair, Medium has had recognizable peaks in content quality. The first was from 2012 to 2017, before we offered subscriptions—when Medium was a pure and vibrant space for thoughtful writing. The second was 2017–2021, when we hired a team of seasoned media executives and editors to produce thousands of high-quality articles.

The end of the editorial era was driven by both budget and mission. As an active user and publisher, I felt the mission element most acutely. Strategically, paying experts for great content to attract subscribers seemed logical. But as part of the community, it was clear these “pros” were crowding out the grassroots—who actually form the platform’s backbone and are most likely to share unique, commercially valuable experiences. Medium is at its best when it empowers people who don’t aspire to be professional creators, but who have valuable, hard-won lessons to offer. The internet can’t belong only to media professionals, influencers, opportunists, and content creators. There must be a place that understands the value of user-generated content (UGC), specialized insights, and personal narratives from people living interesting lives.

As CEO, I also saw the steep financial costs of the “editorial era.” That high-powered team delivered 760,000+ paid members—but at a huge financial loss. A core part of my mandate was plugging the hole left by that period.

After the editorial team, we endured an 18-month quality slump. As investor Bryce Roberts quipped, “If your product is giving away cash, you’ll always find ‘product-market fit.’”

We were giving money away, naively assuming it would incentivize loyal users. In reality, it attracted a wave of opportunistic new writers.

By mid-2022, reader complaints were rampant: Medium was flooded with endless “get rich quick” schemes. Founder Ev lamented that the platform was overrun with clickbait and lazy recaps of others’ work. The “viral playbook” of the time: steal a Wikipedia entry, attach a clickbait title, rewrite it in dramatic “broetry,” and cash in—sometimes to the tune of $20,000 per piece.

I fully agreed with Ev: Medium’s defining feature should be its mission. We strive to “deepen understanding.” Too much paid, commissioned content lacked substance and veered away from our mission. It forced reflection: what are we here for?

To address this, we introduced the Boost mechanism—adding human curation and expert judgment to recommendations. We refined the Partner Program incentive structure, rewarding thoughtful, deeply considered work. We also added a Featuring tool, allowing publications to promote pieces they stand behind—on the principle that readers should have the final say in choosing whom to trust.

No one could call this an easy process—nor are these systems now flawless. But the best articles on Medium today are a world apart from those of the past. That’s why, last year, we could confidently declare we were building a better internet—one valuing deep thinking and authentic connection, not misinformation and divisiveness. No one accused us of grandstanding; that was a sign of real progress.

04 Chaotic Internal Governance

External Capital Loses Confidence

At our lowest point, two groups were tied to Medium’s fate: investors and employees (not to mention readers, writers, and editors).

Investors had long since lost faith. They had no interest in backing a turnaround—which is par for the course. They know some bets will be written off, and when that happens, they move on. We were just one more failed investment.

Yet our team, against all odds, still wanted to reverse Medium’s decline. That drive was the product of Medium’s underlying spirit, motivating every employee during the darkest days. And the situation was even more severe than I’ve outlined here.

Medium’s future depended on relentless effort from this team (and any new hires)—yet decision-making and value distribution remained skewed toward absentee investors.

We owed $37 million in overdue loans. In accounting terms, we were bankrupt.

On top of that, investors held $225 million in liquidation preferences. That’s a standard startup term: on liquidation, investors get made whole before employees see a dime. In good times, no one worries about it.

But when times got tough and the company’s assets were less than its liabilities, the result was that years of employee effort would be wiped out and all value shifted to disengaged investors. That prospect was devastating for morale.

In short, debt and liquidation preferences were the two huge burdens representing the real cost of falling into the abyss. And there was more—I need to be fully transparent about the scale of the situation.

Taking on so much outside investment left us with an extraordinarily tangled governance structure. You’d expect the CEO to be in charge, but in practice, I needed approval from investors—spanning five separate “batches” of capital (all of whom had checked out). Venture funds typically sell off assets to secondaries after several years, so the right to control the company could be transferred from uninterested but predictable backers to unknown, unpredictable ones at any time.

Making things messier, Medium also owned and operated three additional companies under its umbrella.

This was rock bottom. The best advice I received: “Don’t play the hero.” That came from an investor, who observed that founders are often overconfident about solving any problem. But in this scenario, talent acquisition and major decisions would always be blocked by needing investor approval. Even flawless execution could be torpedoed by a single investor at any moment.

05 The Only Way Out of the “Hole”:

Profitability and Capital Restructuring

We didn’t run out of cash, weren’t sold to private equity, and didn’t file for bankruptcy. Instead, as of August 2024, Medium turned profitable.

We successfully renegotiated debt, eliminated liquidation preferences, consolidated governance to a single investor cohort, sold two acquired companies, and closed a third.

Looking back, this was an enormous accomplishment. Because of the ongoing content quality challenges, simply slashing budgets wasn’t enough: focusing only on cost cuts might achieve profitability, but would rely on selling content that embarrassed us—a commercial win, but a mission failure.

So, we needed a strong enough team to innovate on quality (see above), but also had to make decisive cuts, find growth paths, and renegotiate with investors.

The team was outstanding. I think I did well, too. Before Medium, I spent 15 years as founder/CEO of small companies, priding myself on always reaching profitability from scratch. That’s what I consider true entrepreneurship.

But I did bring two “superpowers”: first, my hands-on experience running small companies gave me a deep understanding of every function. Second, I might be the most engaged Medium power user in social media—I’ve used the platform in virtually every possible role: writer, influencer, business builder, newsletter creator, and founder of three of its largest publications. My work accounts for nearly 2% of all Medium pageviews.

06 Achieving Profitability

Growing Members, Lowering Costs, Streamlining the Team

Restructuring investors required perfect timing: the company needed to be promising enough to save—but not so successful that investors had other options.

So, alongside improving content quality, we first focused on patching the finances. It’s basic financial discipline: we were burning cash, with a shrinking bank balance, and headed for insolvency.

The gap we filled stretched from $2.6 million in monthly losses in July 2022 to $7,000 in monthly profit by August 2024. We’ve been in the black ever since. Some profits are held as reserves, but the rest is reinvested in Medium itself.

This turnaround had three main pillars (not strict accounting categories): growing membership, cutting costs, and streamlining the team.

• Growing membership. Our proudest accomplishment. When I came on board, subscriptions were shrinking—readers were voting with their feet because of poor content. Today, things are different. By restoring quality standards, we’ve shown that people will pay for thoughtful content—a meaningful vote for a better internet.
• Cutting costs. Another point of pride. Most savings came from cloud infrastructure, dropping from $1.5 million to $900,000 a month, thanks to engineering innovation and strong cost discipline. Internally, we had a “ladder” mantra: each rung meant saving or making $10,000. Whether the money came from growth or savings, we celebrated both.
• Team streamlining. A tough but necessary topic. Medium had 250 employees at its peak, now 77. I wasn’t involved in every layoff, but led one round myself. Two thoughts: (1) No leader here ever took layoffs lightly. (2) In a struggling business, layoffs are sometimes brutally necessary. Medium is healthy with 77 employees, but would have failed with 250.

In managing costs, we learned a hard lesson with office leases: contracts often outlast your runway. Sometimes, you have no choice but to sign up for space you can’t actually afford long-term. Normally, you could sublet unused space if you couldn’t pay the rent.

We were paying $145,000 per month for a San Francisco office with 120 desks we didn’t need. Like many during COVID, we went remote, and later, our employees were distributed across the U.S. The office became obsolete.

Unfortunately, everyone else was in the same situation, so the sublease market vanished. Our landlord took a hard line—likely under pressure to report better building occupancy to their own investors, counting our empty but paid-for floor as “in use.” In a seven-story, 800-desk building, maybe 20 people showed up on any day—and none of them worked for us. We tried everything to get out of the lease, including offering to buy it out early, just to recover expenses for cleaning and building fees. The landlord refused, possibly because they needed our headcount for their own debt negotiations. Only after their own deal was done did they let us pay a termination fee and walk away.

07 Capital Restructuring—No Matter How Hard

This section covers negotiations with investors.

To be honest, I didn’t have a background in this, but I genuinely enjoyed tackling the challenge. Medium attracts the curious—I’m one of them. This was a business situation most people only encounter in case studies.

Ironically, the frozen VC market helped us. We had just two choices: close shop or achieve profitability. In a stronger market, our lenders might have forced a sale. But in a buyers’ market, the Medium team had the upper hand: if you want us to keep working, you have to make it worth our while—otherwise, we all walk, and investors lose everything.

This type of negotiation is known as a “recap,” a restructuring of the company’s cap table. At first, I resisted, since it went against my business instincts—you take someone’s money, you’re responsible for returning it. But I ultimately had to change my mindset. Every founder may face this: sometimes, unless you clean up your cap table, you have no company left to save.

The day before I started, VC friend Ross Fubini met with me. He was excited about my turnaround plan, but immediately brought up the idea of a recap. I swore I’d never impose that on shareholders. But he was blunt: unless I renegotiated, all my effort would be wasted. A year later, I realized he was right.

So, the question became “how?” Usually, a recap is driven by a “white knight” investor—the company faces a “death threat,” and legacy shareholders must accept new terms or watch it fail.

But we had no new investor prospects. VC markets had frozen, and frankly, we didn’t have the scale for “VC-grade” growth.

So I learned about two other “death threat” mechanisms. First, from a Medium post called “Clean Up Your Own Shite First” by investor Mark Suster: new investors don’t want to play bad cop; instead, they want management to handle the dirty work, up to and including threatening mass resignations.

(As a side note, this perfectly illustrates the commercial value of amateur writing. That single UGC post generated millions in value. Every current paid Medium author owes some of their income to Mark’s article. All hail UGC!)

Frankly, using a mass resignation threat was outside my comfort zone and experience. This wasn’t just a theoretical recap—this was a real standoff over more than $200 million in investment. Still, the logic was undeniable: without a recap, Medium would fail and all our work would be for nothing.

So I started down that path, arguing that a recap was essential for any future employee incentives—only to realize that $37 million in loans were also coming due, held by multiple investors. That was an even bigger existential threat.

My approach: I told lenders to convert their debt to equity or see the management team walk—then used recap terms to secure enough equity for them and other investors.

In essence, recap means two things: investors give up their special rights—like liquidation preferences and governance controls—and accept major dilution. If they owned 10% before, maybe they own 1% after. Recaps are sometimes called “cram down rounds” because old shareholders get squeezed to make room for new stakeholders and future teams.

In structure, our recap was packaged as a new financing round. But after so many funding rounds—Series XX, Series Z—our lawyers dubbed this the “A prime round,” as a new beginning.

As a partial safeguard for fairness, prior investors had the right to participate in the new round. Despite the tough terms, participation could in theory prevent being wiped out. In our case, only 6 out of 113 investors participated. That low turnout was clear evidence that we weren’t exploiting the terms for personal gain.

Beyond the terms, the recap process involved a huge amount of relationship management—with investors, former staff, and the current team.

The investors were, in fact, easy to deal with. Here’s something that’s true of top-tier VCs (and we had some of the best): they’re reliable because they’re hunting for “home runs,” not pennies. They avoid ugly disputes that could hurt their reputation with founders. I never expected to become a VC cheerleader, but after this, I have nothing but praise for XYZ’s Ross, Upfront’s Mark, Greylock, Spark, and a16z.

The big takeaway: the market “zeros out” legacy companies. That happened to former Medium employees. I’m friends with many, having worked out of every Medium office. Their equity was heavily diluted, too. I personally called some to tell them their shares were likely worthless—while recap might give them a little upside; the only way to get meaningful value was to come back to work here. If you’ve ever felt “my startup shares are worthless,” this is a textbook example of why. Former staff had no ability to stop it—my calls were just a matter of professional duty.

Current employees were next. Some owned shares dating back to the company’s inception, all of which were heavily diluted. This troubled me, but recap logic prevailed. To make recap fair, you must clear the decks so future employee incentives are meaningful. Past work got diluted; only future contributions were rewarded. We issued new, vesting equity—no “swapping” for old shares, myself included. I used the phrase “likely worthless” when explaining their old grants: high exercise costs, buried under massive liquidation preferences, and attached to an insolvent company. Of course, actual value can only be determined by a real buyer, but post-recap, liquidation preferences are lower than current annual revenue, so employee equity now has some real chance of value.

This was the moment we dug ourselves out. We now have clean financials, profits, a product we’re proud of, and a simplified company structure. I increasingly appreciate our lawyers’ observation that this is a true new start.

We remind ourselves frequently why we keep doing this work. I can’t say there’s any rational business incentive—other than a deep love of reading and writing. I fell for this company years ago because it shares that love, and I want to see what we can build on a solid foundation. I’ve been CEO for three years but loved Medium for 13. No matter how irrational it seems, saving this company feels absolutely worthwhile.

08 Appendix

A few points that didn’t fit into the main story—this piece is long enough already.

• To bridge the gap between deciding on recap and actually completing it, we introduced a Change in Control (CIC) plan for employees. It’s akin to a contract substitute for equity—a rare tool, but I’m happy to share our templates with any founders who could use them. The plan was later replaced by the recap but filled a vital gap to ensure team members would benefit if recap fell through.
• I completely overlooked the team’s morale. That was a key part of our turnaround—since the staff had endured a series of failures and had no reason to believe the next CEO wouldn’t fail too. Ultimately, I relied on the “find your allies” principle from the book The First 90 Days and a broader takeaway about building trust in our plan—a lesson I think I read about in Harvard Business Review, though I can’t recall the article.
• We had a $12 million outstanding loan that hadn’t defaulted; it was converted to equity during the recap.
• Startup valuations are often an exercise in vanity. Our peak was $600 million. I have no ego about today’s valuation—but I won’t disclose it, since I don’t want it used to benchmark us against peers. We’re profitable—they aren’t. That’s the only comparison that matters.

Disclaimer:

1. This article is reprinted from [Founder Park], originally titled “CEO Retrospective: From $2.6 Million in Monthly Losses to Profitability—How Medium Battled Back from the Brink.” Copyright remains with the original author [ Founder Park ]. If you have concerns regarding this republication, please contact the Gate Learn team and we will address it promptly.
2. Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute investment advice.
3. Other language versions of this article are translated by the Gate Learn team. Do not reproduce, distribute, or plagiarize this translated article without referencing Gate.