Edwin Dorsey is not your average 25-year-old. He has an ability that few his age — aside from the occasional wunderkind founder/CEO — have ever had: Edwin Dorsey can move markets.
Dorsey, who graduated from Stanford in 2020, runs a newsletter on Substack called The Bear Cave, which boasts more than 47,000 subscribers. Of those, about 1,300 are paid subscribers.
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The newsletter is “focused on corporate misconduct — specifically I write about $1-billion-to-$10-billion, U.S.-listed public companies that I feel are misleading investors or harming customers,” Dorsey says.
Between that revenue and the money he makes from a second, smaller newsletter dubbed “Sunday’s Idea Brunch,” in which he sits down to interview great investors, Dorsey boasts annual recurring revenue, or ARR, of about $500,000 after costs.
And he does it all while getting in 15,000 steps a day and sometimes working as little as four hours per week.
The Start of a Newsletter Empire
Dorsey, as you might imagine, is a bit of a finance wonk. As an economics major at Stanford, he worked ahead to graduate a few months early (in the portentous month of March 2020) and set to work on his brand new Bear Cave newsletter.
And Dorsey, who had interned for a hedge fund all four years of college, didn’t spin up his newsletter to strike it rich.
“I thought, ‘Hey, I need to get a job. One way that I can get noticed is to start this newsletter,'” Dorsey says. “So it was not actually originally started as a moneymaking thing, it was more as a way to keep busy during the pandemic, and hopefully get someone to notice my writing and give me a job.”
He did it, in short, to get noticed by hedge funds.
But that soon changed. Things got off to a good start, and later that year he made a decision. “In September 2020 I started charging for it.”
Subscribers to the free version of The Bear Cave get a weekly summary of news in the world of activist investing and a slew of interesting tweets from across the investing world, while paid subscribers also get two deep-dive investigations per month on public companies Dorsey views as problematic.
When he first made the leap to the paid route, Dorsey made a bold choice, pricing his service at $34 per month or $340 per year. It worked. “Within a month and a half it was doing about $100,000 in annual recurring revenue, and I knew it would be my full-time job,” Dorsey says.
He became one of the fastest authors in Substack history to reach $100,000 in ARR. There’s a reason Dorsey’s newsletter could quickly command such a price, which is more than three times the cheapest non-ad-supported Netflix Inc. (ticker: NFLX) plan: Correctly wagering against overvalued public companies can make you a lot of money on Wall Street, and investors are always looking for ideas.
Dorsey’s own policy, in contrast to many famous short sellers who put out bearish research of their own, is to never wager against the companies he writes up, making money from subscriptions alone.
That said, The Bear Cave’s success as a business is directly tied to Dorsey’s impressive track record of sniffing out losers. Here are just a few of Dorsey’s notable bearish write-ups:
— Since his Dec. 3, 2020 exposé on insurer Root Inc. (ROOT), shares have plunged about 98%.
— Two weeks later, on Dec. 17, the market took notice of The Bear Cave report on blockchain-enabled trade finance platform Triterras Inc. (TRIT). Shares took a 31% one-day beating on heavy volume following his published investigation. In less than 15 months, shares were delisted from the Nasdaq. Triterras is now a penny stock on over-the-counter markets.
— Oct. 7, 2021: The Bear Cave publishes “Problems at The Joint Corp (JYNT).” Shares fall 11.3% that day on elevated volume. From there, it’s down another 80% and change as of early May.
— On Dec. 1, 2022, in one of the more timely calls in The Bear Cave’s brief history, Dorsey devoted his paid newsletter to investigating Silvergate Capital Corp. (SI), the crypto-focused lender that would, months later, be one of the first dominos to fall in the still-evolving regional banking crisis. Less than 100 days after his report, Silvergate announced it would be liquidating its operations.
[Read: 5 of the Top Hedge Funds in 2022]
The Path to $500,000; Newsletter Economics
Yes, on a lax week — one where he’s not doing one of his famed twice-monthly deep-dives on companies he’s sour on — Dorsey can work as little as four hours. And yes, The Bear Cave was able to quickly pick up paid subscribers. But there’s a lot of behind-the-scenes work that had to happen to build the newsletter business Dorsey enjoys today.
“The tough thing was getting it jumpstarted a little in the beginning,” Dorsey admits.
“I used Twitter, but some things I did that put things in my favor were I individually DM’d all 5,000 of my Twitter followers, and that took like three days. And then I also made a list of every single college investment club in the country and I cold emailed all of them, with the logic being that college students will share and talk and forward — that’s how I got a bunch of signups in the beginning. That’s when you needed to really hustle.”
As for how he got the contact information of the college investment clubs: “You make a list of the 200 biggest colleges and you start Googling each college investment club and you cold email the person you see in charge,” Dorsey says.
Even today, Dorsey admits that as a finance nerd, the “line between work and personal gets very blurred … but in a week in which I’m obsessing over something [the work week] could be closer to 100 hours.”
In order to give his subscribers their money’s worth, Dorsey still does the type of grunt work you might expect from a hedge fund employee, filing Freedom of Information Act requests, digesting footnotes in Securities and Exchange Commission documents and parsing statements from management for red flags.
Here’s how the economics of Dorsey’s two newsletters break down:
The Bear Cave has around 1,300 paid readers bringing in about $550,000 in ARR. When the newsletter first started charging, it cost $34 per month or $340 per year. In January 2021, Dorsey raised prices to $44 per month or $440 per year. The average subscriber pays somewhere around $35 per month at the newsletter’s current run rate. (Shortly before this article was published, Dorsey raised prices for the second time ever to $64 per month or $640 per year. “Every time I raise prices I grandfather in existing readers at the lower rate,” Dorsey says.)
Sunday’s Idea Brunch has around 700 paid readers bringing in about $50,000 in ARR.
That’s a gross of around $600,000 between the two newsletters, but then there are some modest costs to doing business that add up: Substack takes a 10% cut; credit card fees and Stripe, the payment platform, eat up around 3.5%; and then refund requests total about 0.5%, according to Dorsey. Those costs add up to about 14%, or $84,000 per year, meaning Dorsey’s current take-home run rate is roughly $516,000, give or take, before taxes.
Recommendations for Others
It’s Dorsey’s rare mix of talent, hard work, passion for the subject matter and self-discipline that’s enabled his success.
But when asked what he’d recommend to other aspiring paid newsletter entrepreneurs, he doesn’t use those terms, instead breaking it down into a sort of formula.
“Find a niche, get very knowledgeable about it, get very excited about it and build a Twitter following in that domain,” Dorsey says.
If you can do that, then start a free newsletter geared toward your passionate followers. “After a few months, if it’s growing well, you can create paid content in that area,” Dorsey says.
What’s Next?
Dorsey started The Bear Cave in an effort to get on Wall Street’s radar. That strategy has worked; many of the hedge funders he might’ve worked alongside are now Bear Cave subscribers. But he no longer aspires to work for a hedge fund.
“My goals tend to be rather personal,” he says. He’s mainly focused on doing good work, getting in great shape and having fun. “I spend three hours every day walking in New York City. I try to get 15,000 steps a day walking outside if it’s sunny out,” Dorsey says.
“If I had a financial target, I’d like to get to $1 million in ARR by the end of the year … I think I can do it, it’s growing fast.”
So, beyond financial milestones, what’s next for Dorsey professionally? He’s done well on Substack, but he’d like to try his hand at another digital media platform as well.
“If anything, I want to get into YouTube,” Dorsey says. “The goal is to keep killing it with the newsletters, and then eventually invest in making YouTube content focused on exposing corporate misconduct.”
Corporate wrongdoers, take note. Dorsey is watching — and he’s got quite a following.
[READ: The Top 10 Largest Private Equity Firms in the World.]
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How This 25-Year-Old Makes $500k a Year With His Newsletter Business originally appeared on usnews.com
