Every time I hear of another founder passing on a multi-billion dollar offer, I think back to Tom from MySpace and how he sold MySpace off for a lot of money and went on to live happily ever after. Smartest guy in the social media game.
Wait till you hear about Jan Koum, who took over $10 billion from selling WhatsApp to Facebook and has become a prominent collector of mansions, superyachts, and rare Porsches [3].
Whatsapps whole schtick from the beginning was something "you pay us $1 pr year and we provide you a top tier messaging service without ads and without analyzing you data or your social graph or anything".
I was enthusiastic about it, and possibly even more enthusiastic about it as I finally got my first invoice (yes, they didn't start billing right away, but they were very open about their plans, unlike Telegram who always just said something like "it isn't that expensive anyway, someone is shouldering it and we have a plan").
It had a nominal $1 per year fee, but in most of the world (like here in India, where it's now practically a utility), they never charged anything because even a trivial sum like that would have caused a ton of friction. That's why it became so popular.
This is a viral "feelgood" story that keeps circulating but MySpace was a project within an existing company, eUniverse, later InterMix. Tom and Chris DeWolfe were employees of InterMix, not founders. Intermix was acquired by News Corp. for $580M. Not sure how much equity Tom ended up with. It certainly could have been enough to allow for a "normal" early retirement but I'm not even sure about that. I had some dealings with Brad Greenspan, the CEO of Intermix, after the MySpace sale. Presumably he had far more equity than Tom or Chris, and let's just say that he did not behave like someone who was financially secure.
According to a complaint about the sell price made by Greenspan at the time [1], he owned about 10% of Intermix. If he’s not financially secure, I think that speaks mostly about his actions after the sale.
Hard to believe that Twitter was willing to offer $4B for a service they managed to recreate themselves for (presumably) a tiny fraction of that cost. Makes you wonder if all the AI panic right now is going to end up going the same way.
They weren't buying the technology, they were buying the community + creators on the platform.
This has nothing to do with AI at all. Clubhouse was a kinda cool social network that came out at exactly the right time during COVID. AI is something we've been working towards since the 50s, and over the next few years will change absolutely everything.
Twitter already had a large community and set of creators while Clubhouse really didn't. Moreover, most of the Clubhouse users already had Twitter accounts and just switched their audio conversations to Twitter Spaces once that product became available.
I think at this point it's obvious that Clubhouse was not worth $4B (10% of Twitter's final sale price!), so no point in arguing about that. The interesting question is: what combination of bad judgement and groupthink made anyone think it was in the first place.
In a world of fast and loose cash, people find justifications for spending fast and loose. I don't think it requires too much more than that. Crypto firms running on good will and hype managed to get billions of $ (in crypo-bucks) to dump their money, much of which is completely gone. You could argue overvalued, but in the world of pets.com, this is far from the worst example of outsized speculation.
The invite-only launch was a selling point. "It's a exclusive service, but if you score an invite, you might have a casual chat with a bunch of billionaires and SV bigwigs."
This may be surprising to people in Palo Alto but 99.9% of regular working people have nothing to say to billionaires and SV influencers, outside of maybe some profanities. There's no way a product with that as the premise would have had a future outside of its ivory tower niche.
Despite it's origins, ivory tower means, in the sense of being out of touch with common people, academia. It does not mean being out of touch because rich or nobility.
Clubhouse is literally just software that artificially limited things to be popular by:
1. Limited users
2. Limited to iPhones.
3. Having no history or recording of conversations.
I saw the $100 million series B for Pinecone and thought something similar, since vector databases are becoming more easily commodified, with Postgres already getting pgvector and pgANN.
It would have converted to approximately 3.3 billion USD when Elon bought Twitter. However, even if twitter wasn't purchased and no one sold while it sunk to $17/share (which is about the average of estimates people were making when Elon finalized buying it), it still would be over a billion dollars as an exit. Do you think Clubhouse is a unicorn now?
At that time, I don't think so. It was an incredibly small team back then, and the CEO of Twitter at the time was Jack. It likely would have remained (somewhat) independent, at least in the short term, similar to Vine and Instagram. And given equity, I assume almost all employees would have become millionaires.
There was no chance that Twitter (who already had periscope) would accept a $4B+ deal to buy Clubhouse.
In fact, it was very predictable as I said here before the acquisition talks that Twitter would push on with using Spaces instead of buying Clubhouse. [0]
The hard truth was that Clubhouse launched too slowly and even Twitter Spaces launched faster than Clubhouse to release their Android app. [1]
The invite system, slow release of the Android app caused them to lose steam to Twitter and Discord during the social audio race of 2021 at the time. [2]
Everyone (who wants to make money from their app)? I own an Android and I'd still launch an iOS app first because the vast majority of mobile revenue comes from iOS, not Android. At the very most I'd use Flutter to launch on both platforms at once but I'd still prioritize the iOS side.
If you use a cross platform framework, sure, but if you only have resources for one platform (or where cross platform is not suitable for whatever reason), I'd pick launching on iOS first any day of the week.
counterpoint: you can outsource android i.e. pay a high quality dev shop to clone your iOS app and adapt it nicely for Android. I've done this several times, to great effect.
They are plenty important, but they're not rich. iPhones are not the majority of the market by any stretch, but they do form a majority of the phones well-off people use.
I know you and your coder friends use Android despite having plenty of money, but the general public sees Androids as the budget option.
I liked the way this was written. No BS, just straight up, "We need to reset". It's refreshing to hear.
I stopped using Clubhouse after being an early user for a couple of months. Some conversations were good, but most weren't quality conversations and over time I stopped paying attention to the app. I think the final blow was Twitter spaces which I don't pay attention to either.
The crypto/nft bros and wannabe influencers killed it for me. It’s sort of tolerable when you can scroll away this crap in half a second not so much when you’re forced to listen to them interject a conversation with their nonsense
Layoffs always suck, but one thing that's encouraging to see is that every single tech company is offering a lot of support and very generous severance packages to affected employees, wayyy beyond what is required by law. In other industries in most states the norm is to be escorted out of the building with your last paycheck, that's it.
It's good to see tech companies offering generous support to laid-off employees, but veterans of past downturns warn that this generosity may only last during the initial wave of layoffs.
wouldn't suppose you could tell me what it's for? I see someone saying that Twitter recreated it.. but that doesn't mean anything to me.. their website is so arrogant as to basically only offer a link to download the app.. because I should just.. "know" what they do?
Which was always an amazing take, since Facebook works by giving you a few minutes to catch up on friends/groups while you're sitting on the toilet or waiting for a bus. It doesn't require you to be in a quiet place and more or less concentrating for an hour in order to get anything out of it.
It's essentially a conference call app. You create a room or space or whatever and you can participate or listen in on audio. Some have called it live podcasting. But it's a conference call in the most basic sense. Twitter copied it with Spaces, which feels like a more natural fit. The reason Clubhouse is so popular, or was so popular is that a16z funded it at the peak of zero interest rates. Clubhouse is a ZIP and will likely either get acquired or go out of business as it seems many have stopped using it.
Yup. I expected this to be a “we’re shutting down, thanks for all the fish” type message. And it sounds like if not for the astronomical raises they did in the good times that’s what it would be. They’ve been hemorrhaging users since Dec 2020.
Glad this isn't corporate mumbo jumbo but a real assessment of where they're at. Its impossible to make the changes that clubhouse needs to make, and iterate at the speed they need to iterate at with a large team, and the founders don't hide the ball. I don't use the product, and I don't think its going anywhere, but I appreciate the candor from the founding team.
Very generous severance. The writing was on the wall and if I am an investor this is the right call to make. The company needs to pivot, you need a lean focused team to have a chance at surviving the pivot.
Probably the expensive lesson learned here is don't bet your company on short-term trends (like COVID lock downs) that can be disrupted by a twitter hackathon.
One minor nit: don't use phrases like "people who are departing" in letters like this it just feels off. If you want to act like you're owning it then you need to own it.
> "we work hard to support the people who are departing"
Anyways wish those who are being axed the best of luck (it's a tough market right now) and hope the company is able to realign on a trajectory for success.
hindsight is 20/20. you shouldn't necessarily be deterred by building something that a large company can also build. there have been plenty of examples that contradict this point.
BUT there's nuance here. i think in this case, the venn diagram of the userbase at Twitter & the users on clubhouse is basically a circle: the type that love to ingest information, stay on top of bleeding edge trends, be on top of what "thought leaders" have to say, information influencers, brand builders, etc. This demographic of people that would immediately get a lot of use out of a clubhouse clone built directly into Twitter. Clubhouse messed up royally here by not selling
Fair but any reasonable business leader will assess the risks and at least have a plan to get around them, and who knows they may be working towards that and hence the layoffs.
It seems they tried to go after the golden goose (build a platform) but instead existing platforms basically ate their lunch. That coupled with the changing social dynamics from reopening were too strong headwinds to weather with their current business model.
What this means is they are basically back to square one, and need to build a new product and pray they get to PMF. If they are lucky they will have some reusable components.
It will be interesting to see what happens to them and what they choose to go after in the next stage of their journey.
Salary through the end of August is a pretty nice severance. Still unfortunate for those laid off, but this might be the most generous package I've seen so far.
Saw this coming. Clubhouse was exciting at first when it was a place where you could pop in on random celebrity conversations, but now is mostly a place for bad bad business advice, bad relationship advice, and clout chasers trying to get rich quick
I still resent them for forcing the project management app called Clubhouse to get a rebrand [0]. Well, maybe not forced them, but a result of the dynamics during the zero interest rate era.
Yeah I was going to comment on this. It's an unfortunate situation because I'll forever know the product as Clubhouse, but now they changed their name.
Is it unusually nice that such an early start-up is giving 4 months, acceleration, and more? Yea! A lot of A- and B-stage layoffs have paid far less.
But with so much funding, it’s very very hard to see this move as anything other than massive C-level incompetence. Good job trying to make it look like accountability though.
Some times you hit the puck so hard the hockey stick cracks. Not sure it’s fair to call it incompetence but they’re being decent in the acknowledgment of it.
You’re thinking of being too early to the market, which is exactly what didn’t happen.
Clubhouse’s case is much closer to the explosive growth that physical country clubs and golf courses saw in late 2020 and 2021. It’s a niche product that caught serious waves. I guess some VCs like to compare high ROI with athletic excellence but hockey is actually nothing like surfing.
IMO the real problem with Clubhouse was it was for the intelligentsia and their hangers-on. That's not a profitable market.
Advertising dollars chase the masses, and what the masses want is, well, celebrities, the good looking, the attractive, and the funny. The public is chasing dopamine hits, and advertisers chase the public.
Yea it’s not clear how you collect money on the product aside from charging a subscription fee. Random ad interludes don’t work that well in a live setting, and most people aren’t looking at the app for most of the time they’re using to make visual ads work.
Layoff ops are pretty standardized so I would be surprised if there wasn’t a template that has been commonly agreed upon to be as neutral in tone as possible
There was a period in late 2020 where I was convinced Clubhouse would leapfrog Twitter as the place where valuable industry-facing conversation and information would be housed.
It's audio. That means it's very slow to consume and requires much of your attention. That is never going to get the same sort of usage numbers as something you can flit in and out of like Twitter or Instagram.
It's a shame, the idea is good, just not defensible against copy cats.
I think they missed an opportunity to pivot into voice chat for websites/apps as a service. I see big value in how Discord does ambient voice chat as a feature of a server, and I think that could translate well into smaller communities that live outside Discord in websites/apps. Provide the service in an easy to use slick API/SDK, and handle all the heavy lifting of voice data/p2p etc.
That's kinda the point of VC maths though. If you throw 100 darts and get 1 hit that grows by 1000x, you're up 10x which is a nice return.
I agree that a16z has a lot of hubris, and their more recent investments seem to be going off the rails a bit (entirely personal opinion), but I don't think they would argue at all over the idea that most of their investments _won't work_.
> If you throw 100 darts and get 1 hit that grows by 1000x, you're up 10x which is a nice return
This math breaks down when you’re unilaterally pushing up valuations and writing massive cheques. That your concentration and downside. It’s why Andreessen lags its peers on returns. If you’re a founder, take their cash (obviously), but understand you’re closing doors (so take a lot of it).
The point is to be good at throwing darts and knowing what to throw darts at. One in 100 random companies doesn't become a unicorn. The whole point of being good at investing is to be able to create a positive feedback loop that allows you to both continue throwing darts (well) and pay yourself handsomely. Not to spray darts at fads and hoping you're barking up the right tree.
This kind of math can be pretty damaging because for every failure, the VC needs the one hit to be bigger and bigger. And with investments like Airbnb that are only "disruptive" due to breaking the law, A16z is incentivized to leverage lobbyists and other tools to simply change the laws to favour their pet investments.
Suppose that's about as well as such a note can be done, with exception of not guaranteeing against future layoff(s), only alluding to it ("strength").
I think every company acknowledges that there's next to zero value in the hardware itself. Large companies have policies to collect them due to data/IP protection policies. Smaller ones probably don't care as much.
If their employees all have macbooks that can be wiped remotely then yeah that isn't uncommon at this stage. My company allowed laid off folks to keep their laptops after the wipe. Probably just avoids a logistical headache getting the machines back from remote employees.
Big time logistical headache. Not only the cost of shipping itself, but then also reimbursing all of the employees for that expense. Then receiving hundreds of units and then having to check them. What are you going to do with these machines? Now spend time to sell them? Store them? By the time you're ramping up hiring, the machines are outdated. Then you need to pay IT to clean them up and refurbish them. And your new employees don't get the dopamine hit from opening a new MacBook and latest hardware.
No. Most companies don't want you keeping a machine filled with proprietary information and credentials, even if your access gets rolled after you're terminated. But if the company is about to hard pivot and they're laying off half of the people who know proprietary information, I suppose it doesn't make much sense to care much.
Back in the day, NetApp did something similar. It's sad it's not more common, it really helps folks apply for jobs if they don't have a pile of laptops at home.
Though, as the price of computers have come down, it's less common for folks to not have a computer at home - it's still a wonderful gesture that's very low cost.
For a brief moment, it looked like they were bringing in a new demographic that wasn't active on twitter. So I could've seen a moat there. Agreed on pure tech - never saw it a pure moat in itself.
There is no reason or justification as to why Clubhouse was valued at $4B. A failure pump and dump scheme with a16z left holding this heavy bag. Still not making any money and burning through cash.
I'd give them at least 5 years [0] to run out of money without funding and a maximum of 10 years of existence that they will either be shutdown or acquired.
https://techcrunch.com/2021/04/07/twitter-said-to-have-held-...
The hard truth is software can't be patented and Twitter could copy the concept verbatim without paying them a penny.