A messaging app startup that raised $200M shuts down afters users were 95% fake

[valianteffort]

Are softbank actually the biggest idiots in VC? It almost seems like everything they invest in is a handshake deal built on "just trust me bro" numbers.

[CharlieDigital]

I have brought this up in another comment, but my experience in the VC world is that it operates too heavily based on 4 types of "trust":

    1) Institutional trust (Stanford, Harvard, MIT, "ex-FAANG", "ex-McKinsey", etc.), 
    2) Social trust (someone you know that has already established one of the three other kinds of trust), 
    3) Serial trust ("3-exits", "former CEO/CTO/VP of..."), and 
    4) Transitive trust ("Sequoia invested in X; I trust Sequoia; therefore, I should invest in X")

In many cases, this trust makes perfect sense. But it seems that in more than a handful of high profile cases, these types of investments based on trust has superseded basic due diligence, skepticism, and common sense.

[dbish]

Having recently completed fundraising for a pre-seed, it's wild to me that I had VCs spending multiple weeks sometimes on "due diligence" for an idea-stage product, yet there are many examples of just yolo huge investments. It's who you know or what hype is around you in these cases I suppose.

[roseway4]

Softbank had a strategy of deploying a lot of capital very quickly. That is, taking many more bets than traditional “high conviction” VCs. High transaction costs (including time to close) as a consequence of deep diligence would have broken this model.

It doesn’t look like this strategy worked out well for them.

[ProllyInfamous]

LOL I personally know an asshat VP at SoftBank — "just trust me bruh" !

In early 2017, while being ousted from another banking system, he advised me to invest in a Retail Mall Holdings company, instead of Bitcoin (because the latter is "idiotic").

I did NOT take his advice. See CBL's returns verse BTC's.

[xiphias2]

Not really...the real idiots are Saudis for giving SoftBank more money to play with. Still, so far it doesn't look like oil revenues are going down.

[motoxpro]

Not just SoftBank. Founders Fund too.

[rasz]

someone sure is

>Masayoshi Son. He had for many years the distinction of being the person who had lost the most money in history (more than $59bn[38] during the dot com crash of 2000 alone, when his SoftBank shares plummeted),[39] a feat surpassed by Elon Musk[40][41][42] in the following decades.

[jarym]

> “Oh, man, the number of times I’ve been asked why my company isn’t growing as fast as X and then found out X was a fraud all along.”

This, in sports, finance, startups - everywhere. Dirty players skew the dynamics of any system leading to worse outcomes for those that choose to remain honest.

We need the supposed ‘smartest guys in the room’ to be less dumb and do due diligence and we need strong consequences for founders that misstate their company’s position.

[myth2018]

> We need the supposed ‘smartest guys in the room’ to be less dumb

Indeed. Many don't quite understand technology, and investors are no exception.

There are smart ones, but those not necessarily make good investments -- they may simply look for good future exits and leave the bomb on the laps of the next suckers.

[cyanydeez]

Welcome to wealth inequality consequences #356433

[mejutoco]

Reddit famously started with a lot of fake users. I think the founders mentioned it in an interview. Even the Swedish guy from the show Succession was inflating his numbers. And those attributed clicks from Facebook (especially fb) and Google, better not to look too close.

[han-tyumi]

Reddit is a little different as their intention was to populate the platform with content in the early days [1], not to mislead investors with fake metrics.

Mind you that Huffman and Ohanian did this manually, while founders today can use LLMs to fill their platforms with bots that can interact "naturally" with users. I wonder how many are already doing it.

[1] https://www.youtube.com/watch?v=zmeDzx4SUME

[pests]

Thanks for the spoiler. :(

[beezlewax]

Happens in the show Silicon Valley too.

[sharadov]

I interviewed there a couple years back and a lot of things seemed really fishy. They did not give answers to a lot of my questions. So my spidey sense was right!

[costanzaDynasty]

Everyone on and around social media wants new and better forms of social media.

I think the average person thinks social media is the drizzling shits but if they have to use it, they'll just stick to the large platforms.

[thephyber]

I think some users certainly act as you describe, but I suspect the majority of users will follow the early adopters after they identify and popularize a better mousetrap.

The history of social media platforms suggests to me that users are fickle and have no strong connection to any platform. Friendster, MySpace, Facebook each had their moment and then most users either left the platform or spend more time on other platforms.

We are in an interesting phase where lots of different new platforms are experimenting with differentiation strategies. There is a whole ecosystem of “political right” social media (Truth Social, Gab, Parlor, Rumbl, etc). The federated social media platforms are selling the “you won’t lose access to everything due to moderation/banning” niche. I’m sure there are Web3 (the blockchain one) social media platforms, but I can’t be bothered to look into their details.

[tomsmeding]

That's easy. Everyone on about computers as a thing wants newer and better computers. The average person thinks computers are crappy and stick to the large platforms if they have to use them.

s/computers/furniture/, or kitchen ware (cooking), or any other daily thing that some people have significantly above-average interest in.

This also goes for software: word processors, machine learning frameworks, browsers.

[WheelsAtLarge]

I guess this is the way to get rich quick now. Imagine a company with millions of fake users all created by a LLM app.

[winternett]

More companies than we know use this as a tactic. Even though many apps have millions of users, many of them create an account and then never log in again. The companies also provide promotional incentives to employees that run accounts to post and make sites look livelier and more communal than they truly are.

App trustworthiness is at an all time low if you ask me. It's like each store you walk in to is a scam operation out to get money for returning the littlest amount of value back. There is no more organic or honest growth, even users on platforms are faking their statistics too... This entire ecosystem will eventually end up eating itself in my opinion.

[RGBCube]

Hey, Reddit was all fake users at the start, making people think it was active and persuading them to join.

[rocky1138]

May I introduce https://chirper.ai

[thumbuddy]

Already happening to some extent

[gmd63]

Yep, cue the "free market" folks celebrating poorly-informed transactions between VCs dumping these companies on construction workers investing to try to fight inflation enough to send their kids to college.

[aussieguy1234]

Here it is: https://www.fry-ai.com/p/social-media-no-humans-allowed

[hotpotamus]

I remember this being a significant plot point in "Silicon Valley". I suppose life imitates art imitating life.

[somedude895]

It even happened before with an app called Frank, where JP Morgan fell for it: https://news.yahoo.com/jpmorgan-claims-scammed-student-loan-...

[pizza]

Succession, too!

[pratchett]

How are messaging apps still getting these valuations when Telegram, signal, Whatsapp and lime chat exist?

[kevincox]

They all want to be the WeChat of the rest of the world. They want a platform that people live inside and all other companies just become apps inside their store (where they collect a tax of course).

None of the mentioned apps have managed to do this. Maybe that is because there is no consumer interest, but it doesn't make the goal any less appealing.

[happymellon]

Only one of those doesn't require your phone number.

It'll be nice when we get to the point where we can have a proper working chat app that doesn't require one. Hangouts used to be great but Google has to always make sure their chat doesn't work.

[vinyl7]

The economy is detached from reality

[sam1r]

http://archive.today/liPtm

[falloutx]

Why is it always Softbank getting scammed?

[marcus0x62]

Anybody who has seen a Masayoshi-son presentation and then gives SoftBank capital to invest deserves whatever loss they take.

https://www.businessinsider.com/13-slides-softbanks-vision-f...

https://finance.yahoo.com/news/golden-geese-unicorns-inside-...

[cvhashim04]

Lack of due diligence?

[lizknope]

> Two years ago, a messaging app startup called IRL reached a $1.2 billion valuation

> Earlier this year, a former employee alleged that IRL—the name stands for “in real life”— had fired him after he voiced concerns that many users were bots

It's hilarious that "In Real Life" was 95% bots.

[vincengomes]

The name of the App is IRL.

It boasts of 10M+ downloads in Google Play

[Havoc]

>funding round led by SoftBank Vision Fund 2

Oh dear. I wonder if there will be a Fund 3

[re-thc]

What was the remaining 5% real users?

The employees, investors and friends and family off?

[bruceb]

5% is 1m users. IRL was advertised on UFC PPV.

There are some people on it just not enough to warrant that valuation.

[jasonlotito]

Fake it till you make it, right?