Clubhouse, a social audio platform startup valued at $4 billion a year ago, is laying off half of its staff

Clubhouse, a social audio platform startup valued at $4 billion a year ago, is laying off half of its staff

Time Stamp: April 28, 2023 9:49 AM
Source Node: 2617364

“Today we announced that we’re scaling back our org by over 50% and saying goodbye to many talented, dedicated teammates in the process. We’re deeply sorry to be doing this, and we would not be making this change if we didn’t feel it was absolutely necessary.”

Clubhouse, a once-high-flying startup that has become a symbol of deception and excess in Silicon Valley, is laying off half of its staff. The Live-audio chat app announced on Thursday that it would lay off half of its staff, or a little over 100 employees.

In a post on Thursday, Clubhouse said the reduction in staff is needed to “reset the company.” As per LinkedIn, the company currently employs slightly over 200 people.

“As the world has opened up post-Covid, it’s become harder for many people to find their friends on Clubhouse and to fit long conversations into their daily lives,” co-founders Paul Davison and Rohan Seth wrote. “To find its role in the world, the product needs to evolve. This requires a period of change.”

The layoff announcement comes just a year after the startup was valued at $4 billion following a Series C funding round we reported back on April 18. The investment was led by Andrew Chen of venture capital firm Andreessen Horowitz with major investors like DST Global, Tiger Global, and Elad Gil.

This news should not be surprising given that Clubhouse was a prime example of the tech industry’s irrational exuberance during the pandemic that saw investors pouring billions of dollars into startups with zero to no sound business model.

Clubhouse was launched in March 2020 at the beginning of the pandemic when physical gathering places were closed and consumers, celebrities, tech executives, and venture capitalists searched for alternative ways to connect and entertain themselves. At the time, money was abundant and cheap, and many saw Clubhouse as the new killer startup that will upend social media platforms like Facebook and Twitter.

Clubhouse took the internet by storm as people flocked to the new secret invite-only social app to chat and hold watch parties.  Clubhouse, with its ability to allow people to listen in on discussions about various topics, including music, technology, fashion, and more technology, quickly went viral.

The app soared in popularity after appearances by important celebrities such as MC Hammer, Oprah Winfrey, and Mark Zuckerberg were all present on the platform. But the party didn’t last long after people returned back to their normal lives. The final nail in the coffin was when Twitter also launched its Twitter Spaces and Clubhouse went downhill from there.

The popularity of Clubhouse faded so rapidly that Thursday’s blog post, which announced the company’s decision to lay off half of its staff, seemed long overdue. It appeared as though the downsizing should have happened several months earlier.

Clubhouse was founded in March 2020 by Paul Davison and Rohan Seth. Just two months later, the app was already valued at around $100 million despite having just 1,500 users at the time. The clubhouse’s still in beta but Silicon Valley is already going crazy because celebrities and high-profile venture capitalists are promoting it. According to mobile data and analytics firm App Annie, the Clubhouse app has been downloaded 12.7 million times.

Below is the memo Clubhouse sent to its staff.

“Earlier today, Clubhouse founders Paul Davison and Rohan Seth sent the following note to Clubhouse employees.

Team,

Today we announced that we’re scaling back our org by over 50% and saying goodbye to many talented, dedicated teammates in the process. We’re deeply sorry to be doing this, and we would not be making this change if we didn’t feel it was absolutely necessary.

If you are among those impacted, you will receive a calendar invite to a 1:1 meeting with a manager in your department within the next 10 minutes. In the meantime we wanted to provide everyone with more context around why we made this decision and how we will be supporting the individuals who are departing.

Resetting Clubhouse

As we’ve talked about in team meetings, Clubhouse was designed to be a place where you could come together with friends, meet their friends and talk. It works really well when your friends are on the product and you have the time to meet up. Millions of people in our core community know this. But as the world has opened up post-Covid, it’s become harder for many people to find their friends on Clubhouse and to fit long conversations into their daily lives. To find its role in the world, the product needs to evolve. This requires a period of change.

Rohan and I have tried to make this work with our current team size, but we haven’t been able to do it effectively. It’s difficult for us to communicate the strategy to cross-functional teams when it’s evolving by 1% each day, or to make quick changes when each surface is owned by a different product squad. Being remote has made this especially challenging for us. The end result is that it’s hard for teams to coordinate, people feel blocked by us, and brilliant, creative people are left underutilized.

In order to fix this we need to reset the company, eliminate roles and take it down to a smaller, product-focused team. We arrived at this conclusion reluctantly, as we have years of runway remaining and do not feel immediate pressure to reduce costs. But we believe that a smaller team will give us focus and speed, and help us launch the next evolution of the product.

Supporting those impacted

There is no good way to do this, and this is no consolation, but it’s important to us that we work hard to support the people who are departing and recognize how important their work has been to the history of this company. Here are some of the resources we will be providing to everyone who is impacted:

  • Severance pay. We will pay salaries for the rest of April, plus 4 months of additional severance for all departing employees. This means everyone affected will receive their full salary until Aug 31, 2023.
  • Equity acceleration. We want everyone who helped build the company to have the opportunity to participate in future upside. We will accelerate everyone who is impacted to their Aug 2023 vesting date, and for those who haven’t reached their one-year vesting cliff, we’ll also waive the cliff and provide pro-rata monthly vesting through their Aug 2023 date.
  • Healthcare. We will pay for COBRA through Aug 31, 2023 for everyone affected, so they can continue to receive full healthcare coverage for themselves and their families during this period.
  • Laptops. We will allow everyone who is impacted to keep their company-issued laptops, to help them research and apply for new roles.
  • Career support. We will help departing employees in finding their next role. This includes partnering with our investors to help connect them with other companies, serving as enthusiastic references and aiming to support them however we can. If you are impacted and would like career support, you can submit your information here and let us know what services would be most useful.
  • Immigration support. We will be providing support for those who are on visas. If you are impacted and on a visa, you will receive more information in your 1:1 meeting.

As a founder you work tirelessly to build a great team and dream of one day having coworkers like you. The people leaving today are without exception brilliant and humble. We will always be grateful for the role that each of you has played in building Clubhouse and we would rehire any of you in a second if we could. Our hope is to rebuild and one day earn the right to do that. In the meantime, we know that people here will go on to do great things, and that other companies will be extremely fortunate to hire you.

For those who are staying, we know this is a difficult time for you as well. Not only are you saying goodbye to people you’ve built alongside, but many of you will be feeling uncertainty about the future. We want you to know that we’re making this change to ensure that our future is strong.

The path forward

The world needs what Clubhouse is building – a better way for all of us to hear our friends’ voices, have more meaningful conversations and feel connected to the people around us. As remote living, empty scrolling and Zoom meetings become more common, this is truer than ever. We have a clear vision for what Clubhouse 2.0 looks like and we believe that with a smaller, leaner team we will be able to iterate faster on the details, build the right product and honor our teammates who helped us get here.

Today will be a very hard day, and for the rest of this morning we will prioritize meeting 1:1 with everyone who was impacted. Those who are not impacted will receive a calendar invite for a brief team meeting at 3pm PT. Here we will regroup as a team, talk about today, and begin the path forward together.

Paul and Rohan”

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