What Happened To Clubhouse? And Is It Actually Dead?

There is no denying that the Covid pandemic had a long-lasting impact on all of us. It not only forced billions of people to quarantine at home for months but significantly accelerated the growth of the internet economy.

One of the major beneficiaries of said pandemic became audio-based social network Clubhouse, which managed to amass tens of millions of downloads. The company behind the app was subsequently valued at an eye-popping $4 billion.

However, interest in the app began to dwindle just as Covid restrictions across the globe started to be lifted, which ultimately begs the question: is Clubhouse actually dead?

In the following sections, we will detail the rise and subsequent fall of the Clubhouse app and try to answer the question of whether it can eventually live up to its promising start.

Who Is Behind Clubhouse?

Clubhouse, which is headquartered in San Francisco, California, was founded in 2020 by Paul Davison, and Rohan Seth.

Launching the app has, however, not been the founders’ first rodeo. Let’s rewind back to the year 2002.

That year, Davidson had just completed his Industrial Engineering degree at Stanford, which subsequently landed him a stint at consulting powerhouse Bain.

In 2005, he returned to Stanford to pursue his MBA. Armed with all the educational experience one could ever want (and probably a boatload of offers), he ultimately decided to join database startup Metaweb.  

This certainly proved to be a wise decision as the firm was acquired by Google a mere three years later (in 2010).

Being a two-time Stanford grad as well as a successful startup exec undoubtedly made him a perfect candidate for receiving venture investments.

And that is exactly what happened. He joined legendary VC Benchmark Capital as an Entrepreneur in Residence, allowing him to experiment with a variety of ideas.

One of those ideas became Highlight, a social media app that allowed you to share your location, which he launched together with Ben Garrett in late 2011. One would sign up via Facebook and let Highlight run in the background. Once a friend or stranger with common interests was close, the app would go on to notify you.  

However, he would soon learn a costly lesson that is all too common in the social media world. Highlight, after $5.5 million in raised funding and some heavy buzz that it garnered from the tech conference South by Southwest, eventually fell into obscurity.

Davison and Garrett gave it their all and launched two subsequent apps. One was called Roll and enabled users to share their camera roll with friends. The second one, named Shorts, displayed photos to random people nearby.

None of those apps really took off, though. Pinterest, in 2016, acqui-hired Davison and the rest of his team. After two years at Pinterest, he had another one-year stint at crypto startup CoinList, serving as a temporary CEO.

Rohan Seth, in the meantime, had just begun a Computer Science degree when Davison graduated (2002). He spent the next six years as an engineer at Google once he graduated.

And much like Davison, he felt the need to branch out on his own. In 2014, Seth launched Memry Labs. He and co-founder Rohan Dang, formerly an engineer at Microsoft, experimented with launching a variety of social apps.

One of those became Dayfie, which essentially encouraged users to share one selfie a day with friends. Ironically, while Dayfie never really took off, the assumption of creating a more authentic social experience wasn’t that far-fetched. Years later, the app store charts would be dominated by BeReal, which essentially offered a similar user experience.  

Seth, after a few more failed attempts, essentially suffered the same fate as Davison. In 2017, real-estate upstart Opendoor acqui-hired him and the rest of his team. He would ultimately remain at Opendoor until 2019.  

As fate would have it, Davison and Seth, who were introduced to each other by a common friend in 2011, were reunited that same year under somewhat unfortunate circumstances. And those very same conditions would ultimately lead to the creation of Clubhouse.

What Happened To Clubhouse? Detailing Its Rise And Subsequent Fall

Rohan’s daughter, Lydia, was born in December 2018 with a very rare genetic mutation called KCNQ2, which affects one’s brain function and caused her to have repeated seizures.

This prompted Rohan to create the Lydian Accelerator, a non-profit group named after his daughter whose stated goal is to advance research and thus not only help Lydia but the millions of other children suffering from this disease.

Luckily, what Rohan and his wife discovered through extensive study was that the disease was actually treatable. And in order to fund that research, he needed to raise money for the non-profit.

So, Seth eventually decided to reach out to Davison who he knew was particularly skilled at raising money for new ventures. And raising they did. Within months, the two managed to attract $1.5 million in funding for the non-profit foundation.

What Davison and Seth discovered was that they actually liked working together. Given their similar educational and professional backgrounds, this was certainly a match made in heaven.

So, in the fall of 2019, they launched an app called Talkshow, which allowed people to schedule and host radio-like live programs. Hosts would be able to broadcast their shows on Twitter while taking in live questions from listeners.

During the beta phase, users were flocking to a particular feature, more specifically the ability to join a show and speak alongside the host. Now, that feature in and of itself wasn’t necessarily what led to the pivot towards Clubhouse.

Instead, the founders adapted their strategy almost by necessity. In early 2020, the Covid-19 pandemic forced billions of people around the world to quarantine at home, thus making in-person contact impossible.

According to The Information, Alpha Exploration, the company behind Clubhouse, had raised a seed round of $1 million in February to finance product development. Ben Rubin, co-founder of the now-defunct app Houseparty, was among the backers.

In March 2022, they officially rebranded the product from Talkshow to Clubhouse and made it available to a selected minority of iOS users.

Wayback Machine

The app’s initially limited availability is exactly what made it so appealing – even though it wasn’t even the founders’ intention in the first place. They simply wanted to limit access to be able to properly test everything out.  

And the fact that its early users included personalities such as legendary investor Marc Andreessen only raised the app’s profile. Many of Clubhouse’s initial users were high-profile VCs who used it to discuss all kinds of matters since the app was invite-only when it launched.

It was still somewhat shocking that Davison and Seth, only two months after the official launch, managed to raise $10 million in Series A funding at an eye-popping valuation of $100 million. The money came from VC firm Andreessen Horowitz, which allegedly beat out Davison’s former employer Benchmark.

What was even more shocking was the fact that Clubhouse, at the time of the funding, only had around 5,000 users.

People would soon begin to use the app for all kinds of purposes, ranging from lively discussions all the way to collectively listening to music or conducting group roleplays. Unfortunately, not all of those use cases were as innocent.

For instance, journalists like Taylor Lorenz had rooms created on her behalf where hosts would openly mock and harass her. Later, in September (on Yom Kippur), a group of predominantly non-Jewish moderators created a chat room in which they shared multiple antisemitic statements.

Clubhouse, unlike text-based platforms like Twitter, had a tough time policing the content on its platform, especially given that it only had a handful of employees at the time.

However, the founders were certainly not without fault either given that the platform, months after launching, was still lacking basic moderation features such as the ability to flag harmful or hateful content.

The app’s growth didn’t seem to suffer too much, though. Celebrities such as Jared Leto, Ashton Kutcher, and Kevin Hart all joined the still invite-only platform, which grew to over 10,000 users by the end of 2020.

Clubhouse, in order to continue attracting users, introduced its own influencer network in December 2020 that would incentivize creators to bring on new users. The app, much like Peloton or Zoom, became synonymous with the pandemic-fuelled proliferation of digital platforms.    

Its growth was rewarded with yet another round of funding in January 2021. That same month, the founders managed to raise $100 million in funding. Andreessen Horowitz, which was the round’s only investor again, valued the business at $1 billion, thus making it a unicorn a little less than a year after being launched.

The world’s biggest social platforms soon started to take notice. In a matter of weeks after the funding round, giants like Facebook, Reddit, and Twitter all began to work on their own audio solutions that would be natively integrated into the respective platforms.

Twitter, which had launched competitor Spaces back in November 2020, allegedly made a $4 billion bid in March to acquire Clubhouse.

The founders, who previously took some chips off the table during the funding rounds, ultimately declined – a decision that would prove to be the wrong one in hindsight (but more on that later).

Andreessen Horowitz and a slew of other investors including DST Global or Tiger Global Management, as a result of Twitter’s advances, decided to up Clubhouse’s valuation to $4 billion in April (Clubhouse did not disclose how much it raised during that round).

A month later, in May, Clubhouse finally unveiled its first Android. And on July 21st, 2021, the app finally exited its beta phase and became open to everyone, thus removing the invite-only restrictions.

Unfortunately, even those two measures couldn’t halt the app’s drastic decline. Download and usage numbers, due to the rollout of vaccines and the ease of lockdown restrictions, started to heavily diminish. Even early backer Marc Andreessen, one of its first users, didn’t log into his account for months at a time.

CEO Davison, in an interview with Bloomberg, publicly announced that he and the rest of the team got ahead of themselves and couldn’t handle all that incoming interest. Instead, he wanted to focus on steady and gradual growth by building out foundational features.  

And that is exactly what they did. Over the course of the coming months, Clubhouse unveiled a slew of new features that were meant to improve the user experience.

They added support for 13 other languages, the ability for hosts to record conversations (both introduced in November), being able to re-share rooms, a web version (both in January 2022), in-room chats (February), and so much more.  

Unfortunately, a worsening economic environment forced the founders to lay off multiple employees in June 2022. The issue was amplified by the fact Clubhouse still doesn’t monetize its platform as of the time of writing.

All of this ultimately begs the question: is Clubhouse dead for good? Let’s explore the answer to that question in the following section.

So, Is Clubhouse Dead?

There is no denying that interest in Clubhouse has significantly diminished since countries around the globe began opening up.

Take, for instance, search interest. Data from Google Trends that interest peaked around the end of 2020 and the beginning of 2021.

trends.google.com

Download numbers have significantly diminished as well. In February 2021, its iOS app alone was downloaded close to 8 million times according to data provider App Annie. A year later, and throughout 2022, monthly downloads have often failed to reach the seven-figure mark.

Similarly, Clubhouse is located outside of the top 10 in both Google’s Play Store as well as Apple App Store after dominating the charts for months.

However, the decline does not necessarily equate to Clubhouse being dead. Monthly active user numbers are hard to come by but accessing the app shows that users are still engaged with each other in various rooms.

The app’s undeniable decline points to larger problems in the world of venture funding. Investors like Andreessen Horowitz pour hundreds of millions into startups in hopes of discovering the next multi-billion-dollar company.

After all, some of the world’s most valuable companies, including Facebook or Google (vis-a-vis YouTube), are (partially) situated in the social media domain.

As a result, they push founders to aggressively go after those opportunities to create a competitive moat around the platforms they create.

This is particularly important considering that many of today’s social products can easily be copied and integrated into an existing ecosystem (Instagram’s copying of Snapchat’s Stories being the most prominent example).

Clubhouse, in all likelihood, still has enough cash in the bank to figure out a winning business model. The firm ‘only’ employs around 80 people while the founders managed to raise over $110 million in funding thus far.

It remains to be seen whether Davison and Seth can pull it off or if Clubhouse eventually joins the graveyard of the many promising social startups that came before it.

Hi folks, Viktor checking in! Years of experience in various tech-related roles have led me to start this blog, which I hope provides you with as much enjoyment to read as I have writing the content.