In the fast-paced world of startups, the rise and fall of companies can be swift and dramatic.
Two years ago, IRL, a messaging app startup, achieved unicorn status with a valuation of $1.2 billion and aspirations to connect people through shared experiences. However, recent revelations have shattered the company’s claims of success, as it was discovered that the majority of its users were automated or bots.
IRL, or “in real life,” garnered attention in the tech industry when it secured a $170 million Series C funding round led by SoftBank Vision Fund 2, bringing its total funding to over $200 million. The company boasted about its authentic communities and its mission to create organic connections among users. However, doubts surrounding its user base emerged last year when employees questioned CEO Abraham Shafi’s claim of having 20 million monthly active users.
Recent developments have further tarnished IRL’s reputation. The company confirmed that a thorough investigation conducted by its board of directors revealed that 95% of its users were either automated or bots. As a result, the company acknowledged its unsustainable prospects, leading to the decision to shut down.
Additional controversies have accompanied the downfall of IRL. Earlier this year, a former employee alleged that he was fired for raising concerns about the prevalence of bots on the platform. In April, CEO Abraham Shafi resigned amidst mounting scrutiny. The Securities and Exchange Commission had already initiated an investigation into potential securities law violations related to the company’s misrepresentation of its business performance to investors.
The startup community responded swiftly to IRL’s demise, highlighting the dangers of fraudulent practices in the pursuit of rapid growth. Leaders from other startups emphasized the importance of building genuine businesses and cautioned against the allure of overnight success. The repercussions of the startup boom of recent years, characterized by inflated valuations and unrealistic expectations, are expected to reverberate throughout the industry.
Once employing around 100 individuals, IRL had secured investments from prominent firms such as Founders Fund, Goodyear Capital, and Floodgate Fund. Former CEO Abraham Shafi had ambitious visions of creating a global messaging platform akin to WeChat, which boasts over a billion users in China. However, it is evident that IRL will not fulfill its aspirations.
As the tech industry continues navigating the aftermath of this scandal, it underscores investors, entrepreneurs, and users need to exercise caution and diligence in distinguishing between genuine innovations and deceptive practices.