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Why did Secret shutdown and not pivot?

I'm sure everyone knows that Secret (the anonymous chat app that raised at $100M valuation not that long ago) is shutting down. The founder said "Secret still has significant invested capital, but our investors funded the team and the product." My first thought is why didn't they pivot? They have a on of cash and runway and clearly get something about mobile. There is room - even with a reduced team - to take some time and launch something new. If they had been at it for years and were tired I'd somewhat get not doing that. But they probably have several million left. Curious to hear thoughts from people - not in a gossipy way, but in an explanatory insightful way.

28 Replies

Jonathan Barronville
10
0
Jonathan Barronville Entrepreneur
Software Engineer at npm, Inc.

I know this is going to be an unpopular opinion, but my response to this is simple: lack of a personal incentive to continue taking risks necessary to turn the venture around (if possible). Each founder was able to cash out $3M in < a year for an app with no revenue (or visible revenue model). They hit some bumps and realized they don't really have to continue the battle.

Now, obviously, things are always more complicated than they seem at the surface, but that's my theory.

Kate Hiscox
1
0
Kate Hiscox Entrepreneur • Advisor
Boss at Venzee
It sounds like the founder took the decision. I have no knowledge of what happened but it reads implosion. Even though they had significant traction and investment, it's still about the team and he says two things; 1. "Unfortunately, Secret does not represent the vision I had when starting the company" (which he hi-lights). 2. "While a majority of the team has already moved on to other exciting opportunities, I will dedicate most of my time to helping the core team find their next roles." My assumption would be that the founder didn't share the same vision as investors. Tough decision to make though. Product traction of 15 million users along with investment don't come easily and often, not twice. I'm surprised the founder didn't find a way to work through the issues at hand but no one knows the situation better than them, so its tough to speculate.
Heather Wilde
2
0
Heather Wilde Entrepreneur • Advisor
Coach, Mentor, Advisor, and Finder of Unicorns
There are a few things at work here:

One of the founders already left the company in January.
They already had one unsuccessful pivot.

You don't have to "go down with the ship."

The remaining founder likely looked at the value proposition of the company, decided that there was nothing that they could change the platform to that would be true to their original goal. If they changed it much more it would no longer be "Secret".

Quite simply, they were creating a product that people did not want or need, and it is commendable that they shut it down before wasting all the investor money.

Lane Campbell
0
0
Lane Campbell Advisor
Lifelong Entrepreneur
Lack of Motivation. Pivoting gave rise to Twitter, it could have given rise to another great company from this team. The leadership clearly didn't want to bother.
Richard Pridham
0
5
Richard Pridham Entrepreneur • Advisor
Investor, President & CEO at Retina Labs
Did they burn through he $100M? If not, investors would get part of their money back, no?
Stephen Huson
3
0
Stephen Huson Entrepreneur
Leader in Internet lead generation, SEM / PPC / SEO and analytics
I think Richard's point is right on. They were not increasing traction, key people had left, and only one of two founders remained. Given that the founders had sold some equity in an early round and only one ot them remained, it is unlikely that the founder has control. The investors have control, don't like where things are headed, and would rather liquidate, taking the remaining cash rather than spending it on this venture or the remaining team.
Brogan Keane
5
0
Brogan Keane Entrepreneur
CEO & Founder at FlareWorks, Inc.
In 9 out of 10 cases like this, the founders do propose ongoing pivot options to their Board/investors who likely came to the collective conclusion that they would rather get their remaining capital returned then bet on another pivot, in a brtutal consumer mobile field, with co-founders and key employees bailing at ever-increasing rates (demonstrating that the internal rate of sponsorship was rapidly declining).

Secret demonstrates the investment communities obsession with viral metrics over long-term, sustainable value. It's unclear to me the monetization value of anonymous content networks. Authorship is central to the concept of quality in content and lacking it only creates rapidly diminishing perceived value.

At some point, I felt like most of the secrets I was reading were made up by people trying to generate as many social "likes" as possible. It was novel, for some fun, but never sustainable when one eventually has to cram for finals, care for an ailing sick one or, otherwise, perform at their job so they can make rent the following month.
Michael Brill
3
1
Michael Brill Entrepreneur
Technology startup exec focused on AI-driven products
@Richard, I think they raised $35m... minus $6m for founders minus, say, another, say, $9m(?) for operating costs still leaves $20m. That's a lot of money to fritter away when when you've lost momentum and passion and key people and ideas. The founders don't have a financial need to make it successful, so why not take a step back and then go work on something they have a true passion for. They can afford to do that and it's probably the right thing to do.

This is what 'fail fast' looks like.


Anthony Zeoli
1
0
Anthony Zeoli Entrepreneur • Advisor
Digital Strategy and WordPress Consultant and Trainer
Anonymity breeds spam and harassment. It's been proven time and time again as newspapers battled anonymous commenting trolls since comments began being implemented in blogging and newspaper websites. This should have told everyone that Secret was never going to be a good idea in the first place. A space where no one knows no one and where everyone is faceless is not an interesting space.

It seems that the founders took some cash out early and that bred division and people lost faith. They lost some key hires to other companies. They were losing traction by the minute, with people deleting the app.

As others have said, they already pivoted once and that didn't do anything to stem the tide, so it's best to cut your losses and move on then try to save something that was destined to fail in the first place.
Bob Binder
0
0
Bob Binder Entrepreneur
Member of Technical Staff at Software Engineering Institute | Carnegie Mellon University

The Wall Street Journal story says there were several reasons.

http://www.wsj.com

Investors will not be made whole, although it looks like a substantial part of the last raise will be returned.Founders cashed in near the valuation apogee, however. It seems like a "go big or go home" story, at least in part.

I wonder what will happen to the founders? This reminds me of Roberto Duran's "no-mas" fight. Duran was a great fighter, no lack of heart. But that one fail is all he's remember for.

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