/Silicon Valley is going crazy for Clubhouse, a social media app with 1,500 users that’s already worth $100 million

Silicon Valley is going crazy for Clubhouse, a social media app with 1,500 users that’s already worth $100 million

MC Hammer on Tuesday, January 28, 2020

Nathan Congleton | NBC | NBCU Photo Bank

If you tuned into the Clubhouse app Monday night, you could have heard a lively discussion on how the coronavirus is affecting the prison population. Speakers included MC Hammer, political commentator Van Jones, writer and activist Shaka Senghor and venture capitalists Marc Andreessen and Ben Horowitz.

Despite the big names, only about 1,500 people, mostly with ties to prominent tech investors, had access to the chat. 

Clubhouse is the buzzy new social app of 2020, freshly valued at $ 100 million after a reported $ 12 million in funding from Andreessen Horowitz. There’s no website yet, and the founders, Paul Davison and Rohan Seth, have stayed out of the press. Their LinkedIn profiles say they started Alpha Exploration Co., the parent company of Clubhouse, earlier this year. 

Those in the exclusive beta group describe the Clubhouse experience as a mashup of listening to a podcast while scrolling through your Twitter feed and attending a conference remotely.

Upon launching the app, they see a few virtual rooms with the names of the people in them. Sometimes there are two participants, occasionally there are 100. When they enter a room, the audio switches on and they can hear people speaking â€” it’s like walking into a conference room where a panel or Q&A is happening. The room’s creator can decide who gets to speak. 

Clubhouse screenshot

Bilal Zuberi, a partner at venture firm Lux Capital, said Clubhouse is the only social audio app that’s captured his interest.

“Almost all social media requires us to look at a screen,” said Zuberi, whose firm has offices in New York and Menlo Park, California. “This is the first one where I’m not looking at a screen. I’m involved in social media but I’m sitting by the pool with my kids and as long as I’m muted and not speaking, it’s great.”

Clubhouse is keeping a tight lid on invites, with only a dozen or so new people joining a day. The average number of daily users is currently about 270, or roughly 18% of the total number of signups, according to a person close to the company. Davison will commonly hop into a room for a few minutes to ask the participants for feedback on a particular feature.

Zuberi said a senior executive at Uber invited him a few weeks ago. He estimates he now spends about half an hour per day listening to conversations, and sometimes participating.

While cooking dinner on Monday night, he was one of about 100 people listening to the discussion on race that featured MC Hammer and other well-known voices. Felicia Horowitz, Ben’s wife and the founder of the Horowitz Family Foundation, was also a participant, tweeting afterwards, “Clubhouse was incredible!”

‘It’s either dead by July or it’s something big’

In Silicon Valley, where many of the world’s top entrepreneurs boast about trying to solve some of the universe’s most complex challenges, social media apps have served as both the butt of endless jokes and the source of absurd value creation.

For almost two decades, start-ups have sought new and novel ways to help people connect with friends, peers, celebrities and strangers. Most have gone broke along the way, but the few successes ⁠— Facebook, Twitter, LinkedIn (now part of Microsoft), Snap and Pinterest ⁠— generated billions of dollars for founders and early investors.

It’s the ultimate boom-or-bust business. Revenue comes mostly from advertisers, and success relies mostly on the so-called network effect: Every user brings in three new people, who each bring in three more. Either you’re the category winner, like Facebook, or the failed also-ran like Friendster. In many instances, it all proves to be a passing fad, like Yik Yak, an anonymous messaging app for college students that collapsed after raising over $ 70 million. Or Yo, which allowed users to send the simple one-word message “Yo” and worked more as a parody than a useful tool. Or Chatroulette, an anonymous video chat app that was a brief pop-cultural phenomenon in 2010, then collapsed as users flooded it with unwanted nudity.

Josh Felser, co-founder of venture firm Freestyle, expects Clubhouse to face the same sort of binary outcome.

“It’s either dead by July or it’s something big,” said Felser, who estimates he spends about an hour a day on the app. “We’re all locked away right now so it was a good time to launch it. I don’t know if it’s sustainable.”

Much of the engagement on Clubhouse today comes when a celebrity joins a room and followers get notified. It could be MC Hammer, comedian Kevin Hart, actor Jared Leto (talking about washing fruit with soap) or hip-hop artist Fab 5 Freddy. Ben Horowitz, who has close personal ties to the hip-hop community, says his firm is targeting talent to bring onto the platform.

Actor Jared Leto enters the Heavenly Bodies: Fashion & The Catholic Imagination Costume Institute Gala at The Metropolitan Museum on May 07, 2018 in New York City.

Ray Tamarra | GC Images | Getty Images

Chris Lyons, the head of Andreessen Horowitz’s Cultural Leadership Fund, and Naithan Jones, a partner at the firm, “have put more people in Clubhouse than anyone,” Horowitz tweeted on Monday.

An Andreessen Horowitz spokesperson declined to comment for this story, and Davison said he’s not doing interviews yet.

Matt Brezina, a San Francisco-based investor, joined Clubhouse in April after hearing about it from his friend Nate Bosshard, co-founder of fitness start-up Tonal. Brezina has become a fervent user, typically opening the app after getting notifications that someone he follows is in a room or created a room. He listens while cooking or laying in bed, and describes Clubhouse as the “AirPods social network.”

“I’ve used this app a lot to the point where my wife is like, ‘You’re on that app aren’t you,'” said Brezina, who’s listened to chats about raising children while sheltered in place and Joe Biden’s presidential campaign strategies. “It’s so simple, but it’s such a powerful platform for people to have candid conversations.”

After reports of Clubhouse’s financing round surfaced over the weekend, critics took to Twitter to ask if it’s just the latest toy for tech bros.

Del Johnson, a former Google and Oracle employee who now invests in start-ups, tweeted that he’s been invited to Clubhouse three times but hasn’t yet joined, citing his “aversion to all exclusive clubs where the exclusion isn’t based on anything tangible.” Other detractors pointed to the absurdity of the valuation, while supporters argued that if it works, it will be worth many billions of dollars.

Can it scale?

Before even thinking about revenue, Clubhouse’s next big challenge will be opening the app to many thousands more people without it getting cluttered. Certain categories are a natural fit, like comedy, spoken word, poetry and music, because artists could create a room and instantly pull in their fans for a live performance.   

“The remaining question is ‘can it scale,'” said Austen Allred, CEO of tech skill education company Lambda School, in an e-mail. “I don’t think anyone clearly knows that answer. I can imagine it scaling, though. There are hundreds of millions of people using Twitter and I have my little corner of it I pay attention to. I don’t see why that can’t be true for Clubhouse.”

Allred said he’s listened to sessions with Kevin Hart and Andreessen, and said he tuned into Monday’s discussion “about the realities of being a black man in America.”

Bobby Thakkar was among the first few hundred members and is part of a group of about 40 people that calls itself the “Back of the Bus.” They open a room every night and chat away often until 4 a.m. about any number of ridiculous topics,  but very specifically not about the tech industry. Thakkar said the group spent part of an evening talking about internet domains of famous people who don’t own the websites of their names. 

“An hour later we bought up 150 domain names,” said Thakkar, who’s currently in between jobs in Texas and jokingly writes on his LinkedIn page that he’s a partner at Back of the Bus Capital. “I have no idea what we’re going to do with them, but I spent $ 50 that day for no reason.”

Still, Thakkar has put serious thought into the future of Clubhouse. He thinks it will eventually be a good acquisition target for Spotify, which has robust libraries of music and podcasts but doesn’t have a social element. Comedian Joe Rogan, who attracts millions of listeners to his podcasts, could start a live discussion, or Hart could spontaneously start performing for his fans.

Importantly, nobody has to worry about how they look.

“On video, you have to be in front of the computer, and you have to have shaved and look good,” Thakkar said. “I’ve been on the app while going on runs, and plenty of people are on it while on their Peloton.”

After a full day of Zoom meetings, that sounds pretty appealing.

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