The challenge of zombie startups
Hello, and welcome to Pipeline. I’m Biz Carson, and my favorite Vine was the Del Taco fresh avocado.
This week in the startup world: zombie startups, lots of layoffs, and disappearing megarounds.
Elon Musk wants to bring back Vine. It won’t be easy.
There’s a collective tech nostalgia of what could’ve been, would’ve been, should’ve been when it comes to Vine.
Years before TikTok, Vine created a social network around six-second looping videos. It had all the early hallmarks of TikTok: the virality, the influencers, the marketing. But three years after a 2013 launch that saw it catapult to the top of the app charts, Twitter shut Vine down. Instagram, Snapchat, and YouTube were all competing over short videos, and Vine didn’t build the right features or help creators monetize.
Now, Elon Musk is considering resurrecting Vine and bringing it back as a challenger to TikTok.
“Instagram is vulnerable now, so any new approach has better chances of working than before. But if it's the exact same product, it's tricky to believe that it's going to go as well,” said Niko Bonatsos, an investor at General Catalyst who has backed social app makers like Snap, Discord, and Yik Yak.
There’s certainly public support for a Vine reboot. In a Twitter poll with over 4.9 million votes, nearly 70% of respondents were in favor of bringing back the short-form social network.
- But nostalgia alone won’t mean it becomes useful overnight. As Bonatsos pointed out, most of Vine’s original fans from nearly 10 years ago are no longer in their teenage or college years with loads of free time to spend on social media. Today’s time-rich teenagers don’t have that fond recollection of Vine that would help drive them to naturally use it.
- “To bring back the app is not that hard. To make it culturally relevant again is the hardest thing,” Bonatsos said.
Bringing it back might not be so easy either. There’s a whole lot of technical debt, thanks to an untouched codebase that a slimmed-down army of Twitter engineers would have to work through.
- While Musk has asked employees to start looking through the existing code, it might be better if the company just started from scratch, according to Sara Beykpour, who worked on Vine at Twitter and led its shutdown. “This code is 6+ years old. Some of it is 10+. You don't want to look there. If you want to revive Vine, you should start over,” Beykpour said in a tweet. (She didn’t respond to a request for comment.)
Products have come back from the dead before, but zombies rarely win.
- On the pro side: Steve Jobs is hailed as a hero for reviving the Mac. Yik Yak, a once-popular app among college students, died in 2017 and relaunched last year; it recently released an Android app. Gowalla was dissolved in 2012 but came back with new venture funding in 2021. The cyclical nature of trends means things like QR codes, vinyl records, and even Polaroid cameras are having a moment again. (Unfortunately, ’90s fashion is too.)
- On the con side: There are still plenty of zombie startups walking around that exist in name, but aren’t quite the same. Munchery, the former food delivery service, is now a recipe website. Napster’s latest revival is some kind of Web3/NFT play. Social network Bebo was resurrected four times and sold twice before giving up the ghost. “It’s been emotional,” wrote founder Michael Birch on what's left of its website.
Vine will have to be something different to usurp TikTok and have any staying power. YouTube creator MrBeast pointed out that everyone has copied TikTok, so whatever Twitter does, it has to make it more than a copy or it could be a waste of time. “No one is original anymore, whatever you do will be on every other platform the next month unless it has a deep moat,” he said.
- Twitter’s product leaders are already trying to think through it with the goal of potentially relaunching by the end of the year. An early idea is to turn the camera inside of Twitter’s app into an easy way to record and post Vines, according to a report from Platformer. A reported use case could be users filming reaction videos to tweets they see.
With Twitter’s product roadmap evolving by the hour, it’s too early to say what will happen to Vine 2.0. Let’s just hope its lifespan isn’t as short as its videos.
A version of this story previously appeared on Protocol.com. Read it here.
“I couldn’t give my boyfriend the full allocation he wanted in my seed round, so he floated the idea of us getting married instead,” a VC overheard. I guess that’s dating in San Francisco these days.
If there is such thing as a “good” layoff announcement, Stripe’s memo from CEO Patrick Collison has earned praise for being forthright in the two mistakes the founders made: 1) “We were much too optimistic about the internet economy’s near-term growth in 2022 and 2023 and underestimated both the likelihood and impact of a broader slowdown.” 2) “We grew operating costs too quickly. Buoyed by the success we’re seeing in some of our new product areas, we allowed coordination costs to grow and operational inefficiencies to seep in.”
“There’s just too much influence in a small number of people, where if Keith Rabois or Elon Musk just tweet something, everyone just jumps on the bandwagon,” said former AngelList exec Eric Woo, who is trying to build a new ratings system for the venture industry.
“Basically, they were trying to make fun of me.” #Girlboss author and Nasty Gal founder Sophia Amoruso called out The Information for making her into a “disgraced girlboss” costume idea in the same category as Elizabeth Holmes. “I’ve laughed off a lot of painful things over the years, but this one stung,” she said. The Information ended up apologizing and removing the item.The worst mail-merge mistake ever: Instead of the name field, a founder instead inserted their personal CRM notes on the VC. That’s how Lightspeed’s Mercedes Bent got an email saying: “Hi Has deck. Seems kinda stuck up. Didn’t accept my LI request but boss did. Stanford grad. Paints a picture, Updating you on a few.…”
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Valuations have become less hype-driven and more realistic; the amount of time spent on due diligence has increased substantially; and every founder needs to directly, clearly, and concisely answer the question, “Does this project have any real-world utility, and does it create economic value?”
No one ever says congrats when someone gets a term sheet for a down round, but perhaps they should, writes Threshold’s Heidi Roizen. Valuation nostalgia can creep in, but it’s not the end of the world as long as you avoid making certain mistakes.
If you're looking to build a paid membership program, look to China. Their internet giants largely skipped an ad-based model and went straight to memberships that come with VIP perks based on usage, and it can be a model for companies like Twitter, Snap, and startups exploring building a membership program, says a16z’s Connie Chan.
Everyone used to be asked about their 5G strategy, now it’s the metaverse. But what is that nebulous place? Former a16z partner Benedict Evans outlines ways tech leaders should be thinking about the metaverse.
“The problem isn’t that Elon Musk owns Twitter — it’s that you don’t,” writes Substack’s Hamish McKenzie. Yes, it’s partially an argument for why Substack is better, but McKenzie brings up some interesting points around ushering forward an era where people have the power over their own distribution.As promised, Sequoia’s Sonya Huang updated the Generative AI market map to include even more companies.
Need to know
Another no-good, very bad week for layoffs. Twitter was gutted by massive layoffs of the company, but it wasn’t the only one to cut staff this week. In addition to the aforementioned Stripe layoffs, more fintech companies also had to pull back with Chime cutting 12%, Digital Currency Group decreasing by nearly 13%, Upstart laying off 7%, and NFT startup Dapper Labs slashing 22%. Keith Rabois’ Opendoor cut 18% of the company, and Lyft laid off 13%.
The DOJ is sniffing around the Adobe-Figma deal. The government reportedly contacted Figma investors, competitors, and customers as it scrutinizes the transaction. Don’t forget: Adobe will have to pay Figma a $1 billion breakup fee if the deal is blocked.
Tiger Global backs out of China. It made its name as an early believer in China, but now Tiger Global is reportedly stopping new investments in the country amid political uncertainty.
75+ VC firms signed on to support reproductive rights. The VCs for Repro Coalition states that criminalizing abortion is a violation of human rights that stifles innovation.
The $100 million round is disappearing. Data from Carta shows the number of megarounds has fallen to pre-pandemic levels.
OpenAI wants to back generative AI startups. The company behind GPT-3 and DALL-E is launching the Converge accelerator and giving around 10 teams $1 million each to build new products around AI.
Moves: Former VC Megan Quinn stepped down as COO of Niantic, but is remaining on the company’s board. The #TCtoVC pipeline is alive and well with TechCrunch’s Jordan Crook being the latest to move into venture and join Betaworks as a partner. Lerer Hippeau’s Meagan Loyst is leaving her investing role to focus on the Gen Z VCs collective full time. Self-driving trucking company TuSimple fired its CEO, Xiaodi Hou. Yext founder Howard Lerman is back with a new remote-work startup Roam (waitlist only). Optimizely co-founder Dan Siroker is building “a search engine for your life” with new a16z-backed startup Rewind.
From Protocol: Are the U.S. and China really in an AI race? In a special series from Protocol, AI reporter Kate Kaye dug into how a golden age of collaboration has turned into competition with former Google CEO Eric Schmidt profiting from AI investments while spreading Cold War rhetoric.
Also from Protocol: How I decided my startup needed a new leader, from Marqeta CEO Jason Gardner, who says he’s looking for a “late-stage co-founder.”
Also, also from Protocol: What's something no one tells you about raising capital? ClickUp’s Zeb Evans, LaunchDarkly’s Edith Harbaugh, TrueLayer’s Francesco Simoneschi, Retool’s David Hsu, and TigerEye’s Tracy Young all shared the advice they wished they’d been given with Protocol’s Braintrust.Your weekend reading: You may know Alexis Ohanian as the founder of Reddit or as Serena Williams’ husband who cheers her on courtside. But the founder-turned-VC is working on building his own legacy with venture firm Seven Seven Six. “I don’t want to ever again feel like I’m one vote out of five on a thing that I created,” he told The Information in a new profile on Ohanian’s search for redemption.
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The VC correction is proving once again that valuations are not an indicator of success. While money continues to flow, the crypto winter and VC slowdown have forced even the most committed Web3 venture capitalists (and their investors) to proceed with more caution.
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