Two years ago, a messaging app startup called IRL seemed to be thriving.it boast Its “unicorn” status has reached a valuation of US$1.2 billion in the US$170 million C round of financing led by Softbank Vision Fund 2.
“We have an opportunity to build WeChat for the rest of the world,” Shafee said. Tell The Verge in 2021, referring to the messaging app in China with more than 1 billion users.
Today, SoftBank prosecute IRL’s $150 million take came after the startup’s board concluded that 95 percent of the company’s users were fake or “from bots.” IRL says it’s closing.Its website now reads “We like to be in IRL.comwith an “IRL CLOSED” notice.
SoftBank accused IRL of using a proxy service to inflate user data via bots and hired a firm to cover up the scheme. Its complaint states: “Because IRL does not have any profitable revenue streams, its value to outside investors like SoftBank depends on its active user metrics as a source of potential future revenue. As a result, SoftBank relies on IRL executives’ Accuracy of representations of quality.”
at the latest all in In the podcast, venture capitalists weigh in on SoftBank’s realities and the need for robust due diligence.
“I would say that for us, besides looking at metrics that anyone can do, the first part of due diligence is off-sheet references: talking to customers against a list you make yourself, not the company itself”, said David Sacks, general partner at Craft Ventures.
Chamath Palihapitiya, who founded venture capital firm Social Capital in 2011, noted that checks and balances were insufficient, and that he believed venture capitalists were “very inexperienced,” saying they “didn’t even know How to ask fundamental questions, even more insidiously — you don’t have the courage to say hard things. So it’s frankly inexcusable that these things happen.”
Angel investor Jason Calacanis added that a key role of venture capital is to “ask uncomfortable questions and do uncomfortable due diligence… You can trust the founders, but you have to verify that the data you have is correct.”
wealth SoftBank was reached for comment but was not immediately returned.
May, Softbank release Its tech-focused Vision Fund posted a record investment loss of nearly $40 billion. It also went into what founder Masayoshi Son called “defense mode,” stopping new investments in the fund.