20VC Clubhouse Founder Paul Davison on What Went Right and What Went Wrong What Does Clubhouse Do Now To Regain Mindshare Why Clubhouse is not a Content Platform What is the Next Wave of Consumer Social and Does Web3 Play a Role

In a revealing conversation on 20 VC, host Harry Stebbings interviews Paul Davison, the co-founder and CEO of Clubhouse. They delve into Clubhouse's rapid rise and subsequent challenges, discussing the app's unique position as a platform for live audio conversations that mimic real-world social interactions. With over $310 million raised and a background that includes founding Highlight and working at Benchmark, Davison shares insights on the importance of building a retentive product, the impact of COVID-19 on remote living, and Clubhouse's commitment to enhancing global friendship and connection. Addressing the competitive landscape, Davison emphasizes Clubhouse's focus on live audio and its differentiation from content platforms like Twitter Spaces. He also touches on the future of Web3 and its potential integration into Clubhouse's economy. Throughout, Davison underscores the importance of company values, transparency, and the ability to adapt and maintain morale amidst the pressures of media hype and rapid growth.

• Harry Stebbings introduces the episode of "20 vc" featuring Paul Davison, co-founder and CEO of Clubhouse.
• Clubhouse became one of the hottest apps in 2021 with a user-centered platform for audio communication.
• Paul Davison has a history of entrepreneurship, including founding Highlight and working as an EIR at Benchmark.
• He has raised over $310 million for Clubhouse from prominent investors.

"Today's guest took the world by storm, becoming one of the hottest apps in the world in 2021." "Prior to cofounding Clubhouse, Paul was the founder of Highlight, a location based consumer social service backed by Benchmark."

These quotes introduce Paul Davison and the impact that Clubhouse has had on the social app landscape. They also provide context for Paul's entrepreneurial background.

• Harry thanks Bubba Muraka for contributing questions to the interview.
• Harry highlights Harvard Management Company (HMC) as a significant partner in venture capital and entrepreneurship.
• Mercury is presented as a banking solution for startups, offering a variety of financial services and tools.
• Market X is introduced as an investment platform for accessing high-growth private tech opportunities.

"Thank you to Bubba Muraka for some amazing questions." "Harvard Management Company is constantly seeking out the next generation of great investors and entrepreneurs."

These quotes express gratitude for the input received for the interview and showcase the role of HMC and other partners in supporting startups and investments.

• Paul Davison discusses his and co-founder Rohan's history in creating social apps.
• They recognized the inefficiency in how people connect and meet new friends.
• After selling Highlight to Pinterest, they decided to explore other areas but were drawn back to the audio space.
• The initial version of Clubhouse was preceded by a more formal app called Talkshow, which was eventually discontinued.

"Rohan, my co founder and I have been building social apps for over a decade now." "Eventually, we sold highlights to Pinterest and I spent some time there and Rohan was working on social apps as well."

These quotes outline the extensive experience Paul and Rohan have in the social app industry and their journey leading up to the creation of Clubhouse.

• Paul reflects on his experience with Highlight and how it influenced the creation of Clubhouse.
• He emphasizes the importance of not overbuilding, focusing on durability, and building a company with the right values and principles.
• The decision to keep the team small and move quickly with experienced hires was a key strategy.

"I think there's a lot that I did not take with me intentionally." "You learn not to overbuild, not to spend a ton of time on some secondary or tertiary screen that no one's really going to visit."

Paul shares insights on the lessons learned from past ventures, stressing the need to avoid overcomplication and to concentrate on the core product and company values.

• Paul advises waiting to build out a team until the product has proven traction.
• He highlights the effectiveness of having a prototype to attract team members.
• The conversation touches on the advantages that come with having a network and reputation in the industry.

"When we did our Series A, the company was two of us." "Don't scale the team until you need to."

These quotes from Paul provide practical advice for startups on team building and scaling, suggesting a cautious approach until the product has demonstrated success.

• Founders should have a deep passion for their startup idea.
• Passion is evident during discussions with potential co-founders, teammates, and investors.
• Storytelling is a critical skill for founders in various aspects of business growth.

"You want to think about it all the time. When you go to talk with potential co-founders, potential teammates, potential investors, it shows that you are so excited about this thing."

This quote highlights the importance of a founder's passion for their startup idea, which becomes apparent when they communicate with others involved in the business.

• Clubhouse aims to democratize access to networking and idea-sharing.
• The platform intends to allow people from any background to connect with like-minded individuals.

"And that's something that I really hope clubhouse can change. This idea that no matter where you live in the world, no matter how much money you have or what sort of networks you have access to, you can suddenly be in the room and you can meet people who are interested in the stuff that you're interested in."

Paul Davison underscores Clubhouse's mission to provide equal access to networking opportunities, regardless of a person's location, wealth, or existing networks.

• Observing retention numbers is key to recognizing product-market fit.
• Clubhouse's initial simplicity and ability to mimic real-world social interactions contributed to its success.
• Word of mouth is a powerful growth tool for products that enhance natural human behaviors.
• Successful communication products often don't invent new behaviors but make existing ones easier.

"We look at the stuff that you would expect us to look at, like retention numbers. That's really the big thing that we always come back to, is retention and engagement."

Paul Davison points out that retention and engagement are primary indicators of product-market fit, which Clubhouse closely monitors.

• Technological advancements often create a window of opportunity for new products.
• Clubhouse benefited from a confluence of technological trends like AirPods and text-to-speech.
• Timing, execution, and luck are critical for a company's growth.

"There's usually a why now where there's sort of like a five year window where it becomes possible to take a new experience online."

Paul Davison discusses the importance of timing in the success of technology products, suggesting that certain technological advancements create a ripe environment for innovation.

• Clubhouse experienced rapid growth, followed by a decline.
• The decline may be associated with changes in consumer behavior post-COVID.
• The company intentionally tried to grow slowly to avoid system stress.

"We tried really hard to grow slowly and we succeeded for nine months."

Paul Davison reflects on Clubhouse's intentional slow growth strategy, which was ultimately overcome by an unexpected surge in user numbers.

• COVID-19 accelerated the shift to remote living, but the trend is expected to persist.
• Online experiences complement and eventually take share from offline experiences.

"Covid is temporary, but remote living is permanent."

Paul Davison suggests that while the pandemic is temporary, the trend towards remote interactions, which Clubhouse facilitates, is here to stay.

• Retention is the primary metric Clubhouse focuses on for measuring success.
• Engagement metrics like session time and participation are also important.

"I think we mostly look at retention. So engagement, like you're talking about, that matters a lot."

Paul Davison identifies retention as the most critical metric for Clubhouse, indicating the importance of creating a product that users consistently return to.

• Early retention indicators (D1, D7, D30) can predict long-term retention.
• Companies aim for high retention rates to ensure stickiness and growth.

"Twelve month retention is great, but you also need to learn really quickly. D one retention, usually a good predictor of D seven. And once you get to D 30, if something is sticking by D 30, it usually sticks pretty well."

Paul Davison emphasizes the importance of early retention metrics as predictors of long-term user stickiness.

• Live content has unique value in certain contexts like news and sports.
• Clubhouse focuses on live interaction rather than passive content consumption.

"I think that that's generally right for content. News is an exception where you want to talk about what's breaking, what's happening right now."

Paul Davison acknowledges the general preference for on-demand content but points out the special cases where live content is preferred, aligning Clubhouse with these exceptions.

• Clubhouse competes for user time against various forms of entertainment and communication.
• The platform is positioned as a space for active participation and conversation.

"At the end of the day, everyone is competing for time. That's true. But there are certain contexts, certain times during the day, where I feel like passively listening or passively watching videos, and there are other times where I feel like hanging out and talking with people."

Paul Davison discusses Clubhouse's competition in the broader context of how consumers choose to spend their time, highlighting the platform's focus on interactive experiences.

• Startups require resilience in the face of media scrutiny and public opinion.
• Founders must develop a thick skin to navigate the highs and lows of startup growth.

"I think you have to have a thick skin if you're going to do startups."

Paul Davison comments on the necessity for founders to withstand criticism and maintain focus on their startup's journey.

• Harry Stebbings expresses admiration for entrepreneurs and individuals who take risks to innovate.
• He is inspired by historical figures like the Wright brothers who faced skepticism and danger but persisted in their endeavors.
• The key to progress is seen in those who build and try new things despite the risks and criticism.

"I really admire entrepreneurs. I really admire people who take a swing."

This quote highlights Harry's respect for the entrepreneurial spirit and the courage to pursue innovative ideas.

"But I think the people that really move things forward are the ones that are building stuff and trying stuff."

Harry believes that progress is driven by individuals who are actively working on new projects and ideas, despite the challenges they may face.

• The discussion turns to the necessity of having a thick skin when facing criticism while trying to innovate.
• Harry suggests that staying focused and continuing to build is the best response to negativity.

"And I think the only response is to have a thick skin and to just stay focused, heads down, building."

Harry advises that the best way to deal with criticism is to remain resilient and concentrate on the work at hand.

• Paul Davison discusses the challenge of maintaining morale and leadership during negative press cycles.
• He emphasizes the importance of being grateful for the opportunity to build something meaningful.
• Transparency and honesty with the team are crucial, as is acknowledging that startups often have a non-linear path to success.

"I think good people really respect transparency. They don't want you to sugarcoat stuff."

Paul believes that team members value openness from their leaders and prefer to be informed about the real challenges the company faces.

"Startups are not a linear path."

Paul acknowledges that startups often encounter various obstacles and that success is not guaranteed, which is a reality that should be communicated to the team.

• Paul Davison declines to comment on a specific acquisition offer but speaks about the importance of focusing on a particular medium to succeed.
• He believes that the company that wins in a new medium is the one that dedicates itself fully to that medium.
• Clubhouse is positioned well due to its focus on spoken audio and conversations.

"The company that wins is going to be a company that is fully focused on the medium."

Paul argues that companies that specialize in a new medium have historically been the most successful, suggesting Clubhouse's focus on audio gives it an advantage.

• Paul Davison reveals that Clubhouse has several years of financial runway, even without generating revenue.
• The strategy is to remain focused on improving the product and community.

"We have years of Runway right now, and that assumes no revenue."

Paul provides reassurance about Clubhouse's financial stability, indicating that the company can sustain itself for an extended period without immediate pressure to monetize.

• Paul Davison discusses the shift from social graphs to recommendation media and machine learning discovery platforms.
• He distinguishes Clubhouse as not just a content platform but also a place for friends-of-friends connections.

"The real core of Clubhouse, friends of friends."

Paul explains that Clubhouse is designed to facilitate connections that extend beyond immediate social circles, fostering a sense of community.

• Paul Davison comments on Twitter Spaces, seeing it as a broadcast product, which differs from Clubhouse's focus on interactive audio experiences.
• He acknowledges that larger networks have developed audio products but maintains that Clubhouse targets a different experience.

"Twitter is doing what they've done in the past, which is helping people broadcast to other people."

Paul distinguishes Clubhouse's interactive platform from Twitter Spaces, which he views as a continuation of Twitter's broadcasting approach.

• Paul Davison speaks on the rise of authenticity in social media platforms, where stress-free environments foster friendship and connection.
• Clubhouse aims to provide a means for authentic interaction through audio, allowing users to focus on conversation without visual distractions.

"Authenticity is a means to an end."

Paul suggests that authenticity in social media is valuable because it facilitates genuine connections, which is a core goal of Clubhouse.

• Paul Davison agrees with the notion that social media often succeeds by providing users with new creative tools.
• He emphasizes the importance of reducing friction and making it easier for users to look good in front of their friends.

"Virality is all about making your users look awesome in front of their friends."

Paul agrees with the idea that social media platforms can achieve virality by empowering users to impress others, which ties into the provision of creative tools.

• Paul Davison expresses a strong belief in the future of crypto and its role in the evolution of the internet.
• Clubhouse is in the early stages of integrating an economy into its platform, aligning with the principles of Web3.

"I'm very long on crypto. I'm a strong believer."

Paul's statement reflects his confidence in the longevity and significance of cryptocurrency and its integration into digital platforms like Clubhouse.

• Web 3.0 technology is anticipated to be integrated into products seamlessly, without the end-user noticing.
• The user experience (UX) of Web 3.0 is currently lacking but is expected to improve with new core components becoming available, such as fiat on-ramp and custody solutions.
• The inflection point for technology adoption often occurs when new services are built on top of it that enhance user capabilities without them being aware of the underlying technology.
• Wikipedia is cited as an example where users valued its free, accessible, and constantly updating content, not the technology it was built on.

"What I'd like to do, what we'd like to do is do it all on top of web three rails, but have it be completely under the hood."

This quote emphasizes the goal of integrating Web 3.0 technology into products in a way that is invisible to the end-user, focusing on the functionality and benefits rather than the technology itself.

• Timing is highlighted as a crucial factor in business and product success.
• The conversation acknowledges that being too early or too late can impact the reception and success of a product or service.

"Listen, Paul, timing is a big thing."

This quote underlines the significance of timing in the context of business and product launches, suggesting that it can be a decisive factor in achieving success.

• Paul Davison prefers audiobooks over traditional reading and enjoys nonfiction, particularly works that combine informative content with a poetic style.
• He mentions Carlo Rivelli's "Reality is not what it seems" and James Click's "The Information" as examples of books that have made an impact on him.

"I only do audiobooks. My wife makes fun of me because I'll say, oh, I read this book and she goes, listen to I don't have a single favorite."

The quote reveals Paul Davison's preference for audiobooks and his interest in nonfiction, suggesting that this format allows him to engage with content more conveniently.

• Clubhouse's success is attributed to its ability to concentrate user engagement and build a strong community.
• The platform's challenge lies in replicating this success across multiple communities simultaneously.
• Paul Davison admits that Clubhouse's growth was hindered by not hiring engineers quickly enough.
• Building a remote team and maintaining culture and communication is identified as the hardest element of Paul's role.

"I think that we managed to concentrate liquidity and get people all in a single room at the same time and get a good community going."

This quote explains a key factor in Clubhouse's success: the ability to create a platform where many users can engage in conversation within a single space, fostering a sense of community.

• Hiring pace is critical for scaling, and in hindsight, Clubhouse would have benefited from hiring more staff earlier.
• The importance of having a robust infrastructure and effective discovery mechanisms is emphasized, especially during rapid growth periods.
• Long-term perspective and steady growth are considered essential for overcoming challenges and maintaining a core community.

"I think we didn't hire fast enough."

This quote reflects on a strategic misstep in Clubhouse's growth, indicating that a faster hiring process, particularly for engineers, could have supported the platform's scaling efforts more effectively.

• Clubhouse aims to foster friendship and provide a space for people to have conversations and meet new friends.
• In five years, the vision is for Clubhouse to be a go-to platform for conversations and friendship-building, accessible to everyone.
• The focus is on providing a welcoming and engaging environment for users, regardless of their location or network.

"Our mission at clubhouse is to increase friendship in the world."

This quote encapsulates the core mission of Clubhouse, highlighting the platform's goal to be a space where users can connect, converse, and build relationships.

• Founders are advised to have thick skin when dealing with media and public opinion to avoid being distracted by criticism.
• Having prior experience and perspective helps in managing expectations during periods of intense hype and growth.
• The conversation reflects on the importance of not getting carried away by external validation and maintaining a critical, self-aware approach to building a company.

"You got to have thick skin and stay focused."

This quote offers advice to founders on handling media scrutiny and public opinion, emphasizing the need for resilience and focus to navigate the challenges of entrepreneurship.