A messaging app startup that raised $200M from SoftBank and others is shutting down because 95% of its users were fake

Two years ago, a messaging app startup called IRL reached a $1.2 billion valuation in a $170 million Series C funding round led by SoftBank V. . . Boasting of its “unicorn status” and noting that it had raised more than $200 million to date, the company described itself as “the leading group messaging social network that brings people together through events and shared experiences."

Fast forward to today and the venture is shutting down, admitting that those claims had been incorrect—to put it mildly. The board of directors concluded after an investigation that 95% of the users were “automated or from bots,” as The Information reported on Friday.


In “the old days” banks were very tight-fisted about giving business loans and getting one for a star-up was basically impossible. That’s because to make those loans banks had to use primarily depositors’ money and getting depositors’ money wasn’t either.

Sure there was a minor ponzi-like element to it. The bank would require that XYZ company the start-up keep its deposits with the bank. First and foremost the deposit would include whatever money it had just borrowed from the bank.


Fast forward to the current time and recent past, and banks did not/do not need depositors money (they don’t even need many depositors) Banks could get nearly endless amounts of money, borrowing directly from the Fed at literally zero interest for the purpose of funding hair-brained tech start-ups run by people who had no experience doing anything besides sitting in a cubicle writing code.

The key elements are

  • "Don’t be the only source of funds. Lend the money directly to the hair-brained start-up only after also lending money to a VC who put that money into the company.
  • The interest rate the bank paid to get the money was literally zero.
  • The company could be profitless and idiotic. It never needed to actually make or sell enough stuff to survive. If it could survive off the original loan for a few years, the loan could be bundled into commercial bonds (mortgage crisis ring a bell?) or the company could go public. (IPO)