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? |

Paul Davison is the Co-Founder and CEO @ Clubhouse, the startup that believes people are at the centre of every moment, providing a platform to talk with friends and meet new friends. To date, Paul has raised over $310M with Clubhouse from a16z, DST, Elad Gil, Naval Ravikant, and many more. Prior to co-founding Clubhouse, Paul was the Founder of Highlight, a location-based consumer social service backed by Benchmark. Before Highlight, Paul actually spent time at Benchmark as an EiR. In Today's Episode with Paul Davison We Discuss: 1.) Entry into Startups: How Paul came to found Highlight in the early days of consumer social? What elements worked with Highlight that he took with him to Clubhouse? Which elements did not work that he learned from? 2.) Clubhouse: What Worked: What does Paul believe are the primary reasons that Clubhouse grew so fast? What metrics does Paul use to determine true product-market-fit and stickiness? What is good retention on Day 1, Day 7 and Day 30? How important is 12-month retention? 3.) Clubhouse: What Did Not Work: COVID: Does Paul believe that Clubhouse was the COVID antidote we all needed? How sustainable is that if so? What trends make it more sustainable? Live Does Not Work: How does Paul respond to Mike Mignano's comments that "live does not work"? Why does Paul believe that Clubhouse is not a content platform? Quality: Does Paul agree that the quality of live is not as good as the quality of produced content? Is that a problem? If the quality is worse, what is significantly better about live? 4.) The Future of Social: Does Paul agree that we are seeing the disregard of the once hailed social graph in favour of a new era of recommendation media? What does this mean for Clubhouse? With the rise of the likes of BeReal, how does Paul think about the importance of authenticity in the next wave of consumer social? How does Paul forsee Web3 and the next generation of consumer social being interlinked? What will it take for Web3 to break through? What are the core barriers today? Does Paul agree that the best consumer social tools empower creators with Superhuman powers? 5.) Lessons on CEOship: What are Paul's biggest lessons on successful company building? How does Paul manage the criticism and negativity of the press personally? How does Paul maintain the morale internally when the press cycle is so negative? How has Paul adapted himself to gain a thicker skin and not pay as much attention? Items Mentioned in Today's Episode: Paul's Favourite Book: Reality Is Not What It Seems: The Journey to Quantum Gravity, Information: A History, a Theory, a Flood

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  This is 20 VC with me, Harry Stebbings, and I'm so excited for the show today. I've wanted to do this one for a long time. Today's guest took the world by storm, becoming one of the hottest apps in the world in 2021. It's had its ups and downs, and today we talk about them and the future plans. And so I'm thrilled to welcome Paul Davison, co-founder and CEO at Clubhouse, the startup that believes that people are at the centre of every moment, providing a platform to talk with friends and meet new friends. To date, Paul has raised over $310 million with Clubhouse from Andreessen Horowitz, DST, Ela Gil, Naval Ravikant and many more. Prior to co-founding Clubhouse, Paul was the founder of Highlight, a location-based consumer social service backed by Benchmark. And before Highlight, Paul actually spent time at Benchmark as an EIR.

• 0:44Harry Stebbings?

  I'd also want to say a huge thank you to Bubba Miraka for some amazing question suggestions today. Really did make such a difference. But before we move into the episode today, Harvard Management Company is constantly seeking out the next generation of great investors and entrepreneurs. HMC has managed Harvard University's Endowment for nearly 50 years and was one of the first institutional investors in venture capital. Their experience and long-term investment horizon makes them ideal partners to get world-changing ideas on a path to viability and success. They work as a true partner, providing insightful perspectives to help managers succeed. I personally have had the pleasure of working with the HMC team and can say that they are truly exceptional partners and savvy investors. Whether you are launching your first fund or your fifth,

• 1:28Harry Stebbings?

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• 2:12Harry Stebbings?

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• 2:56Harry Stebbings?

  to unlock a world of incredible later stage private market investments. That is marketxventures.com. But that is enough from me. So now I'm very excited to hand over to the one and only Paul Davison, co-founder and CEO at Clubhouse.

• 3:14Speaker 01

  You have now arrived at your destination.

• 3:17Harry Stebbings?

  Paul, this is such a joy to do. I've wanted to do this one for a long time. We've known each other for quite a while now, but thank you so much for joining me first.

• 3:24Speaker 02

  Thank you for having me, Harry. I've listened to many episodes, so I'm very excited to be here.

• 3:29Harry Stebbings?

  And it's so funny, Bubba was like, ask him how he has so much energy all the time. So I mean, I'm gonna save that for a bit later in the show. I want to start, basically the founding of Clubhouse, name we all know and recognize today. Take me back to that founding aha moment for you. And what was that aha moment?

• 3:45Speaker 02

  Rohan, my co-founder, and I've been building social apps for over a decade now. The first company I started was a location based social network called Highlight that helped you learn more about the people around you. And the whole thesis behind it was that the people in our lives, the people we become friends with, the people we marry, the people we do things with, they're the most important thing in the world. Nothing affects our lives and our happiness more than the people around us. But the way that we learn about people and the way that we decide how to bring new people into our lives and get to know them is just incredibly random and inefficient. Eventually, we sold Highlights to Pinterest and I spent some time there and Rohan was working on social apps as well and we reconnected in late 2019. And we sort of said, man, we've always wanted to work together. Timing is lining up right now. Let's do it. What should we build?

• 4:27Speaker 02

  Obviously, we're not going to do a consumer social app because those things are crazy and we love them so much, but we've got kids and like it's probably not a rational thing to do. So we were looking at education and productivity and enterprise and all sorts of other stuff. And we started to get deeper into audio and we were looking at it going, man, we love this space so much, like we love podcasts like yours, we love audiobooks. And I think most importantly, we love having conversations with our friends. We were looking at what the state of the art was and at the time it was basically podcasting, which is great for listening, but it's not great for participating and it's a lot of work. And it felt like it was going to grow quickly as a space because of AirPods and Alexa and text to speech and all sorts of other stuff. So as we got deeper into it, we eventually said, ah, shoot, we have to build a social app.

• 5:12Speaker 02

  And I remember going back to my wife, we've been together since high school and I'm like, so I'm really sorry, but we're going to build another social app. And she's like, I think that's great. I know you love it and that's what you should be doing. So we sort of time boxed it. We said, okay, we'll give ourselves six months to try and make this thing work. And if it doesn't work, we'll go do something more boring. And the first thing that we did, I think we might have reached out to you at this time, Harry. We had this app called Talk Show, a more formal precursor to Clubhouse. It was a bit more broadcasty and we built it in a few weeks. There were hints of magic to it, but we didn't believe that it was going to be durable. It didn't seem like a place where people could go to discover content and hang out and talk. And so we killed it after about six weeks and we launched the first version of Clubhouse. And you ask about the aha moment, it just kind of worked from the early days.

• 5:55Speaker 02

  And I can tell you, we worked really hard to give it the right conditions to grow. And I think Rohan and I were probably the last ones to admit that something was working with the product because we've been doing this stuff for so long that you just, you naturally try and become your own worst critic.

• 6:09Harry Stebbings?

  Before we get to why it worked, I do just want to ask, I place a lot of value on serial entrepreneurship and the lessons that come from it. You mentioned the time with Highlight there and the 10 years before building a consumer social. What did you do with Highlights that you took with you to Clubhouse? What did you do that you did not take with you? How did it impact your building of Clubhouse?

• 6:29Speaker 02

  Oh man, I think there's a lot that I did not take with me intentionally. I mean, I loved Highlight, I loved it, but you learn so much. It's not a rational thing to keep going back to the table with consumer social stuff. I do feel like you get better at it over time. You learn to pattern match. 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. You learn tactical growth hacky things aren't really going to make your product work. That's not the right thing to focus on. So we, we talk about durability a lot. And I think the most important thing, though, you learn how to build a company the right way. Rohan and I spent a lot of time before we decided to build Clubhouse aligning on values. We, we said, if we're going to do this, we're going to keep the team really small.

• 7:14Speaker 02

  We're not going to raise money unless we really think something's working and we think we need to raise money. And we're going to move really quickly because that's a huge advantage that you have as a startup. But we're going to move quickly, not by taking on everything and burning everyone out and working 20 hours a day and doing everything poorly. But we're going to move really quickly by hiring experienced people who know what they're doing. Most of our people are, have done it before. They're at the top of their game in their field and their craft. They're brilliant and that makes such a difference. In order to build out a team like that, you have to try really hard to be transparent with them about everything, to be pro employee in every decision that you make. You know, you don't build a great company by nickel in and dime in and, and trying to like optimize how much equity you retain. You have to kind of try and do the right thing, even when no one's looking. And you have to be smart about how you execute as a team.

• 7:59Speaker 02

  So we have a set of operating principles, 80/20 and respect for sequencing. And if something's not going to change the answer, don't bother doing the analysis and no points for packaging on internal stuff and type one versus type two decisions, frameworks that allow you to move faster. When I look back at how I ran Highlight versus how I run Clubhouse, there's a lot that you take with you. I think that makes all the difference in the world. And I think really good people. Respect a company that tries to act in a principled way.

• 8:27Harry Stebbings?

  Can I be blunt? Founded Highlight, you sold it to Pinterest, you then worked at Benchmark. You had the experience in the network to hire those people and you had the pedigree. If you're a normal founder who doesn't have the Benchmark E I R, the acquisition by Pinterest, good luck hiring your very, very experienced, seasoned operators that early. It doesn't happen. What would you say to them?

• 8:49Speaker 02

  I think that's absolutely true. A couple of things I'd say. One is, we didn't actually build out the team at Clubhouse until we felt that there was real traction there, that we really needed to build out a team. So when we did our Series A, the company was two of us. Rohan was doing all the engineering, I was doing all the pixels and we would collaborate a lot on product. It was just us. And I think that's really helpful. Like, don't scale the team until you need to. I think if you need to raise a team earlier, having some sort of prototype, having something that you can show them that goes really, really far. The way that you find people who want to build something with you is, number one, work on something that you love and 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, then you can tell the story better.

• 9:34Speaker 02

  And I think being able to tell a story well is so important as a founder, right? It's helpful for building the team, for recruiting, for fundraising, for closing business deals, for doing M and A. And so really investing in that goes a long way. And the last thing I'd say, you are absolutely right that access is not evenly distributed. And that's something that I really hope Clubhouse can change. The 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.

• 10:05Harry Stebbings?

  So you mentioned there, you know, two of you, when you raised the Series A, and actually it was then that you realized that something was working. What were the signs that you knew that it was working and then actually product market fit tick? And it was time to ramp?

• 10:17Speaker 02

  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. But if you think about it from a more zoomed out view. When we launched Clubhouse, it was quite simple. It was a single room. The whole app was a single room. There was no audience. Everyone was a speaker. There was no follow-up graph. Everyone followed everyone and you couldn't change that. And so you'd come in and you got invited into this thing. You'd come in and you'd see your friends there hanging out. And you'd see friends of friends and people that were here in your extended network and you'd talk with them and you'd laugh and you'd hang out and you would spend hours doing that. It really mimics that real world behavior of hanging out with friends. It just takes it online. And I think that that core experience works. People stayed for hours.

• 11:02Speaker 02

  They come back all the time. And I think word of mouth is the best way for a product to grow. And my fundamental belief is that the best communication products, they don't invent new behaviors. They take what we are wired to do as humans, what we love doing, and they make it easier to do it instantly with anyone. And this predates the internet, right? Like, think about the telephone. Before the telephone, I could only speak to people who were within earshot. And then we got the telephone and suddenly I could sit here and I could talk with people all over the world. And before video, we could only see things that were line of sight. And now I can see through buildings and across continents. And if you think about the internet, what that did, it only accelerated that. Why did Tinder work? It worked because people loved to date. But now, suddenly, you could do it without getting rejected and you could do it from anywhere. Why did Zoom work? We have to have business meetings, but now you can do it from anywhere.

• 11:47Speaker 02

  But I do think that when these products take off, all the ones I named and other ones, there's usually a why now moment. Facebook, people suddenly had cell phones, but there was no way to look up people's cellphone numbers. When you think about Instagram, we just suddenly got mobile photos, but they were slow and they weren't very high quality and we needed a better way to share them. And I think with Clubhouse, there was a why now. I think it was AirPods. I think it was Alexa. I think it was text to speech. But I just fundamentally believe that technology takes offline behavior that we love doing already and it makes it dramatically easier. 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. Inevitably, some company is going to come along with the right combination of timing and execution

• 12:31Speaker 02

  on the exact details and a lot of luck, and they will be the one to grow. And in our case, the growth was a lot faster than we had expected or planned for.

• 12:40Harry Stebbings?

  I mean, the growth was insane. And if there's one thing that I get criticized for, Paul, like many things, I'll, I'll, my dad will say that. But one thing really is I'm too soft, apparently. Twitter loves to tell me I'm too soft. Fuckers. But I I promise not to be. And so, you know, obviously, we had a cocky sick growth. And then, I'm being direct, we had this decline. And I wanted to talk about the reasons for the decline before we talk about the future. Number one reason for decline, I often think to, is, as you mentioned, Covid there. And the consumer behaviour, we were lonely, we were bored, and we were given this drug of Clubhouse, which made us not lonely and not bored. My question to you is, was Clubhouse the Covid antidote? And was it a short-term consumer behaviour change?

• 13:24Speaker 02

  Covid is temporary, but remote living is permanent. What you see over time is that we have offline experiences, and then online complements come. They're not as high fidelity, but they have other advantages. And over time, they get better and they take share from offline, and then they expand the market for it. We're a funny company. We tried really hard to grow slowly, and we succeeded for nine months, right? The reason we had the invite model is because it was two of us, and we didn't want to grow too quickly because things break. The reason we didn't do press was because we didn't want to grow too quickly. Six months after the Series A, the company was still probably like seven of us. And then we had a couple of months where we just grew like 10x every month. And that does a couple of things, right?

• 14:05Speaker 02

  The first thing is it gives you two months of silly download numbers that everyone will compare the company to. But it also stresses the system. Those numbers, they looked really good on paper, but we weren't giving people a good experience. It was a terrible experience. You try and use the app, and it hadn't been built to support that level of scale. Everything is breaking. You're getting error messages, the app is crashing, it's in the wrong language. That community that we had worked hard to build got too big, which made it really hard to find relevant people if you joined six months after we had started. And our goal is not to grow 10x per month. That is never going to be sustainable. That's never going to be a good experience for any product. Our goal, take the foundation that we have, stay heads-down building, and just make it better and better.

• 14:50Speaker 02

  You know, so Covid absolutely accelerates remote living. But I think remote is permanent and I think people want to hang out with friends.

• 14:57Harry Stebbings?

  What is the North Star metric then? Is it the amount of sessions that people join? Is it the amount of time they stay for in the session? Is it the amount they host? What is the guiding metric which determines the success of a user on Clubhouse?

• 15:08Speaker 02

  I think we mostly look at retention. So engagement like you're talking about, that that matters a lot. You know, our average person, if you join a room on Clubhouse, on average, you're there about seventy or eighty minutes a day. Thirty to forty percent of people are talking, depending if you look on a weekly or daily basis. So it's really, really participatory. But the thing that you want to optimize for is retention. If you can build a retentive product that people love, you're going to grow, I believe.

• 15:32Harry Stebbings?

  What's the right retention numbers? I I had a lunch with the one of the most successful consumer social ambassadors of all time just now. And he was like, Harry, you need to look at the twelve month retention numbers. And I was like, twelve month? Fucking hell, that's a long time.

• 15:45Harry Stebbings?

  I was looking at six months, so I felt like shit. Like, what retention numbers to you are indicative enough of stickiness?

• 15:51Speaker 02

  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 thirty, if something is sticking by D thirty, it usually sticks pretty well.

• 16:02Harry Stebbings?

  What is good for D thirty? I don't think Snap had like thirty five percent. What's good for D thirty?

• 16:08Speaker 02

  So different companies define it in different ways. If you define D thirty as what percent of people who install the app on D zero physically open the app on the thirtieth day? Not on the week that follows, but on that day. North of twenty percent is good, fifty percent is great.

• 16:22Harry Stebbings?

  The other one that I actually spoke to Mike Mignano about, which is obviously the founder of Anchor.

• 16:26Speaker 02

  Yeah.

• 16:26Harry Stebbings?

  Is he said, the thing I learned is live does not work, Harry. People want on demand. People want to listen in their own time. Why do you think that's wrong?

• 16:35Speaker 02

  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. I think sports is an exception where you need to know who the winner is. But I do think there's something qualitatively different. About live that we don't really understand, like if I'm sure you've had the experience in the past where you're in the car and a song comes on the radio that you like. And you're like, oh my gosh, we've got to listen to this, but you wouldn't open up Spotify and listen to it in the moment, even though you could. There's something about live that feels special, but generally I think Mike's right and you're right. Live for content is really hard. From my perspective, Clubhouse is not about content. Clubhouse is about talking. Like I was saying, seventy to eighty minutes a day, people are in these rooms and thirty to forty percent of them are talking.

• 17:15Speaker 02

  They're, they're hanging out with people. I think it would be a bad strategy to try to compete for passive content. Because I think what you're saying about live is right.

• 17:24Harry Stebbings?

  I always view the ultimate currency is the consumer's time. That is the currency that I compete for, which is why I compete against games in my mind. I compete against Netflix. It's not just invest like the best. There's many other things that we compete against. Love you, Patrick. But my point being there, like, who do you compete against then? Cause like, are you competing against the phone call with my mom? You are competing with podcasts still though, aren't you? And content.

• 17:48Speaker 02

  It depends on what the person is looking for. There are people that open up Clubhouse to listen. But I think the most magical experience, what they love it for, is the people that they meet, the friends that they're hanging out with, the conversations that they have. 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. And I think Clubhouse competes more on the latter.

• 18:14Harry Stebbings?

  Can I ask you a blunt question, Paul?

• 18:15Speaker 02

  Yeah.

• 18:16Harry Stebbings?

  There is this unbelievable ability for us today to build up these heroes in technology. And the desire to do that is so we can then smash them. As bluntly, many media people have liked to do with Clubhouse. How does it feel?

• 18:28Speaker 02

  I think you have to have a thick skin if you're gonna do startups. I think that's something that I've developed over the years. Personally, I feel that I really admire entrepreneurs. I really admire people who take a swing. It's so easy to dunk on people and shit on people and say why something can't be done. But I get personally really inspired by the people that are out there trying. I read this book on the Wright Brothers a while back and it, you know, it's like a hundred years ago. It wasn't that long ago. But they're sitting there on the ground. Looking up at the sky going, I'm gonna figure out how to make man fly. And everyone who's trying it just died, like so many people just died. It was so dangerous and everyone was just like laughing and saying it couldn't be done. But I think the people that really move things forward are the ones that are building stuff and trying stuff.

• 19:12Speaker 02

  And so I try to celebrate that. But the reality is when you're trying, like you're gonna have to deal with that, right? And I think the only response is to have a thick skin and to just stay focused, heads down, building, right?

• 19:23Harry Stebbings?

  It makes me think of the, I think it's the Roosevelt quote, which is like, you know, credit goes to the-

• 19:27Speaker 02

  Yeah, the man of the arena.

• 19:28Harry Stebbings?

  Yeah, exactly.

• 19:29Speaker 02

  Yeah, I love that.

• 19:30Harry Stebbings?

  My question to you is, I get that you are a seasoned entrepreneur, you have a thicker skin. You're also just more mature as a person bluntly. You wouldn't know it looking at us, but say I'm a little bit younger than you and I'm on the clubhouse team, say, I do not have such a thick skin. How do you maintain morale and leadership when there is negative press cycles? And although you're good, you need to uphold your team and instill that fighting confidence in them. How do you do that as a leader?

• 19:56Speaker 02

  I think it's really challenging. It's one of the bigger challenges of building a company when it's not a linear path. And one other thing I would say about having a personal perspective on it. I feel immensely grateful that I live in a world where I get to spend time building something I love. So I think having that perspective is important. I think kids changed my perspective too. You don't worry as much about Silicon Valley nonsense. But I think for the team, talking openly about it. I think good people really respect transparency. They don't want you to sugarcoat stuff. They don't want you to bullshit them. They want you to be straight with them. And the reality is startups are not a linear path. If you look at most social platforms that have eventually succeeded, they went through some messy middle period and some didn't make it and some did. So we sort of tell them, here's where we think we are.

• 20:40Speaker 02

  Here's what we know. Here's what we think works. Here's what we think the right next step is. If you disagree, like, please tell us. We talk a ton about product as a team. Honesty and transparency, being able to explain what you think the mission is and why you're so excited about it. I think that tends to resonate with people. It's again, something that you learn as an entrepreneur over the years.

• 21:03Harry Stebbings?

  I'm pushing the boundaries here of acceptability, so you shoot me down by all means. Was it tempting with the Twitter offer?

• 21:11Speaker 02

  I can't comment on that, but I will say that, you know, we've thought a lot about how this world plays out. Who ultimately wins and what is the right to win? I think what we're working on has the potential to really, really impact society in a big way. It feels obvious to me, this is going to exist. I think the company that wins is going to be a company that is fully focused on the medium. If you look at history, that is how it has played out. New networks don't come along very often. They tend to happen when there's a new medium that emerges on the internet. Historically, the company that is focused on that medium has tended to win. Like text was Twitter, photos was Instagram, video was YouTube and now TikTok. And I think spoken audio, talking, conversations, I think that's going to be the same.

• 21:52Speaker 02

  And the reasons for that are tied to the fact that when I use a product, when I use it, how I use it, so much of that is a function of the medium. If I'm using an app that is short form text or photos, I usually open it when I have 20 seconds to spare. I have two minutes to spare. I'm walking to the hallway and waiting in line for a cup of coffee. I don't have airplanes in. I'm not looking to participate. The set of people who I follow are the people who are really good at that medium. The primary discovery service that the app opens to is dedicated to that medium. If it's on some secondary or tertiary screen, usage plummets. If it's not the company's most important reason for being, they shutter it when things get hard for them. The business model, the brand, all of it is tied to that medium. So I believe that the company who wins is going to be a company that is fully focused on that medium. And I think that we're in a good position to do that. We're fortunate that we raised a lot of money before the tech downturn.

• 22:36Speaker 02

  And our goal is to just stay heads down, focus on the product, focus on the community, and just make it better and better and better every week. And I think if you do that, it puts you on a good path.

• 22:47Harry Stebbings?

  How much runway do we have?

• 22:48Speaker 02

  We have years of runway right now, and that assumes no revenue. We've got, we've got a lot.

• 22:52Harry Stebbings?

  You mentioned kind of the medium there. One thing that we've seen is actually kind of the disregard for the social graph, which we've all hailed for so many years. And you see this across Facebook, Twitter, TikTok, towards this, and I think Miniano does this well, which is like the disregard for that and the praising now and the complete movement towards kind of recommendation media and really all companies being machine learning, discovery platforms for media and TikTok really kind of pioneering that. Do you agree with that?

• 23:18Speaker 02

  I think there's some truth to that for content. But I don't think Clubhouse is a content platform. The way that I think about it is you have kind of a spectrum from communication products like messenger apps to media products. And they all operate pretty differently. So with Clubhouse, I think that some of that applies. The real core of Clubhouse, friends of friends. Like, if you think about it, there are a lot of products that are private five-person messenger products for people you already know. Small groups of friends that know each other. There are a number of great products for big admin-led community management, Discord and Slack and like legacy Facebook groups. I think the world tends to operate around friends of friends, and I think that hasn't fully come online yet.

• 23:59Speaker 02

  So if we can help connect you with your friends and insert that sort of presence layer where you can open up your phone anytime you want and just talk with a few friends. And allow you to meet other people through your friends, I think that's a really powerful thing.

• 24:12Harry Stebbings?

  So I'm an investor in BeReal and everyone is shitting on me because I'm like, oh, BeReal has real defensibility. And everyone's like, oh, well, any big consumer social company can just copy you. So I thought, who else to ask but you for your advice, Twitter Spaces. What do you make of that?

• 24:25Speaker 02

  I think that we've seen quite a few larger legacy networks build out audio products over the last year and a half.

• 24:32Harry Stebbings?

  Yeah.

• 24:32Speaker 02

  Twitter is doing what they've done in the past, which is helping people broadcast to other people. And I think that they've done a fine job at that, and it's pretty different from what I think we target at Clubhouse.

• 24:44Harry Stebbings?

  Yeah.

• 24:44Speaker 02

  I think it's a broadcast product.

• 24:46Harry Stebbings?

  So you think it's different. You think theirs is a content game?

• 24:48Speaker 02

  I think it is much more so in that direction, yeah. You know, they recently combined it with podcasts in the podcast tab. I think that's really what they're targeting is broadcast.

• 24:56Harry Stebbings?

  We mentioned BeReal. I mean, BeReal's kind of premise is authenticity. But how do you think about kind of the rise of authenticity in social? Where we've kind of moved from this generation of decadence and perfection to now we want selfies of our friends without coffee in the morning. And that's cool now.

• 25:13Harry Stebbings?

  How do you think about the rise of authenticity and kind of that realness integrated into the next generation of social?

• 25:21Speaker 02

  I think authenticity is a means to an end. When you provide a stress-free environment where people can be themselves, it helps build friendship and connection. In the same way that for us, I think of audio as a means to an end. It allows you to hear nuance and intonation and tone without worrying about what you look like or how messy your house is. So I think authenticity is a means to an end, and that is why we built Clubhouse. We have actively seen more and more rooms going private and semi-private over time. You actually only see a fraction of what's happening on the Clubhouse network when you open the app, and that's increasingly true over time. I think there's a lot of value in that, right? And they're just different products, right? Broadcast is one thing, and there are people that just want content that is not interactive.

• 26:03Speaker 02

  I think authenticity works with friends and friends of friends and people in situations where you want to build relationships with people, and that's a very powerful thing.

• 26:12Harry Stebbings?

  Yeah, one thing I found interesting, I remember once hearing Kevin Sisham say that like the best social products are fundamentally built on the foundations of giving creators or people tools to create that they didn't have before. You know, for Instagram, it was beautiful filters which made everyone a wonderful photographer. Do you agree with that statement, that it starts with creator tools?

• 26:30Speaker 02

  I think that it often does. There's a great quote that I will paraphrase and butcher, which is virality is all about making your users look awesome in front of their friends. And constraints are really important in social media too, so I think there's a lot of truth to what Kevin is saying. I have tremendous respect for Kevin. It depends on the type of product though. Tinder or LinkedIn, they're more people networks, and so sometimes the benefits come from liquidity. They come from making it dramatically easier to like connect with other people regardless of your location. All information technology is about reducing friction. And I've always been amazed at how seemingly small reductions in friction have a massive impact on usage. And if you can make stuff easier to do, and if you can make it easier for me to look like I'm really good at this thing, that's even better. So I think there's a lot of truth to what he's saying.

• 27:15Harry Stebbings?

  If they could do a thinning filter on Instagram, I'd be even more addicted. Final one before we do a quick fire. The world is abuzz with Web 3. I mean, wait for you to answer this one first.

• 27:27Harry Stebbings?

  Web 3, what will it take for it to break through? Is it here for the long term? Is it sustainable or is this just another fad?

• 27:34Speaker 02

  I'm very long on crypto. I'm a strong believer. I think it's the right way for the internet to evolve. Right now, we're building an economy into Clubhouse. We're in the early stages of it, but hoping to have something out there in the not-too-distant future. What I'd like to do, what we'd like to do is do it all on top of Web 3 rails, but have it be completely under the hood. And I think with Web 3, with crypto, like the challenge has been that the UX is just not there yet. But a lot of the core components that you need to do things like Fiat OnRamp and Custody and everything else, I think those will be coming online in the next six to nine months. I feel that for products in general, the inflection point often comes when services get built on top of them without end-users even realizing it.

• 28:17Speaker 02

  It's when people build on top of it because it just allows them to do new things for the user. And the user doesn't even have to know what's happening under the hood. Like, an example that I often think about is Wikipedia. When Wikipedia came along, no one cared that it was built on the Lamp stack or even that it was a web-based encyclopedia. They cared that it was free, that it was accessible from anywhere, and that it was constantly updating. And so I believe that in the medium to long term, we'll have products that are built on top of Web 3 technology that are just better. And it just becomes obvious that you should build on top of those because you can do things for consumers that you couldn't do before.

• 28:51Harry Stebbings?

  You know what, Paul? I agree with you. So long on Web 3.

• 28:56Harry Stebbings?

  I literally tweet shit about Web 3 and then my business partner's like trying to invest in Web 3 companies. And all the founders are like, Harry hates it. And I'm like, yeah, so terribly challenging. Listen, Paul.

• 29:06Speaker 02

  Timing's a big thing, you know?

• 29:08Harry Stebbings?

  Timing's a big thing, crucial. I want to dive into a quick fire, my friend. So I say a short statement, you hit me with your immediate thoughts. Sound okay?

• 29:14Speaker 02

  Yeah, yeah.

• 29:15Harry Stebbings?

  Okay, so what's the favorite book and why?

• 29:17Speaker 02

  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. A couple of good ones. I really like Carlo Rummelli, Reality is Not What It Seems. He writes about physics, but it's very poetic. I like The Information by James Click, which is about the history of literally information and how it travels and how we record it. Those are a couple. I do mostly like nonfiction and tech and science books.

• 29:39Harry Stebbings?

  What is the single biggest thing you got right with Clubhouse?

• 29:42Speaker 02

  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. And the whole trick is, how do you repeat that for many, many, many communities at the same time?

• 29:56Harry Stebbings?

  What is the single biggest thing you got wrong with Clubhouse?

• 29:59Speaker 02

  I think we didn't hire fast enough.

• 30:01Harry Stebbings?

  What would you have hired sooner?

• 30:02Speaker 02

  Engineers.

• 30:03Harry Stebbings?

  What's the hardest element of your role with Clubhouse today?

• 30:06Speaker 02

  I think building a remote team is really hard. I don't think it's practical to build a fully in-person company anymore. I don't want to be fully distributed. You know, we went from nine people to ninety-five people over the course of the year. And building culture and communication and all the right working patterns in that environment is really tricky, especially when you're doing it in a very public way.

• 30:25Harry Stebbings?

  I do the same with funds and media companies. New people join, you're like, are you happy? Like, are you enjoying it? Like, did you have a good day? And you have no idea whether they're miserable or like very happy. I find that tough. How did you get Elon on Clubhouse?

• 30:39Speaker 02

  We did not. The Good Time Show did. Like, all of the stuff that has happened in Clubhouse, vast majority of it just happened totally organically. By the user community, the community is amazing. It's literally the best community I've ever experienced anywhere. And all of the people that come on, all the moments that happen, it's all driven by the community.

• 30:55Harry Stebbings?

  If I could remove one recurring event from your calendar, my friend, what would it be?

• 30:59Speaker 02

  I have a recurring block to answer emails. That's the one I look forward to the least. Rohan, my co-founder, the hardest I've ever made him laugh was I made a joke about not being inbox zero and outbox zero. I would remove that meeting and not do it if I didn't have to.

• 31:12Harry Stebbings?

  What's your biggest advice to founders on dealing with the media and hype?

• 31:16Speaker 02

  Get advice from someone who's done a better job of it than I have.

• 31:21Speaker 02

  No, I think you just have to have thick skin. You literally just have to. If you don't, you will crumble. Anytime someone says something mean about you and it's going to distract you, you gotta have thick skin and stay focused.

• 31:30Harry Stebbings?

  Did you believe the hype? I remember when there was like, Paul is Zuck and Clubhouse is Facebook. And I remember literally, because it was one weekend in particular, when I literally got twenty-five calls from growth funds, everyone asking to buy my tiny, tiny investment. You know, this is not big. But I mean, it was crazy. Did you believe the hype then? It's hard not to.

• 31:51Speaker 02

  I think it's Really nice building this company when I have some experience and I've done this stuff before and like I'm older, honestly. The nice thing about that is when things are crazy, crazy good, you're like, yeah, yeah, but it'll die down. When things are hard, you say, yeah, but we'll figure this out. You have so much perspective on it. You tend to be your own harshest critic. You tend to be the most skeptical. We didn't raise money for a long time. We're like, yeah, it seems like it's working, but we don't know if this will scale. I think perspective really helps with that.

• 32:20Harry Stebbings?

  You love all your angels equally. Which angel's been most helpful to you and why?

• 32:24Speaker 02

  I think Baba Maraka has probably been the most helpful.

• 32:27Harry Stebbings?

  Why? I mean, I chatted him before the show and loved him, but why so?

• 32:30Speaker 02

  Anyone who has a chance to work with him should work with him. He is just endlessly supportive. There on a dime, if you need him to do anything, really great to brainstorm on product ideas with, always has great crazy ideas. He's just fantastic, like absolutely phenomenal.

• 32:45Harry Stebbings?

  What do you know now that you wish you'd known at the start of Clubhouse?

• 32:48Speaker 02

  I wish we had known when it would hit an inflection point and we would start growing really fast. That's what I was saying before, like I wish that we had built out the team sooner because fewer things would break.

• 32:59Harry Stebbings?

  What was the biggest thing to break?

• 33:01Speaker 02

  The infrastructure in the near term was broken for a few months. But I think in the long term, discovery is the biggest thing that you need to fix, right? If you suddenly have ten X, a hundred X as many people, how do you ensure that everyone gets in the right room at the right time? Without seeing a bunch of noisy rooms in their feed. And it's a process, right? You take a long term view and you just kind of accept that a lot of people joined and had a bad experience. But millions of people made it through and you've got this core community. And if you just focus on the long term, you you just grow that steadily every month over time.

• 33:29Harry Stebbings?

  Final one for you, Paul. Clubhouse in five years, which is what, twenty twenty seven? We do another show. Where is Clubhouse then?

• 33:35Speaker 02

  Our mission at Clubhouse is to increase friendship in the world. It's a great place where you can be among friends, meet their friends, talk about anything. And we have a lot more to do to make sure everyone has that experience when they join. But in five years, my hope is that everyone listening to this uses Clubhouse whenever they want to talk with friends, whenever they want to have a good conversation. And by doing that, they've made a ton of new friends, they've learned, they've connected with people. People and they have a place where they can always just open their phone and they can feel at home. We can fill everyone's life with fun and interesting people, no matter where you live, no matter where you work from, no matter what networks you have access to. I think that's a pretty amazing future to imagine.

• 34:18Harry Stebbings?

  Paul, I cannot thank you enough. Bubba was completely right on your energy. It is pretty incredible to see, but I cannot thank you enough for being so open and forgive me for my prying questions.

• 34:29Speaker 02

  No, not at all. Thank you so much, Harry. I really enjoyed it.

• 34:34Harry Stebbings?

  Now, I really want to say a huge thank you to Paul for giving up the time today to be on the show and also for allowing me to ask some rather more prying questions than I normally would. Such a great guest to have on. And if you'd like to see more from us, of course you can on 20vc.com. But before we leave you today, Harvard Management Company is constantly seeking out the next generation of great investors and entrepreneurs. HMC has managed Harvard University's endowment for nearly 50 years and was one of the first institutional investors in venture capital. Their experience and long-term investment horizon makes some ideal partners to get world-changing ideas on a path to viability and success. They work as a true partner, providing insightful perspectives to help managers succeed. I personally have had the pleasure of working with the HMC team

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