8 ms·

Yik Yak fires 30 of 50 employees

78 points by w1ntermute 10y ago

koolba 10y ago
> Since it began in 2013, the company behind the purportedly anonymous messaging app has never had, and still doesn’t have, any obvious source of meaningful revenue. Yet somehow, Yik Yak was valued by venture capitalists at $400 million in December 2014 after Sequoia Capital invested $62 million. Do investments of this size/nature typically have a raise-or-pay-us-back date associated with them? i.e. are they usually done as a convertible note to force the issue or pure equity?
- jaredtking 10y ago
  I would assume the board seats that the investors get in return for their investment provide this kind of protection. If the founders do not want to raise another round then the investors can boot the founders out and replace them with someone that will play ball. With board control then this might be more implied versus explicitly defined in the fundraising terms. Disclaimer: I've never been in this situation personally
- greglindahl 10y ago
  Investments in money-losing companies have a natural raise-or-do-something date called "zero cash day". And generally, the company can't raise new money without having a majority of each class of preferred stock vote for it, i.e. a majority of the money in every previous round. So if enough investors have lost confidence in management, no matter how much board control management has, investors can let the company run out of money.
  - koolba 10y ago
    > Investments in money-losing companies have a natural raise-or-do-something date called "zero cash day". And generally, the company can't raise new money without having a majority of each class of preferred stock vote for it, i.e. a majority of the money in every previous round. So if enough investors have lost confidence in management, no matter how much board control management has, investors can let the company run out of money. I was thinking more about the situation where the founders fire all the employees, run the operation as lean as possible (to maintain their obligations), and stretch the $62M as long as they can. At $2M/year that's 31 years without accounting for any growth of the money itself. Besides due diligence on the part of the investors to not give money to the kind of person that would do that, what prevents that situation?
    - greglindahl 10y ago
      xenadu02 is correct that your scenario is vanishlingly rare. After a nosedive, the next most likely scenario is that a failing business cuts its way to semi-profitability, which leaves the investors stuck with a low-growth investment in a fund that's nearing its end.
    - xenadu02 10y ago
      If the founders retain board control and don't run out of money there is little the investors can realistically do. Both sides are taking a lot of risk, I wouldn't rate this as a terribly concerning one. Far far more founders spend too much money and nosedive into the ground.
    - deleted 10y ago
      [deleted]
Larrikin 10y ago
What I don't understand are the people who still have it installed. They ruined the only interesting thing about the app when they forced names on everyone
- Eranmane 10y ago
  They actually reverse-pivoted into being an anonymous app again.
- icedchai 10y ago
  How's that? Just use a fake name.
  - TulliusCicero 10y ago
    The problem with pseudonymous account names is that if you post consistently under one, it makes it possible for people to figure out who you are, people who know you in real life can figure out the pattern. Yeah you could defeat this by repeatedly creating new accounts, but that would be annoying.
Overtonwindow 10y ago
This was sad to see. I work in their building and there were a lot of people crying and unhappy and venting in the lobby.
- Tempest1981 10y ago
  Unfortunately, the bad news hits hardest on those who believed the managements' positive spin. You hope that the leaders were being honest with employees as things began looking worse, so that it wasn't such a surprise.
klinskyc 10y ago
I have not used YikYak since they required me to add a phone number, it's so antithetical to their entire point that, in hindsight at least, their decision to de-anonymize it is unbelievable. Are any of the wave of anonymous social apps doing ok or well?
- abstractbeliefs 10y ago
  As far as I can see, none. There was some discussion recently about Secret coming back into vogue, but that seems to have fizzled in the past fortnight. The sad thing is, a lot of these apps are really successful in the outset, but then end up burned as the companies try, heavy handedly, to monetise. As much as the startup world sees themselves as morally above the like of Google who will sell out customers, many startups seem to sell out both their customers and their product, making fundamentally incompatible changes with what they were built on in the pursuit of cash.
  - minimaxir 10y ago
    Speaking of Secret, the founder of Secret's subsequent startup just launched a side project which is definitely not a stealth attempt at revitalizing Secret: https://bold.io/about-io-2016-12-06 https://bold.io/about-io-2016-12-06
    - fitshipit 10y ago
      related https://vimeo.com/179079175 https://vimeo.com/179079175
      - minimaxir 10y ago
        That's the first time I've seen that, and it's certainly no surprise that the company he works for is never mentioned in the video.
      - randycupertino 10y ago
        Interesting seeing him shilling for Infinity, I thought he was all about ferraris: http://www.businessinsider.com/secret-founder-sells-ferrari-2015-4 http://www.businessinsider.com/secret-founder-sells-ferrari-...
randomdrake 10y ago
Not too surprising. From a technology and hacker standpoint, I had a run-in with one of their earlier developers that left a really bad taste in my mouth. An ex-engineer from Yik Yak reached out while we were hiring a while back. They proceeded to supply a .zip file of their entire source code repository (yes, all of it). They said it was outdated now so it seemed okay in their eyes. This included all of the dot files for configuration: keys, passwords, email addresses, Amazon instances where databases were at, and more. I didn't ask for this .zip file, I was simply looking for some examples of experience. Needless to say, it definitely made me look at Yik Yak differently.
- prodigal_erik 10y ago
  I know a guy who interviews ops people and asks for certain details of their current employer's network security. The only answer he accepts is "no".
  - reikonomusha 10y ago
    Is it really wrong to give architectural considerations of the security of a system? It seems like security is a problem if having a discussion about such things could lead to its compromise. However, I have no expertise in the subject so I could be wrong.
    - codingdave 10y ago
      High-level discussions of how you designed your architecture is fine. But once you get into details, that gives someone enough information to start to fine-tune an attack on it. The more information they get, the better they can attack it. So, yes, in an ideal situation, you would be secure even if they did know your details, but security is never perfect. So it is wise to be conservative in sharing details.
    - asperous 10y ago
      Yeah, that's Kerckhoffs' principle: > "A cryptosystem should be secure even if everything about the system, except the key, is public knowledge"
StevePerkins 10y ago
I work nearby their Atlanta office, and about a six months ago I received numerous phone calls and emails from an internal recruiter about a Go developer job in that office. Speaking of fad flame-outs, his pitch kept trying to link Yik Yak to Pokemon Go (i.e. "one out of every eight yaks is about Pokemon!"). Uhh, okay? I never responded... because I heard that they had shot themselves in the foot with recent app changes, and were dying. Obviously, now I'm glad that I made the right call. I've seen this happen numerous times in my career, though. I just don't understand the sort of denial that keeps companies in "hire mode", even when their internal metrics must make it obvious that things have turned south.
- x0x0 10y ago
  I worked at a company in sf that went from bumping internal referral bonuses / pitching the employees to push eng friends to apply to layoffs in the span of a month. Including an h1b engineer that had been lured away from another company 3 weeks previously. It is, btw, completely legal to lure people away from jobs knowing there's a good chance you'll have to lay them off in the very near future. CEOs are happy to fuck employees over and we should never forget it.
  - ithinkinstereo 10y ago
    > CEOs are happy to fuck employees over and we should never forget it. _Jerk_ CEOs are happy to do that. There are plenty of ethical founders and managers out there that loath this type of behavior. Unfortunately I see more of this flavor at venture backed companies....
    - arethuza 10y ago
      By their very nature, VC backed companies are likely to get more unpleasant surprises than "normal" companies due to their need for regular large injections of capital from willing investors. Everything can look great until a round of investment falls through or is delayed and suddenly things can become unpleasant very rapidly.
kimshibal 10y ago
Everyone is moving to Jodel
Tempest1981 10y ago
Did they try running in-app ads? Why do they have "no business model"? They should still have a big chunk of that $62 million left in the bank, if they only had 50 employees. Cutting that to 20 should give them a few years of runway.
- azinman2 10y ago
  I'd imagine they might have spent a bunch getting into campuses across the US...
  - mcintyre1994 10y ago
    They had a campus representative at my university (UK), not sure how that worked. But if you had high 'yakarma' you'd apparently get free Yik Yak socks/t-shirts etc. from them.
throwaway_yak 10y ago
At a Sequoia-organized hiring event (which was dubbed as a conference) in New York this October, I got a chance to interact with over 10 of YikYak engineers, their hiring manager (ex-Google) and the CEO. The CEO had an unconventional background (was in med school at Furman), so I was interested in knowing how he made it. I was shocked to see that he didn't have any insights about how anything at the firm worked. I asked him how he raised funds, he replied that he found a family friend who worked in startups and everything was good from there. I wasn't interested in getting a job as I already have one, but the arrogant hiring manager didn't stop his attempts at (literally) pushing me towards a computer and asking me to apply. The (now, unfortunate) engineers were the only people who had some clue what they were doing (they had some really decent cross-language optimization problems)...
- greglindahl 10y ago
  Furman doesn't have a med school. He was a pre-med.
uncletammy 10y ago
I saw two of the founders speak at an event during SXSW last year. They spoke about the privacy and anonymity features of their app as if they added no value and caused more trouble than they were worth. To be fair though, half of the people asking questions during the Q&A were angry teachers and parents, grandstanding about how they don't sensor enough. I can see how that might wear you down. I would have cut them a break if they hadn't generally come off as arrogant pricks.
OJFord 10y ago
Yik Yak had 50 employees?! I'd have thought anybody could tell them that was too many... Wasn't Snapchat or Instagram at around that until fairly recently? Yik Yak is no Snapchat or Instagram.
- gaius 10y ago
  You're thinking of WhatsApp
  - OJFord 10y ago
    My point stands m.m.
    - gaius 10y ago
      Indeed!
ThatsEasyRight 10y ago
I've always wondered what happens to all the private conversations, guaranteed anonymized by the user agreement, when a company like this decides to start selling off it's assets.
foxhop 10y ago
Sorta related and not trying to pile it on, but I made a clone of Yik Yak during a hackathon a couple weeks ago. Share notes with people nearby https://unturf.com https://unturf.com
eschaton 10y ago
People shouldn't say "fired" when they mean "laid off." Being laid off means someone's position was eliminated. Being fired means someone was terminated for cause, i.e. because of something they did (or didn't do).
amingilani 10y ago
> Yik Yak fires 30 of 50 employees, still has no business model Oh, so what? Ars is trying to spin it off like the former caused the latter, while it's definitely the opposite. They hired too many people and realized it was time to let some go. There's absolutely nothing wrong with a company trying to rectify its mistakes. Instagram had 13 employees at acquisition, Yik Yak might have expanded too fast, but they're fixing it. > still doesn’t have any obvious source of meaningful revenue. Yet somehow ... valued ... at $400 million in December 2014" Plenty of companies have no revenue model initially, and can be valued at millions of dollars: Snapchat $800m in 2013[1], Instagram acquired at $1b. Maybe i'm too naive, but a company makes plenty of epic mistakes throughout its lifetime, and can do some pretty outrageous things (Zuck's business cards [2]) but that doesn't mean they're incompetent, just learning. This article's trying to shovel as much dirt as it can on the company with cherry picked incidents about trouble the company's run into, and it's not a lot of trouble honestly. How is a company's experimentation with mandatory user handles part of a post on its downsizing? [1]: http://qz.com/97467/snapchats-complete-inability-to-make-money-is-the-reason-its-worth-800-million/ http://qz.com/97467/snapchats-complete-inability-to-make-mon... [2]: http://nextshark.com/heres-the-story-behind-mark-zuckerbergs-im-ceo-bitch-business-card/ http://nextshark.com/heres-the-story-behind-mark-zuckerbergs...

78 points by w1ntermute 10y ago

> Since it began in 2013, the company behind the purportedly anonymous messaging app has never had, and still doesn’t have, any obvious source of meaningful revenue. Yet somehow, Yik Yak was valued by venture capitalists at $400 million in December 2014 after Sequoia Capital invested $62 million. Do investments of this size/nature typically have a raise-or-pay-us-back date associated with them? i.e. are they usually done as a convertible note to force the issue or pure equity?

jaredtking 10y ago
I would assume the board seats that the investors get in return for their investment provide this kind of protection. If the founders do not want to raise another round then the investors can boot the founders out and replace them with someone that will play ball. With board control then this might be more implied versus explicitly defined in the fundraising terms. Disclaimer: I've never been in this situation personally
greglindahl 10y ago
Investments in money-losing companies have a natural raise-or-do-something date called "zero cash day". And generally, the company can't raise new money without having a majority of each class of preferred stock vote for it, i.e. a majority of the money in every previous round. So if enough investors have lost confidence in management, no matter how much board control management has, investors can let the company run out of money.
- koolba 10y ago
  > Investments in money-losing companies have a natural raise-or-do-something date called "zero cash day". And generally, the company can't raise new money without having a majority of each class of preferred stock vote for it, i.e. a majority of the money in every previous round. So if enough investors have lost confidence in management, no matter how much board control management has, investors can let the company run out of money. I was thinking more about the situation where the founders fire all the employees, run the operation as lean as possible (to maintain their obligations), and stretch the $62M as long as they can. At $2M/year that's 31 years without accounting for any growth of the money itself. Besides due diligence on the part of the investors to not give money to the kind of person that would do that, what prevents that situation?
  - greglindahl 10y ago
    xenadu02 is correct that your scenario is vanishlingly rare. After a nosedive, the next most likely scenario is that a failing business cuts its way to semi-profitability, which leaves the investors stuck with a low-growth investment in a fund that's nearing its end.
  - xenadu02 10y ago
    If the founders retain board control and don't run out of money there is little the investors can realistically do. Both sides are taking a lot of risk, I wouldn't rate this as a terribly concerning one. Far far more founders spend too much money and nosedive into the ground.
  - deleted 10y ago
    [deleted]

Larrikin 10y ago

What I don't understand are the people who still have it installed. They ruined the only interesting thing about the app when they forced names on everyone

Eranmane 10y ago
They actually reverse-pivoted into being an anonymous app again.
icedchai 10y ago
How's that? Just use a fake name.
- TulliusCicero 10y ago
  The problem with pseudonymous account names is that if you post consistently under one, it makes it possible for people to figure out who you are, people who know you in real life can figure out the pattern. Yeah you could defeat this by repeatedly creating new accounts, but that would be annoying.

Overtonwindow 10y ago

This was sad to see. I work in their building and there were a lot of people crying and unhappy and venting in the lobby.

Tempest1981 10y ago
Unfortunately, the bad news hits hardest on those who believed the managements' positive spin. You hope that the leaders were being honest with employees as things began looking worse, so that it wasn't such a surprise.

klinskyc 10y ago

I have not used YikYak since they required me to add a phone number, it's so antithetical to their entire point that, in hindsight at least, their decision to de-anonymize it is unbelievable. Are any of the wave of anonymous social apps doing ok or well?

abstractbeliefs 10y ago
As far as I can see, none. There was some discussion recently about Secret coming back into vogue, but that seems to have fizzled in the past fortnight. The sad thing is, a lot of these apps are really successful in the outset, but then end up burned as the companies try, heavy handedly, to monetise. As much as the startup world sees themselves as morally above the like of Google who will sell out customers, many startups seem to sell out both their customers and their product, making fundamentally incompatible changes with what they were built on in the pursuit of cash.
- minimaxir 10y ago
  Speaking of Secret, the founder of Secret's subsequent startup just launched a side project which is definitely not a stealth attempt at revitalizing Secret: https://bold.io/about-io-2016-12-06 https://bold.io/about-io-2016-12-06
  - fitshipit 10y ago
    related https://vimeo.com/179079175 https://vimeo.com/179079175
    - minimaxir 10y ago
      That's the first time I've seen that, and it's certainly no surprise that the company he works for is never mentioned in the video.
    - randycupertino 10y ago
      Interesting seeing him shilling for Infinity, I thought he was all about ferraris: http://www.businessinsider.com/secret-founder-sells-ferrari-2015-4 http://www.businessinsider.com/secret-founder-sells-ferrari-...

randomdrake 10y ago

Not too surprising. From a technology and hacker standpoint, I had a run-in with one of their earlier developers that left a really bad taste in my mouth. An ex-engineer from Yik Yak reached out while we were hiring a while back. They proceeded to supply a .zip file of their entire source code repository (yes, all of it). They said it was outdated now so it seemed okay in their eyes. This included all of the dot files for configuration: keys, passwords, email addresses, Amazon instances where databases were at, and more. I didn't ask for this .zip file, I was simply looking for some examples of experience. Needless to say, it definitely made me look at Yik Yak differently.

prodigal_erik 10y ago
I know a guy who interviews ops people and asks for certain details of their current employer's network security. The only answer he accepts is "no".
- reikonomusha 10y ago
  Is it really wrong to give architectural considerations of the security of a system? It seems like security is a problem if having a discussion about such things could lead to its compromise. However, I have no expertise in the subject so I could be wrong.
  - codingdave 10y ago
    High-level discussions of how you designed your architecture is fine. But once you get into details, that gives someone enough information to start to fine-tune an attack on it. The more information they get, the better they can attack it. So, yes, in an ideal situation, you would be secure even if they did know your details, but security is never perfect. So it is wise to be conservative in sharing details.
  - asperous 10y ago
    Yeah, that's Kerckhoffs' principle: > "A cryptosystem should be secure even if everything about the system, except the key, is public knowledge"

StevePerkins 10y ago

I work nearby their Atlanta office, and about a six months ago I received numerous phone calls and emails from an internal recruiter about a Go developer job in that office. Speaking of fad flame-outs, his pitch kept trying to link Yik Yak to Pokemon Go (i.e. "one out of every eight yaks is about Pokemon!"). Uhh, okay? I never responded... because I heard that they had shot themselves in the foot with recent app changes, and were dying. Obviously, now I'm glad that I made the right call. I've seen this happen numerous times in my career, though. I just don't understand the sort of denial that keeps companies in "hire mode", even when their internal metrics must make it obvious that things have turned south.

x0x0 10y ago
I worked at a company in sf that went from bumping internal referral bonuses / pitching the employees to push eng friends to apply to layoffs in the span of a month. Including an h1b engineer that had been lured away from another company 3 weeks previously. It is, btw, completely legal to lure people away from jobs knowing there's a good chance you'll have to lay them off in the very near future. CEOs are happy to fuck employees over and we should never forget it.
- ithinkinstereo 10y ago
  > CEOs are happy to fuck employees over and we should never forget it. _Jerk_ CEOs are happy to do that. There are plenty of ethical founders and managers out there that loath this type of behavior. Unfortunately I see more of this flavor at venture backed companies....
  - arethuza 10y ago
    By their very nature, VC backed companies are likely to get more unpleasant surprises than "normal" companies due to their need for regular large injections of capital from willing investors. Everything can look great until a round of investment falls through or is delayed and suddenly things can become unpleasant very rapidly.

kimshibal 10y ago

Everyone is moving to Jodel

Tempest1981 10y ago

Did they try running in-app ads? Why do they have "no business model"? They should still have a big chunk of that $62 million left in the bank, if they only had 50 employees. Cutting that to 20 should give them a few years of runway.

azinman2 10y ago
I'd imagine they might have spent a bunch getting into campuses across the US...
- mcintyre1994 10y ago
  They had a campus representative at my university (UK), not sure how that worked. But if you had high 'yakarma' you'd apparently get free Yik Yak socks/t-shirts etc. from them.

throwaway_yak 10y ago

At a Sequoia-organized hiring event (which was dubbed as a conference) in New York this October, I got a chance to interact with over 10 of YikYak engineers, their hiring manager (ex-Google) and the CEO. The CEO had an unconventional background (was in med school at Furman), so I was interested in knowing how he made it. I was shocked to see that he didn't have any insights about how anything at the firm worked. I asked him how he raised funds, he replied that he found a family friend who worked in startups and everything was good from there. I wasn't interested in getting a job as I already have one, but the arrogant hiring manager didn't stop his attempts at (literally) pushing me towards a computer and asking me to apply. The (now, unfortunate) engineers were the only people who had some clue what they were doing (they had some really decent cross-language optimization problems)...

greglindahl 10y ago
Furman doesn't have a med school. He was a pre-med.

uncletammy 10y ago

I saw two of the founders speak at an event during SXSW last year. They spoke about the privacy and anonymity features of their app as if they added no value and caused more trouble than they were worth. To be fair though, half of the people asking questions during the Q&A were angry teachers and parents, grandstanding about how they don't sensor enough. I can see how that might wear you down. I would have cut them a break if they hadn't generally come off as arrogant pricks.

OJFord 10y ago

Yik Yak had 50 employees?! I'd have thought anybody could tell them that was too many... Wasn't Snapchat or Instagram at around that until fairly recently? Yik Yak is no Snapchat or Instagram.

gaius 10y ago
You're thinking of WhatsApp
- OJFord 10y ago
  My point stands m.m.
  - gaius 10y ago
    Indeed!

ThatsEasyRight 10y ago

I've always wondered what happens to all the private conversations, guaranteed anonymized by the user agreement, when a company like this decides to start selling off it's assets.

foxhop 10y ago

Sorta related and not trying to pile it on, but I made a clone of Yik Yak during a hackathon a couple weeks ago. Share notes with people nearby https://unturf.com https://unturf.com

eschaton 10y ago

People shouldn't say "fired" when they mean "laid off." Being laid off means someone's position was eliminated. Being fired means someone was terminated for cause, i.e. because of something they did (or didn't do).

amingilani 10y ago

> Yik Yak fires 30 of 50 employees, still has no business model Oh, so what? Ars is trying to spin it off like the former caused the latter, while it's definitely the opposite. They hired too many people and realized it was time to let some go. There's absolutely nothing wrong with a company trying to rectify its mistakes. Instagram had 13 employees at acquisition, Yik Yak might have expanded too fast, but they're fixing it. > still doesn’t have any obvious source of meaningful revenue. Yet somehow ... valued ... at $400 million in December 2014" Plenty of companies have no revenue model initially, and can be valued at millions of dollars: Snapchat $800m in 2013[1], Instagram acquired at $1b. Maybe i'm too naive, but a company makes plenty of epic mistakes throughout its lifetime, and can do some pretty outrageous things (Zuck's business cards [2]) but that doesn't mean they're incompetent, just learning. This article's trying to shovel as much dirt as it can on the company with cherry picked incidents about trouble the company's run into, and it's not a lot of trouble honestly. How is a company's experimentation with mandatory user handles part of a post on its downsizing? [1]: http://qz.com/97467/snapchats-complete-inability-to-make-money-is-the-reason-its-worth-800-million/ http://qz.com/97467/snapchats-complete-inability-to-make-mon... [2]: http://nextshark.com/heres-the-story-behind-mark-zuckerbergs-im-ceo-bitch-business-card/ http://nextshark.com/heres-the-story-behind-mark-zuckerbergs...