IRL admits 95% of its app users fake, will shut down

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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 Vision Fund 2. 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.” CEO Abraham Shafi stated, “Our primary goal at IRL has always been to create more authentic and organic communities.” 

Just how authentic those communities were came into question last year when employees cast doubt on Shafi’s claims that the app had 20 million monthly active users. 

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.

“Based on these findings, a majority of shareholders concluded that the company’s going forward prospects are unsustainable,” a spokesperson told the outlet, saying the venture would shut down.

Earlier this year, a former employee alleged that IRL—the name stands for “in real life”— had fired him after he voiced concerns that many users were bots, and in April Shafi resigned as CEO. The Securities and Exchange Commission had already begun an investigation into whether the company had violated securities laws in the way it portrayed its business performance to investors, among other issues.

Leaders from other startups were quick to weigh in on the company’s downfall.

“Building a real business without fraud means it’s nearly impossible to reach ‘unicorn status’ in a few years time,” tweeted Winnie CEO Sara Mauskopf, whose company offers a marketplace for child care.

“Lots more stories like this coming. The insanity of the last 3 years is going to lead to a bad hangover,” tweeted Sean Byrnes, previously CEO of Outlier.ai, adding, “Oh, man, the number of times I’ve been asked why my company isn’t growing as fast as X and then found out X was a fraud all along.”

“The overnight unicorn that the media loves to prop up and VCs love to throw $$ into just is not a thing,” tweeted Squad founder and CEO Isa Watson.

At its peak more than year ago, IRL had about 100 employees, The Information reported, and it had also raised capital from Founders Fund, Goodyear Capital, and Floodgate Fund.

“We have the opportunity to build WeChat for the rest of the world,” Shafi told The Verge in 2021, referring to the messaging app in China that has more than a billion users.

It appears safe to say IRL won’t get there.

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