Investors in Secret to get some money back
One of last year’s Silicon Valley darlings has already reached its demise. The social networking app Secret is shutting down. In its less than 18-month run, the company raised $35 million from investors. And early on, it surpassed 15 million downloads.
“It’s certainly been sort of a moonshot, at the speed of the rocket ship ride that is modern internet virality,” says Max Wolff, chief economist at Manhattan Venture Partners, which researches and values tech companies before they go public.
Secret allowed users to blast an anonymous message or picture to friends and connections, to their delight or dismay. Wolff says it was especially popular among high school and college kids.
“There was everything from, “Everyone be careful, there’s a dangerous person who’s picking fights,’ to ‘Yeah, I have a crush on him or her,’” he says.
But the app quickly ran into issues — cyberbullies took unseemly advantage of the anonymity it offered. Wolff says a redesign made the app look too much like competitors Whisper and Yik Yak. Interest fizzled. Key employees jumped ship.
David Byttow, Secret’s co-founder and chief executive, wrote in a Medium post Wednesday that the company no longer matched his vision and he would shut it down.
“I believe in failing fast in order to go on and make only new and different mistakes,” he wrote.
Byttow added that Secret still has a significant amount of capital, which he will return to investors.
“I believe the right thing to do is to return the money rather than attempt to pivot,” he wrote.
Even if Secret had stayed afloat and tried to change course, it would’ve been hard to renew the initial buzz and investor interest, according to Matthew Wong, research analyst at CB Insights, which tracks private company financing.
“The chances of success aren’t as high as they definitely were earlier,” he says.
Manhattan Venture Partners’ Max Wolff says successful turnarounds are rare in this start-up app space. He likens the app economy to the music industry, where you might have a hit single.
“And you put together a really expensive tour, and by the fifth week of the tour, you’re playing to no one,” he says. “Do you really need to spend all the money you were advanced by the record company and finish the next 20 cities?”
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