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The unofficial story of how Clubhouse founders Paul Davison and Rohan Seth failed their way to a $1 billion app

The unofficial story of how Clubhouse founders Paul Davison and Rohan Seth failed their way to a $1 billion app

clubhouse founders rohan seth paul davison

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The first time Rohan Seth and Paul Davison worked together was to brainstorm ideas on how to fundraise.

It wasn’t for Clubhouse, their popular app for listening into conversations as they happen live as a twist on podcasts.

Instead, Seth, a former Googler and founder, needed help raising millions of dollars for his newborn daughter.

Lydia was born with a random genetic mutation — a typo in her DNA — causing severe mental and physical disability. She started having seizures on day one, and she may never walk or talk.

Seth and his wife, Jennifer, a Google employee, did what any parent would. They pored over hundreds of research papers, met with scientists, and started making their own small-batch medicine to improve her condition. The Seths also did what especially tech-worker-parents would do. They started a non-profit foundation to fund research of Lydia’s disease, and they called it an “accelerator,” to accelerate discoveries like potential drug treatments.

Lydian Accelerator Rohan Seth

In the fall of 2019, Seth reached out to a fellow serial entrepreneur, Davison, to get his advice on how to raise money for the non-profit. And with help from many others, the Lydian Accelerator has now secured more than $2 million.

That work led Seth and Davison to talk more regularly, and eventually, the two decided to start a business together.

Clubhouse isn’t even one year old, but it’s already shot into the tech world’s pantheon of unicorns. The company’s new funding gave it a post-money valuation of up to $1.4 billion, a tenfold increase from the previous round. Last week, roughly two million people tuned in to hear celebrities, the tech elite, and people just like them talk about anything.

The app is still invite-only, but it’s now readying for an aggressive expansion. Seth and Davison wrote in a blog post that they will use the fresh funding to cover infrastructure costs and to grow its trust and safety and support teams.

It has all the markings of an overnight success, but the rise of Clubhouse is anything but.

The audio-only chat app was built by two serial entrepreneurs who have been working on social products for a decade, with little success. Seth and Davison have at least nine failed apps between them including Talkshow, their first collaboration and the predecessor to Clubhouse. They each sold a company to a much larger one that hired their employees but shuttered their apps. Clubhouse was their “one last try” to crack the social graph, the founders said.

“Unlike our other attempts, Clubhouse seemed to strike a real chord with people,” they wrote in a blog post.

That’s because their past experiments gave them a blueprint to a new kind of social app, insiders say.

“Building a startup that achieves product-market fit is so hard. Building a consumer social startup that achieves product-market fit is nearly impossible,” Ryan Hoover, founder of Weekend Fund, a Clubhouse investor, said. “Why? Because consumer social is super nuanced and even the smallest tweaks can make or break the product.”

Their history of building apps, failing, and starting again is the reason for their success this time around, Hoover said.

“Talkshow, and all of the products they built before it, helped inform what Clubhouse ultimately became,” he said.

This is the story of how two serial “socialpreneurs” failed their way to creating the next big social app.

Paul Davison once had the hottest app at SXSW

Davison and Seth met through a mutual friend in 2011, but it’s surprising they didn’t run into each other sooner. They both graduated from Stanford, albeit four years apart, and even started working at Google the same month.

In 2006, Davison wrapped a summer internship at Google and went back to Stanford, tech’s feeder school, to get a master’s in business. Then he joined a database company called Metaweb, where he ran product partnerships.

That company sold to Google three years later, but instead of going to work at the search giant, he went to one of Metaweb’s investors, Benchmark. The firm has one of the oldest and most robust entrepreneurs-in-residence programs, which gives serial entrepreneurs the chance to work on a startup — a sort of sabbatical for founders.

Davison had an office at Benchmark where he sketched wireframes, read, met interesting people, and ran product ideas past the partners, he told Business Insider for an article about life as an entrepreneur-in-residence in 2012.

“I came in with a bunch of ideas, that was basically stuff I jotted down in my idea journal over the years,” he said.

But one idea stuck.

Highlight was an app that let users broadcast their location and notified them when they came within a few blocks of a friend or another user with shared interests, with the intention of creating serendipity.

It became the app du jour for the SXSW crowd in 2012, but its fast popularity faded just as quickly.

highlight app

Davison and his cofounder, Ben Garrett, kept iterating. They unleashed the Roll mobile app for sharing your camera roll with your friends, and later, an app called Shorts that showed your photos to random users who were nearby.

It all flopped, and in 2016, Pinterest bought them out, hiring most of their employees but sun-setting their apps.

Davison put in just under two years at Pinterest, then became CEO of a cryptocurrency exchange called CoinList.

Rohan Seth worked on Google apps you use every day

Seth, who is originally from India, didn’t move around as much after graduate school.

He spent more than five years at Google, where he helped make the company’s location-tracking software smarter and more useful. He was also an early member of the mobile team working on Android and Maps.

“Rohan has always been passionate about social products,” Michael Chu, an angel investor who worked with Seth at Google, said. “Even when he was just starting off his career at Google in 2006-2007, he was wanting to do something in social and connect people more closely together.”

Seth left Google in 2012, and he later joined forces with former Microsoft employee Rohan Dang to create Memry Labs, a launchpad for all kinds of social apps. The founders churned out six product in three years, including an app for sharing a selfie-a-day with friends and another for telling your friends when you’re free to chat over the phone.

phone-a-friend app screenshots

Like Davison’s apps before it, nothing that Memry Labs made took off, but it at least found a buyer in a previous investor. Eric Wu, the cofounder and chief executive of home-buying startup Opendoor, joined an angel round of funding in 2015, and two years later, his company Opendoor acquired Memry Labs for an undisclosed sum.

Chu, who was an early investor in Memry Labs, said the takeover was about bringing their “product chops” and talent to Opendoor, a type of acquisition known as an acquihire, meaning it had more to do with hiring the people than about obtaining the company. Seth and his cofounder joined the company and worked on growth products for several years.

“When he tackles something it’s a pretty amazing mix of strong product intuition, grounded in strong technical foundations, fueled by a lot of passion,” Chu said of his old friend, Seth.

The founders came together under devastating circumstances

Seth had 36 hours with his newborn daughter, Lydia, before he learned her diagnosis and his entire world changed.

The family spent the first year of her life in and out of doctor’s offices looking for answers. They learned that Lydia would need a personalized drug that could silence her specific genetic mutation at the source, an “N of 1” treatment.

Quick Father’s Day update! Lydia is 18 months today. She’s very physically & mentally disabled, but sweet & happy for which we are grateful. We are hoping to start her gene silencing treatment this Oct and will keep on fighting to give her & kids like her a better future! 💪🏽 pic.twitter.com/ljbuf94KOo

— Rohan Seth (@rohanseth) June 21, 2020

Seth and his wife, Jennifer, found a team of researchers and clinicians who were willing to study a technology for creating bespoke drugs for patients like Lydia. But they didn’t have the personal means to finance the research.

The accelerator they started led Seth to reach out to Davison. And eventually, they got to talking about other things.

“Against our better judgment, and with the support of two very patient spouses, we decided to give social apps one last try,” Davison and Seth wrote in a blog post announcing the new funding, which was published on Sunday.

The pair first rolled out an app called Talkshow for scheduling and streaming live, radio-like programs. The app, whose logo featured two smiling AirPods, let hosts broadcast their show on Twitter as it was happening and take questions from listeners. A number of prominent investors like Elad Gil and Ryan Hoover were early adopters.

The app’s intent was to make podcasting easier, but Davison “didn’t think it was easy enough,” Andrew Chen, a general partner at Andreessen Horowitz, tweeted earlier this week. The founders peeled away some features and focused on something that Talkshow’s beta testers loved: the ability to have listeners pop into the show as a guest speaker.

And Clubhouse was born.

As of 10 months later, Clubhouse has raised $110 million in funding, is valued at up to $1.4 billion, and is being heralded by investors like Gil as “the first new interesting social network in almost a decade.”

Seth and Davison agree with Gil’s assessment.

“It’s the most exciting thing we’ve ever been a part of,” they wrote on the blog.

Are you a Clubhouse insider with insight to share? Contact Melia Russell via email at [email protected] or on Signal at (603) 913-3085. Open DMs on Twitter @meliarobin.

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