Will Rohan Seth's Clubhouse Survive Competition from Twitter

March 11, 2021

Last month, Elon Musk tweeted Russian President Vladimir Putin asking if he would like to join him “for a conversation on Clubhouse?”, an audio chat app. A serial entrepreneur, Musk founded Tesla, the Palo Alto, California based electric vehicle company, which has a market value of $640 billion.

The online conversation did not occur, with Putin’s spokesmen blaming Musk for not following up. Perhaps the conversation was not Musk’s goal. His tweet generated wide media publicity for Clubhouse, which must have attracted new members for the app.

Members of Clubhouse can set up a room in which they moderate private chats with friends, colleagues and other invitees on topics of mutual interest. They can also be invited to speak at other chats as well as listen to conversations in conference rooms, like the one used by Musk, singers M.C. Hammer and John Meyer, TV host Oprah Winfrey, comedian Kevin Hart and other celebrities and speakers.

Largely due to media coverage of Clubhouse being used by Musk and other celebrities, it now has over two million users. Each night on the online chat app, there are thousands of rooms with people hosting comedy or game shows; playing guitar; discussing sporting events, history, medical issues or travel; singing opera; and meditating together.

Millions are already chatting with others online via posts on Facebook or via video on Google Meet and Zoom. Clubhouse is different because “I’m not looking at a screen…I’m sitting by the pool with my kids and as long as I’m muted and not speaking, it’s great,” Bilal Zuberi, a partner at venture firm Lux Capital, with offices in New York and Menlo Park, California, told CNBC.

San Francisco based Clubhouse was launched a year ago, in March 2020, by co-founders Rohan Seth, 36 years old, and Paul Davison. Currently new members can join only if introduced by a member. By last May, the beta version of the app attracted an average of about 270 daily users, according to CNBC.

That month, Clubhouse reportedly raised $12 million in funding at a valuation of $100 million from Andreessen Horowitz, which manages about $17 billion in venture capital funds.

Initially African American celebrities like M.C.Hammer and Kevin Hart used Clubhouse and tweeted about it, bringing wide media attention and new members. In return, perhaps they - and other celebrities - received a stake in the company. Founders Seth and Davison hint at this arrangement when they state that Clubhouse now has “over 180 investors…including many members of our early community.”

Recently Elon Musk has apparently joined the efforts to bring in new members. In February, more than fifteen thousand members of Clubhouse heard Musk interview Vlad Tenev, the chief executive of Robinhood, an online brokerage.

Based in the Silicon Valley, Robinhood had placed restrictions on trading in shares of GameStop. Over the past year, driven largely by posts and conversations on Reddit, the stock of the video games store attracted thousands of mostly young individual investors. It rose from $3 to $483; then fell to $40; it then rose again and was recently trading at $250.    

Musk’s questioning of Robinhood’s restrictions got wide media publicity and likely several new members for Clubhouse. Musk’s financial interests in Clubhouse, if any, are not publicly disclosed. The interview took place on The Good Time Show hosted by Sriram Krishnan and his wife Aarthi Ramamurthy. Krishnan is a partner at Andreessen Horowitz, an early and major investor in Clubhouse.

In January Clubhouse raised about $100 million in funding at a valuation of $1 billion, according to Axios. The company plans to use the funds to expand its technical capabilities, including to open up the site to anyone who is interested. Soon it plans to offer payments to some of its creators. Hosts and performers will also be able to earn revenues through tips, tickets or subscriptions.   

Apparently Seth and Davison’s goal, in offering financial incentives, is to try to create a favorable business cycle, much sought by social media founders and investors: potential revenue streams attract more celebrities and other popular hosts; and they, in turn, attract more members, especially those who tip or buy tickets or subscriptions. If the celebrities earn good revenues, other celebrities will be eager to use rooms in Clubhouse. And on and on.

Perhaps it is not surprising that the co-founders are trying to attract more celebrities, including with plans to earn revenues since their business faces intense, rising competition. Twitter already has a competing product Spaces. Facebook is reported to be working on one. Then there are several audio social apps from start-ups including Wavve, Riffr and Spoon.

Clubhouse co-founders Rohan Seth and Paul Davison met back in 2011. “Over the next ten years we both kept working on social products—experimenting with new apps, failing, and starting again,” they note.

Prior to co-founding Clubhouse, in 2014 Rohan Seth co-founded Memry Labs, which offers a talk and other social media apps to connect to friends. In 2017, it was acquired by Opendoor. Earlier, Seth spent nearly six years as an engineer at Google. In 2019, he and his wife co-founded Lydian Accelerator “to accelerate genetic treatments for children suffering from genetic diseases, like our daughter, Lydia.”

Seth earned a BS and MS from Stanford University. While at Stanford, he interned one summer at Xerox PARC, a Silicon Valley research laboratory where laser printers, natural language processing and other major technology discoveries have been made over the past 50 years.

Like many Silicon Valley start-ups, Clubhouse has noble goals: “to build a social experience that is more human—where instead of posting, you gather with other people and talk,” deepening friendships, meeting new people and learning. Does it have the time and funds to grow big enough to survive competition from bigger rivals or another hot new social media start-up, also promoted by celebrities? From next month, anyone will be able to join Twitter’s Spaces and talk and tweet at the same time without being tied to a screen. No invitation necessary.   

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