In 2021, SoftBank, the Japanese investment titan, threw its financial weight behind a relatively unknown social media application, IRL, propelling it into the coveted unicorn territory with a substantial investment exceeding $170 million. This sky-high funding round pushed the app’s valuation to an impressive $1.17 billion. But in an unexpected twist, IRL, it turns out, had wildly inflated its user numbers, conceding that a staggering 95 percent of its claimed 20-million-user base was, in fact, nonexistent, as The Information first reported.
SoftBank had optimistically branded IRL as a revolutionary “event-based social network” set to empower “people to do more together.” The unfortunate irony is that there weren’t any real people to “do more together.” Instead, the app was an empty shell filled to the brim with bots and automated accounts.
IRL positioned itself as a youthful, hip alternative to Facebook for event organization, a platform seen by many newer generations as outdated and tailored more towards older users. Despite its name, which stands for “In Real Life,” the app was forced to pivot to online events in the wake of the pandemic, which rendered physical meetups a risky proposition.
The trouble started brewing soon after SoftBank’s considerable investment. The following year, IRL had to lay off a quarter of its workforce. Abraham Shafi, the company’s founder, used a sporting analogy to communicate his vision to the remaining staff, stating, “most people don’t want to be Olympians. In the same way, not everyone will want to walk the path we are walking.”
The company’s decision to slim down its workforce drew attention to Shafi’s claim of 20 million monthly active users. This in turn attracted the interest of the SEC, which began investigating the potential that IRL had misled its investors. By April of this year, the company’s board had suspended Shafi and brought in a new CEO to steady the ship.
However, the bot-fueled user inflation and the somewhat undercooked concept meant that the app was doomed. As a result, IRL is now winding down, taking its fictitious army of 19 million bots with it. The company claims it will return capital to its shareholders, although the remaining amount is unclear. Shafi once boldly stated that the company had enough cash to last until 2024, but this claim holds as much water as the 20-million-user claim. Therefore, a pinch of salt is needed when interpreting these assertions.
This debacle forms part of a particularly bad week for SoftBank, which also poured nearly $400 million into a robotic pizza maker that has since closed its doors and begun liquidating its assets. With both ventures going south, SoftBank potentially faces a loss of $500 million in just one week. That being said, SoftBank isn’t exactly on the ropes. The company, which owns numerous tech firms, recently sold Boston Dynamics for a hefty billion dollars. Nonetheless, this week’s events are undeniably a blow to its reputation.
