Hey — It’s Nico.

Today marks one month since I went FT into Failory.

I’ve done hundreds of things since then, including this week’s launch of 🧠 Behind Tactics, our Tuesday weekly email.

As I said one month ago, feedback is crucial in this path I’m on to build the best newsletter for startup founders.

That’s why today I’m begging you for your feedback. If you read today’s issue, can you hit “Reply” and tell me in 30 seconds what you think about it?

Here’s what I got today:

• The story behind The Messenger’s $50M failure 🔥

• Adam Neumann wants WeWork back — can he pull a Steve Jobs? 📰

• The crypto tool that automates buying and selling coins 🪙

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This Week In Startups

🔗 Resources

How Stripe builds loyalty with personalized gifts (from Failory).

Flagsmith's founder on why he decided to bootstrap (from Failory).

How Jenni.ai went from 0 to $3M ARR in 18 months.

Y Combinator on whether startups should fundraise or bootstrap.

A guide on how to build a brand without breaking the bank.

A report of the state of VC in Latin America in 2023.

📰 News

Cloud-native development tooling startup Weavorks is shutting down.

DocuSign is laying off over 400 employees as part of a 'restructuring plan.'

Threads reaches more than 130M monthly users.

Kore.ai raises $150M to build its conversational AI for enterprises

School transportation startup Zum raises $140M and reaches unicorn status.

Ramp acquires AI procurement platform Venue.

😮 Cool Stuff

Maybe, the shutdown startup I wrote about a few weeks ago, is coming back.

Another founder is stopping sharing MRR updates of his startup, looking for better mental health.

The power of Twitter: instant vendor offer from Bed Bath & Beyond Chairman.

Fail(St)ory

The Messenger Shuts Down After Burning $50M in 8 Months

Two weeks ago, I wrote about Artifact, the “TikTok for news” startup from Instagram’s co-founders that was shutting down just one year after launching.

Another news startup with a similar journey shut down this week, illustrating the difficult times media companies are going through.

8 months and $50M after launching, The Messenger announced last Wednesday they are shutting down.

Beginnings: In May 2023, The Messenger burst onto the scene, aiming to become the next big media venture.

The founder, Jimmy Finkelstein, is a media investor who had previously sold The Hill to Nextar for $130M.

They launched in secret, with a small team of 35 people, but with the goal of expanding rapidly. Finkelstein managed to raise $50M in funding, which he used to hire over 300 people in just a few months.

Shutdown: Despite its founder’s ambitions, The Messenger shut down after just 8 months in operation, marking it as one of the most significant media flops in the last decade.

Finkelstein sent an email last week to his 300 employees, letting them know about the shutdown. In the email, he states that he had “been unable to raise sufficient capital to reach profitability” and blames the “economic headwinds” for part of the company’s failure.

The decision was a complete surprise to the staff, who did not know the situation was so dire. Even Dan Wakeford, The Messenger’s Editor-In-Chief, appeared unaware of the impending closure.

Why Was It Shut Down: The Messenger was losing tens of millions of dollars. During its 8-month existence, it spent $38 million but generated only $3 million in revenue.

A significant portion of these funds went towards office spaces. Finklestein rented numerous offices in Washington, Florida, and New York, totaling over $8 million in expenses.

Why It Failed: In my opinion, there are several reasons:

• The Messenger had an outdated business model that heavily depended on a broad and generic audience being monetized with low-paying programmatic ads.

• Due to the decline of third-party tracking cookies, it has become much harder for advertisers to target their desired specific customers. Therefore, for media publishers, there is now more value in a smaller but less generic audience than in a large audience that has a mix of different users.

• The decline of cookies has come with a decrease in advertising spending. For this reason, many news companies have built a subscription model on top of their advertising revenue. But The Messenger wanted to stay without any paywall.

• In addition, social media behemoths no longer provide news websites with as much traffic as they once did. Consequently, news organizations now primarily depend on search traffic, which requires considerable time to cultivate, or social ads, which are expensive to run.

Lessons:

• The Messenger’s case is another example of how important it is to have PMF before pouring money into a product (or content, in this case). Quibi is another startup in the space that failed after spending millions creating unvalidated content.

• It is vital to be able to adapt your business model to market changes. Finkelstein tried to apply the business model he had experience with on times when automated digital ads no longer worked (due to the decline in cheap organic traffic and third-party tracking); management should have looked for other revenue streams.

• You must manage your burn rate. Spending $8M on office spaces, including a massive one in NY, was probably unnecessary.

Lawsuit: The day following its closure, The Messenger received a class action lawsuit from its former employees, who had not received severance packages.

In the lawsuit, Finkelstein is accused of violating the Worker Adjustment and Retraining Notification (WARN) Act. Under this legislation, companies with 100 or more employees are required to provide their employees with a 60-day advance notice of termination.

The Messenger’s employees want to recover up to 60 days of wages and benefits.

Some employees are also angry that the website was shut down so quickly, which deprives them of the opportunity to use their work to help them find new jobs.

Go Deeper:

• Read my analysis of Artifact’s shutdown.

• Read this Forbes article exploring other reasons for The Messenger’s failure.

Founders’ News

Adam Neumann Wants to Buy WeWork Back

Adam Neumann is endeavoring to repurchase WeWork, the startup he initially founded and was kicked out of in 2019.

The New York Times’ DealBook has published a letter sent to WeWork’s lawyers where Neumann’s new real-estate company, Flow Global, shows interest in buying the company and extends a formal proposal for a $200M debtor-in-possession agreement. 

Since December, Neumann has been holding several meetings with WeWork to explore the possibility of purchasing the company or its assets.

WeWork’s Failure: WeWork represents the wild spending of venture capital, thanks to SoftBank's big investments.

Despite growing big in real estate and being valued at $47 billion, it couldn't go public in 2019 because investors worried about its business model and how CEO Adam Neumann was running the company.

Neumann was forced to step down as CEO in 2019, and in 2023, WeWork filed for bankruptcy. I wrote a newsletter about how the valuation of the business had crashed.

When WeWork filed bankruptcy, Neumann made a statement in which he said that “with the right strategy and team, a reorganization will enable WeWork to emerge successfully” 

Other Comebacks: History is full of successful CEO comebacks, though I’m not sure if Neumann will make the list.

• Steve Jobs to Apple: Jobs stepped down from his position at Apple in 1985 to start a new company,  which was bought by Apple 11 years later for $429M. He then returned as CEO in September 1997. During this period, Steve Jobs revitalized Apple by streamlining the product line and introducing iconic products like the iPod.

• Jack Dorsey at Twitter: After being removed as CEO of Twitter in 2008, co-founder Jack Dorsey regained his position in 2015 when the company was facing a decline in user growth and falling stock prices. His comeback marked a shift in Twitter’s strategy, focusing on streamlining the service and enhancing its appeal to a broader user base.

• Steve Huffman at Reddit: Huffman, co-founder of Reddit, left in 2009 but returned as CEO in 2015 during a period of user dissatisfaction. His comeback focused on improving the platform's content policy and community engagement, which helped stabilize and grow the user base.

Toolkit

This Tool Automates My Crypto Investments*

I don’t frequently talk about it, but I’m really into crypto. I invest in different coins, have some NFTs, and form part of different DeFi protocols.

Crypto is big in Argentina, where I live, because of the whole economic situation here, which you may be aware of.

I’m always looking for the latest crypto tools — and I’ve recently discovered one called Coinrule (YC-backed), which lets me automate my crypto investments.

You sign up, connect it to your exchange, and set up rules for things like “if ETH’s price is less than $2,000, then buy 1 ETH”.

But this is the simplest you can go. There’s a marketplace with dozens of trading strategies that set rules for buying and selling crypto and making a profit.

You can sign up for free here →

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That's all of this week.

Cheers,

Nico

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