We led the seed round for a new social app. Here's why.

WEH Ventures led the seed round of $1.6mn for Slick, a new social product targeted at GenZ. This is our thesis (5 mins read).

Why now?

'Social' products were meant to help you connect with friends and family over multiple ways over the Internet. While that stayed true for a few years, TikTok changed that for good. While most social networks relied on the 'network graph' to be their biggest moat for the longest time, since the launch of Kuaishou in China and TikTok globally, the moat changed to the algorithm that controlled the feed. Content formats have moved from being 'social' to the feed being completely driven by algorithms. We believe this is going to be accelerated driven by Generative-AI, where soon it could become cheaper for the content to be even created by algorithms as opposed to by real users.

Not just Instagram or TikTok, even WhatsApp seems to have traded user experience for monetisation through brands. Agony messages of spam through WhatsApp have been flooding Twitter for the last few months.

We believe the urge to connect with your friends/get to know new people/receive validation/curiosity to know what's going on in someone else's life is not going away anytime soon. So the question we asked ourselves was, do we believe that we will continue to interact only through WhatsApp & Instagram, say 10 years hence (when we can already see the experience degrading)? We don't think so.

Why Slick?

• Great Product - Slick is a really well made product, I'm not talking about the functionalities here (we'll get to that soon), but more about the quality of the application. The UI/UX is well thought of, the back-end didn't break even when they were adding few 100k users/week & when we saw the early reviews, the 1 stars were mostly for requesting new features.
• Impressive Team - Archit Nanda & Rachit Bansal are very hands-on and built the current version of the product with a very small team, over just a few months. The company was started with the intention of being a platform like smallcase for Crypto; however, within a few months of their pre-seed round, they realised this was not going to be a very large company (at least with the current climate & regulation, so quickly did a hard pivot to social, last year). Archit came with incredibly high references (he joined Unacademy in the CEO's office whilst still at college & within less than a year he was promoted to become the youngest director at the company!). Rachit is a tech wonder-kid who was earning a 7-figure salary at a hedge fund, again fresh out of college. They both know each since their school days & complement each other well, so the team hit all the checkboxes for us.
• Understanding Virality - We've met a lot of founders who are great at performance marketing and acquiring users through innovative campaigns. However, to build a social product you almost have to forget about performance marketing and be able to think very clearly about viral hooks. The team understood this from Day1 and optimised the product primarily for this. They spent nothing on performance marketing and still ended up acquiring users in multiple colleges across the country & in almost all cases, the entire college used to be on the product in less than a week. We understand acquisition is not everything, but without cheap acquisition, a well thought out social product won't matter anyway.

..but wait, isn't all this just a FAD?

This was the #1 reason why most other VCs decided to wait it out & declined to invest at this stage. If there was a great team, 1mn users with no CAC + good retention & a product that almost everyone believed was not a FAD, then wouldn't it just be too obvious an investment for almost any fund? What "risk" would we even be taking then? :)

Anyway, so if we decided to lead the seed round now, we had to have strong reasons to believe otherwise. Taking a step back, here's a quick round-up of how social products have evolved in the past.

WhatsApp

• "Now with chat"?! what did the app do prior to this then?
• Well, it started out as an app to share status updates next to names, so people could understand what someone else in their contact book was up to. Hence the name "What's up?"
• Funnily enough, their first coder was a Russian (found through Rentacoder.com) & his friends in Russia started chatting through these "status messages" by constantly updating it.
• That's when they launched v2 of the product which included a dedicated chat feature.

Hammer & Chisel?

• I know what you must be thinking, what kind of a name is Hammer & Chisel for a social product. It wasn't supposed to be one.
• Hammer & Chisel was a gaming studio which wanted to launch massive multi-player games and wanted to be the first studio to capture 1bn users in a game (this was back in 2014 when there were about 2bn mobile devices in use).
• Their flagship game "Fate Forever" won awards like "Best of iPad, 2014" but unfortunately, didn't win the gamers hearts. The only product which was being used in the game actively was the voice chat feature (the only other voice chat product then, was Skype). So with this very pragmatic message, they pivoted to a product called DISCORD :)

“We were very careful in spending our money,” Citron said. “We are an experienced team. We’ve done this before. We spent enough to get Fates Forever out. It was clear it wasn’t going to be a big business. We didn’t burn a lot of money on marketing. We could theorise about why a game didn’t work, but at the end of the day, it didn’t work”

Musical.ly (aka Cicada)

• Zhu who was a product manager at SAP was very passionate about building a large ed-tech company. He realised MOOCs had very low completion rates, so his billion dollar idea in 2014 was to launch a short-form video platform with 3 to 5min videos explaining complex concepts. They raised $250k to build an app called Cicada; it failed on all counts - the videos were expensive to create, tutors couldn't compress complex concepts in 3 minutes & kids anyway didn't care for the app, there was no adoption.
• With less than 10% of the cash left, they pivoted to Musical.ly. They realised videos had to be in seconds not minutes & combining music + videos could do the trick to get teenagers on-board. Within a few months, they became the #1 downloaded app in the AppStore.

Our learning from all of this

• Building social products is hard. Almost all the current leaders have gone through multiple iterations to get to the current form.
• ..but it obviously can be very valuable, now more than ever, since the monetisation formats are well established.
• The one common thread among all these stories is that the founders had the ability to derive insights from even minute user insights really well. And post that, they unabashedly designed their product to suit the user needs rather than decide top down what users want & spend millions on marketing. This handicaps the company as then a hard pivot is almost impossible (remember Clubhouse?).
• Going back to the question, is this a fad? The truth is, we can't know & I don't think that's a question a VC unilaterally has to try and answer. Lot of people thought disappearing photos were a fad (& would be used just amongst naughty teens); Snap has a market cap of ~$14bn now. Benchmark & Tencent realised huge gains from Discord (..but they invested in Hammer & Chisel, before the founder decided to pivot).

We focused more on the founding team. We've been having conversations with Archit every Friday & every time he has been highlighting interesting insights he learnt from users that week. At the same time, there are a lot of questions to which they don't know the answer yet & Archit is pragmatic enough to say I don't know yet, rather than making things up just because an investor is asking. This coupled with the fact that they iterate the product really fast is why we believe they have a fair chance in creating a large consumer product.

At WEH Ventures, we've been active investors in consumer products since 2017; some of our investments include Pratilipi, smallcase, Jar, AppsforBharat, StellarPlay and Simple Viral Games amongst others. If you're building something new, feel free to reach out to me at [email protected].