11x, TechCrunch hit pieces, culture, and risk taking

11x has found itself in a very uncomfortable spot this week. Having raised $75mm over multiple rounds from Benchmark, Andreessen Horowitz, and other big names, a TechCrunch article came out questioning the founder’s ethics, accounting, culture, and, implicitly, the VCs’ savvy.

I have mixed feelings about writing about this subject. There are no winners here. It’s a tough spot for everyone, and some of these people are friends (full disclosure). I’ve invested much more time (too much time?) in writing this post than usual because I think it’s a nuanced question: how do you balance aggressive risks with the benefits to taking those risks?

If you think this is just another person dumping on 11x… it’s not.

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Icarus

There’s no clickbait like an Icarus story. Seeing an AI startup melt is clickbait gold. But did 11x do anything wrong? If they did, was it justifiable? Did the investors make mistakes? Will 11x survive? What does all of this mean for founders playing the fake-it-til-you-make it game–if anything?

I happen to have talked with the 11x team in November; one of its investors in December; and with an ex-employee. I was just looking around the AI SDR space, but much of what’s in the article came up. Read on for high quality, organic clickbait that delivers nutritional value 🙂–and took a ridiculous amount of time to write. Why? To answer the question: what can other founders learn from this?

The TechCrunch story tl;dr

TechCrunch wrote, in short, that:

• 11x displayed logos of companies like ZoomInfo and Airtable as customers without permission. ZoomInfo for example, is quoted as saying, “We did not give them permission to use our logo in any manner, and we are not a customer.” Airtable did a trial, but never deployed the software.

• 11x calculated ARR based on full-year contracts despite offering a 3-month opt-out, leading to inflated revenue numbers (by ~10x). The article quotes an employee saying, “They absolutely massaged the numbers internally when it came to growth and churn.”

• Churn was high during the 3 month opt-out period, due at least in part to product failures, including hallucinations and underperformance. One 11x employee said, “We were losing 70-80% of customers that came through the door.” The company responded that “retention rate is now 79%”.

• Employees described long work hours and pressure from founder Hasan Sukkar, who (among other things) the article says publicly shamed employees on Slack. An employee was quoted as saying, “One day, there will be a documentary about this guy. I do believe that’s how scandalous he is.”

To me, it sounds like typical startup stuff 🤷 with a whiff of maybe something extra. Ben Horowitz came to the company’s defense, saying “This entire article is a lie.” I’d like to believe him.

But those conversations…

The conversations I had with the company and the investor were in confidence; I won’t be sharing that. But the conversation with the ex-employee had no such expectation, and–strangely–some of this came up. Months ago.