“Why do you need money from me when you have every great investor on earth?” That’s the question that caused Backplane to buckle under the weight of its own early buzz.
Lady Gaga’s social network builder startup has run out of money, gone out of business, and sold its assets to a group of previous and new investors who will try to restart it. That’s according to multiple sources, the legal firms that handled the sale, and its former CEO. Backplane’s legacy will serve as a warning of the dangers of fundraising at too high of valuations with exploitative terms in party rounds where no investor takes responsibility. The company is also emblematic of the trouble caused when lavish lifestyles drive up burn rates and bleed companies dry. 5 years and $18.9 million later, the two issues combined to destroy the startup
That was despite basically just being a fan site for Lady Gaga with hopes of launching social networks for brands. It eventually raised $5 million more. But after three years of jet-set founders running two fancy offices, the company had failed to make progress on product, and I reported multiple sources saying the startup was crashing.
Backplane tried to pivot into Place.xyz, cutting its burn rate $160,000 per month, bringing on new CEO Scott Harrison, and restructuring as a self-serve social network maker mobile app.
It grew to 15,000 communities and planned to build apps for Burning Man and LSU. Liquidation Preferences Vaporized Backplane.
The problem was that Harrison says the big-name VC money came with tough liquidation preferences that would give those investors returns first if Backplane had a successful exit.
A Chinese backer was supposed to spearhead a $2.5 million round to keep the startup alive, but they dropped out last-minute.
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