When Seattle startup Round announced a $12 million Series A investment two years ago, it was a moment to celebrate. Its community-based platform that helped tech leaders connect with one another was growing quickly, and the fresh capital would supercharge the business.
But the venture capital dollars may have accelerated its downfall instead.
Round announced last week that it was shutting down. The company had money in the bank for runway, but ultimately decided there wasn’t a path forward.
“The conclusion we drew is that this doesn’t work as a venture-backed business,” Round CEO and co-founder Ryan Fuller told GeekWire on Monday.
Round quickly hit $1 million in annual recurring revenue after launching in 2021 with its software that connected senior leaders working at technology companies. Its goal was to curate a group of executives who shared values rooted in empathy, humility, and curiosity, with the broader mission of accelerating positive impact of technology their companies were building.
But the tech downturn in 2022 and subsequent widespread layoffs threw a wrench into Round’s business model, which relied on individual annual membership fees that were often paid for by employers — which were now trying to curb expenses.
“People didn’t feel comfortable asking for sponsorship in the cost-cutting environment,” said Fuller.
Round pivoted its business model multiple times. But it was clear the rapid growth it aimed to achieve was no longer attainable. And landing more investment in a tightened venture capital market didn’t look promising.
Fuller said he doesn’t regret raising venture capital, and praised Round’s investors — such as FUSE and Primary Ventures — for their constant support.
But things may have turned out differently if the company had been more bootstrapped and better prepared for macroeconomic fluctuations.
“We raised money back when money was kind of free,” Fuller said, alluding to the low interest rate ZIRP era. “I think that was the right thing to do. But it did lead us to build in a certain way when the market was better.”
Fuller, a former Microsoft exec who previously founded and sold enterprise software startup VoloMetrix, also pointed to the difficulty of trying to scale a community-based business backed by venture capital.
Growing a user base while maintaining special connections between members — and also trying to accelerate revenue — was not easy.
“There were times that I wish we were a nonprofit,” he said. “It felt like that would simplify the equation.”
Part of what makes Round’s shutdown more painful is his view on the lack of community in society.
“We all need to be more together versus more apart,” he said. “I feel like the last decade or so has felt like we’re all moving more apart.”
It’s been a difficult past couple of months for the Round team, which included around 11 employees. But Fuller said he’s in awe of the response from everyone that was connected to the company and its mission. Some members are aiming to continue their connections and maintain a Slack group.
“It doesn’t work as a venture-backed business,” he said. “But it does work really well as a community that gives a lot of value to a lot of people. And I’m hoping that that can carry on.”
