Silicon Valley loves youth, smarts and pedigree—and Lucas Duplan has all of them. The son of a well-connected software entrepreneur, Duplan grew up in the Bay Area. He’s a computer scientist with a freshly minted degree from Stanford and personal ties to the university’s president.
In 2010, on a trip to England, Duplan decided there should be a better way to pay for things with your mobile phone: He came up with the idea to use sound waves to transfer money. Unlike with some other payment apps, the idea is that you wouldn’t need to scan your phone’s screen or rely on GPS to pay for things—it would all be done quietly via sound waves. In 2011, Duplan started hiring people and, like most entrepreneurs in the Valley, set about trying to raise some venture capital.
Raise he did. Last June, Duplan, 22 at the time, announced he had landed $25 million for his company, Clinkle. SEC filings show the company later raised another $5 million or so. It’s extremely rare for a startup to raise that kind of money out of the gate, particularly one run by a 22-year-old with no business experience.
Not much was known about Clinkle up until that point—it had no product on the market—but in a company blog post titled “Hello World,” Duplan said Clinkle would reinvent the way we pay for things. Of course, tons of companies are already trying to do the same thing, but in his blog post, Duplan said Clinkle was “fundamentally different from everything else out there.”
He called it a “breakthrough.”
But shortly after the June 2013 funding, Clinkle began shedding employees. One post on Quora, a popular Silicon Valley forum, listed about 30 employees that had left the company since its founding. Then, in December, another 16 people were laid off. Clinkle confirmed the layoffs, but chalked it up to the natural “churn” of running a startup. “[A]s we grow, there are going to be changes in business strategy that result in people seeking opportunity elsewhere,” a company representative said at the time.
The truth appears to be more complicated than that. Over the course of several weeks, I spoke with more than a half-dozen people, including a couple of former senior employees who had worked at the company over the last few years. I reached out to them via LinkedIn or email, asking them if they’d be open to chat about their time at the company. Mostly we spoke about what it was like to work with a 22-year-old boss who had managed to secure the “largest seed funding in Silicon Valley history,” as Clinkle trumpeted at the time, and why people were leaving.
They shared their stories and insights on the condition that they not be named. There have been a number of stories in recent months noting the company’s mini-exoduses and including vague industry gossip about the state of Clinkle. But I haven’t seen any stories in which ex-employees actually talked about life at the company.
The people I spoke with described a company that seemed to be bursting with talent, but that lacked the sort of confident and assured leadership that’s expected at a company that managed to raise so much money from top-tier investors. Duplan, they told me, was an ambitious and smart young man, but didn’t always make the best decisions.
The first person I spoke with, a 20-something who worked at the company for about a year, told the story of a run-in between Duplan and the staff in October 2012. At the time, he said, the company’s engineers were unhappy and decided to lay out their frustrations to management. Several of them spent an evening in the company’s Mountain View headquarters, on a company whiteboard, outlining what they felt needed to change. Many were unhappy, for example, that they were receiving a salary of only $40,000—far below the market rate in Silicon Valley for engineers—and they were concerned about the lack of transparency in how the company’s equity was being doled out, according to the 20-something ex-employee.
One of the company’s engineers hand-delivered those notes—a “manifesto,” as one of the ex-employees calls it—to an executive on the business side and said, “Hey, just so you know, we’re really frustrated. We want to make this thing work, but as it stands, there’s a lot wrong.” According to another person present that day, who corroborated this story, a young woman hand-delivered the letter, a two-page printout, to Duplan.
Duplan fired her on the spot. (The young woman in question has not returned my request for comment.)
Appalled, several employees walked out of the office and to the nearest bar, the Sports Page, a few blocks from Google’s headquarters. About a dozen employees sat at picnic tables discussing what just happened.
Beyond the firing, they were concerned with the overall direction of the company. Around the same time, Clinkle’s relationship with Zions Bank (which, according to ex-employees, was going to handle the backend of Clinkle’s financial transactions) had fallen through. (A representative for Zions, James Abbott, declined to comment about the specific nature of its relationship with Clinkle.) The employees were upset, and by the next day, several employees decided to quit.
“You just can’t fire someone like this,” said a former employee who was there that afternoon. “There’s an HR process. Flying off the handle like that…it led me to believe that he was not willing to take the steps to become a seasoned leader.”
Neither Duplan nor other representatives for Clinkle agreed to speak with us for this piece, despite several attempts on our part. Last week, we presented the company with the assertions and anecdotes in this story, including the event described above, to give it a chance to respond. Clinkle continued to decline to comment.
“At the end of the day, our success will be determined by how consumers and merchants respond to our product,” a spokesperson told me via email. “That’s what we’re focused on as we continue to test the product and build the organizational capabilities that we need to be successful.”
In the first couple of weeks after Clinkle raised the $25 million, Duplan offered a number of cheery interviews, and even received an award from Forbes magazine. But in the last few months, he appears to have become less accessible to the press.
Duplan founded Clinkle in 2011. The story he tells is that the idea came to him while on a summer trip in England in 2010. Apparently, he was frustrated by all the “clinking” coins in his pocket. He wondered why he couldn’t just pay with his phone.
Like a lot of tech founders, Duplan showed an ambition for entrepreneurship early on. In middle school, he sold iPod covers on eBay. Later he rented out his grandmother’s wireless Internet. For fun, Duplan says he enjoys water polo and reading.
He also dresses the part of a seasoned Silicon Valley CEO. You won’t catch him in a Zuckerberg “hoodie,” for instance. In all his professional photo shoots, Duplan appears clean-shaven, his hair combed, and dressed in a blazer and khakis.
In his final year at Stanford, Duplan was admitted to StartX, the on-campus incubator for Stanford startups. StartX is well-known on campus, and is proud of the fact that many of the companies it has spawned “have been acquired by the likes of Apple, Instagram and Yahoo.” Duplan recruited a number of fellow students—including Rob Ryan and John Rothfels, who still work at Clinkle today—to join him.
Stanford, of course, is known for its close ties to the investor community in Silicon Valley. But StartX provides a direct link. The incubator maintains a well-respected list of mentors who serve in various venture-capital roles in the industry. Christine Herron, for instance, has been a mentor at StartX since 2010—she is also a director of Intel Capital, which invested in Clinkle. (It’s unclear if Herron had a direct involvement in the decision by Intel Capital to fund Clinkle. She did not respond to a request for comment.)
Indeed, Duplan seems to excel at the art of salesmanship. Clinkle’s investors are some of the most prominent and well-respected venture capitalists in Silicon Valley. Even Richard Branson, the media mogul, invested in the company—as did Ross Perot Jr., the oil and gas magnate.
But operationally it was a different story, according to the people with whom I spoke. Multiple people described Duplan as distant. The company’s Mountain View offices (Clinkle has since moved to San Francisco) had three rooms—a room for engineers, a room for the business team and a private office. According to the ex-employees, Duplan would spend most of his time in his office, with the door closed. He held few company-wide meetings, and rarely organized social events for the team.
Another thing that consistently came up in my conversations was Duplan’s care not to overspend his budget, which would seem like a good thing. But a couple of the former employees said his frugality got him in trouble with his employees. One employee, for example, said Clinkle cut the company’s dental plan in December 2012.
“He’s like, ‘Oh, yeah, we had it, but not enough people were using it. A lot of people were still on their parents plan, so we got rid of it because we couldn’t get the group rate,’” one former employee told me.
Some of the employees I spoke with said there were certainly things they enjoyed about Clinkle. It had lots of smart, creative people, many of them students and most under the age of 30. The people were full of energy and optimism about their ability to disrupt a multi-billion-dollar industry. People came in early, worked late, and had drinks together after hours, even if Duplan didn’t participate.
“When I was there it was so fun,” says one former employee who worked there for about three months. “It’s the brightest, most-talented individuals I’ve worked with. It felt like the Silicon Valley dream: Let’s take Stanford students and see what we can build.”
Clinkle is competing with a handful of companies that also let people pay for things with their mobile phones—including Venmo, Square, Stripe, and bigger players like PayPal and Google Wallet. Clinkle raised money on the idea that its solution is not only different from the pack but also, of course, attainable.
But what if Clinkle’s product isn’t what it’s cracked up to be? Patent filings from Duplan and Jason Riggs, a former company engineer, show that Clinkle sought patent approval for its ultrasound technology, which has led some to believe that high-frequency sound would be the company’s “secret sauce.”
But when I asked one ex-employee (who was employed at the company in late 2013) about Clinkle’s “breakthrough” technology, as Duplan had called it in his June announcement, that employee sighed. “It’s a mobile wallet app,” he said. “I mean, it focuses a lot on design and user experience.”
Another employee, who worked at the company in 2012, told me that the sound technology was tested on Stanford’s campus and that it technically worked, but not when there was too much noise in the room. If that’s true, it’s hard to imagine that it would be a viable payment option for most retailers.
To be fair, even if the sound technology isn’t part of Clinkle’s first product, it might not matter. If the app is so well-designed, so easy to use, and marketed with precision, it may just catch on.
But Clinkle’s launch delays have become a joke to some—there’s even a website, HasClinkleLaunched.com, to alert people when the company has finally released a product. (At press time, the answer was still “NO.”)
In late January, Clinkle got hacked. Obviously, there wasn’t much customer data to be exposed, as Clinkle still isn’t live. But one picture was particularly resonant. It depicted Duplan holding up what appeared to be $30,000 in cash (there are three stacks of bills, each labeled with a $10,000 band). Clinkle says an employee at a competing company was able to access the images because Clinkle at the time was using an open API, and that the money in the screenshots was fake. Nonetheless, it can’t be the sort of image Clinkle investors are hoping to project.
Right now you can download the Clinkle app from the iTunes store. It puts you on a “wait list,” and claims there’s 138,500 other people already waiting for the app to officially launch, one of the only two facts the company did confirm for us. Some people haven’t written off Clinkle. Dan Primack, the Fortune writer, noted earlier this month that Clinkle continues to attract high-caliber employees.
“If Clinkle is such a joke,” he asked, “how does it keep hiring well-respected talent?”
Even if Clinkle fails to achieve mainstream success, it seems primed for an “acqui-hire,” a type of acquisition where a bigger tech firm scoops up a smaller company not for its product but for its talented staff. You may recall that Color, the startup that raised $41 million but failed to deliver a popular app, was snapped up by Apple for about $10 million. Obviously, those investors lost money on the deal. If Clinkle follows the same route, it will hardly be a big win for the company’s investors.
If anything, the Clinkle story serves as a gentle reminder—an allegory, perhaps—for the bystanders of Silicon Valley’s hype machine. Just because a startup raises lots of money doesn’t mean it’s actually created something valuable.
The adulation many young entrepreneurs receive simply for raising money is tantamount to offering a round-of-applause to the guy who places $100 on lucky number 36 at the roulette wheel. Most companies fail, and fail spectacularly at that. The celebration should come later, when the product is launched and people are using it.
In October 2013, Clinkle hired Barry McCarthy, the former chief financial officer of Netflix. McCarthy, a salt-and-peppered executive with more than 20 years of professional experience, now serves as the company’s COO. To me, at least, the McCarthy hire seemed to represent a reality check for Duplan and Clinkle, a realization that in order to actually get this product to market, they needed to hire someone with experience and a proven track record. To Clinkle’s credit, it’s a promising sign that McCarthy, a guy that likely had many professional options, would choose to bet on a startup that had yet to even issue a product.
Since then, McCarthy has hired other industry veterans: Andrew Rendich, as VP of operations; Allison Hopkins, as VP of talent, and Mike Liberatore, as Chief Financial Officer. The first two were colleagues of McCarthy’s at Netflix.
In a recent interview, McCarthy was asked what he thought of Clinkle’s hyped $25 million funding announcement. He was nonplussed. “The whole glam funding thing?” he asked. “Give me a break. From my perspective, I think of it as a distraction.”