Twitch Founder Justin Kan on Why His Second Venture Atrium Failed

Twitch was one of the biggest success stories, but its founder Justin Kan's follow-up, the legal services startup Atrium, burnt out in three years. While most founders will take the time to celebrate their success on social media, Kan put together an insightful thread on Twitter about what went wrong, what could be learned from the failure of Atrium, and what is coming next. Kan wrote that while his first company, Twitch, sold for almost a billion dollars in 2014 (over Rs. 6200 crore at the time), Atrium lost $75 million (over Rs. 543 crore) in 36 months, and then broke down why this happened.

Atrium, a hybrid legal software and law firm startup, announced in March 2020 that it was shutting shop after having failed to figure out how to be more efficient than a traditional law firm. The company had to lay off all its over 100 employees. Justin Kan served as the CEO of the company until it shut down.

"People love talking about success, but today I'm going to talk about failure. It's time, to be honest about Atrium," he said in the first of a series of tweets. Kan said that during his time as a partner at YCombinator, an American seed money startup accelerator, his ambition to build something big only grew. 

The 37-year-old added that the entire experience was too complicated and opaque and therefore he started Atrium to make this easier for founders. "I built up a team of five founders with different backgrounds. With my name at the helm, everyone was running to us with funding offers," he said. "We raised a $10 million (a little over Rs. 72 lakh) series A with an idea - a 10-slide pitch deck." And here comes the crucial bit, Kan advises people to build something they believe in and love and "not for your ego."

Kan said they weren't clear about the mission at the beginning, adding that one should start with a clear reason to exist and filter early hires for believers. "Without clearly defined goals between co-founders, huge frictional costs can arise," he wrote.

"We hired too fast," Kan said. He went on to add that hiring too quickly, especially before PMF (product-market fit) can be a fatal mistake, as it appears was the case with Atrium. "At Atrium, we hired too many people too fast and we failed to set a cohesive culture early. This is incredibly hard to change later on."

Underlining other issues with Atrium, Kan said it wasn't clear who the company served - the lawyers or the clients who bought legal services. "Without making the distinction, we fell into the pit of trying to be everything to everyone," he said.

He then tried to distinguish between how things panned out at Twitch well but didn't at Atrium. 

Kan also spoke about the "win or die leadership." He said his colleagues needed to be supported and set up for success. 

Not looking inwards and asking big questions was another reason why Kan's second venture didn't flourish, he feels. "Not figuring out my intrinsic motivation made it impossible to stay resilient in tough situations. My big question was, do I really want to be the CEO and build products? I also had no passion or real interest in legal tech," he said.