The Rise and Fall of 11x: A Cautionary Tale for the AI Startup Ecosystem

In the fast-paced world of artificial intelligence startups, the story of 11x is a stark reminder that not all that glitters is gold. This AI-powered sales automation company, once hailed as a rising star in Silicon Valley, now stands as a cautionary tale of what can go wrong when hype, ambition, and questionable practices collide.

I ran into a16z’s briefing on 11x’s story, let’s see what we can learn from the 11x saga as startups, investors, and customers alike.

Their Meteoric Rise is Too Good to Be True?

11x burst onto the scene in 2022 with a bold promise: to revolutionize outbound sales through AI-powered bots.

Founded by Hasan Sukkar, the company claimed to have reached nearly $10 million in annualized recurring revenue (ARR) within just two years. This explosive growth caught the attention of heavyweight investors, with Benchmark leading a $24 million Series A round and Andreessen Horowitz (a16z) following up with a $50 million Series B.

On the surface, 11x seemed to have it all – cutting-edge technology, rapid growth, and the backing of Silicon Valley's most prestigious venture capital firms. But as we'll soon discover, appearances can be deceiving.

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Red Flags Waving in the Silicon Valley Breeze

"Our logo is on their website, but we're not a customer"

One of the first red flags to emerge was 11x's questionable use of customer logos on its website. Multiple companies, including ZoomInfo and Airtable, found their logos displayed without permission. ZoomInfo's spokesperson didn't mince words:

"We did not give them permission to use our logo in any manner, and we are not a customer."

This wasn't just a simple oversight. ZoomInfo had conducted a short trial of 11x's product, found it "performed significantly worse than our SDR employees," and decided not to move forward. Yet, 11x continued to claim ZoomInfo as a customer for months, even in sales calls and on its AI dialer.

Airtable faced a similar situation, with 11x listing them as a customer on their "manifesto" page long after a brief, unsuccessful trial. These weren't isolated incidents – another unnamed company shared a comparable experience.

The ARR Mirage: When Numbers Don't Add Up

11x's reported ARR figures began to raise eyebrows among employees and industry insiders. The company's approach to calculating ARR was, to put it mildly, creative. Here's how it worked:

1. 11x insisted on one-year contracts for pilot programs.

2. These contracts included a "break clause" at three months, essentially creating a trial period.

3. When reporting ARR, 11x counted the full year's value – even for customers who used the break clause to end their trial.

A former employee laid it out starkly:

"We were losing 70-80% of customers that came through the door."

Yet, 11x's reported ARR didn't reflect this reality. Another ex-employee added,

"They absolutely massaged the numbers internally when it came to growth and churn."

While 11x claims to use "contracted ARR (CARR)" and says investors were aware of this metric, the discrepancy between reported figures and actual long-term customer value was significant. One employee estimated that out of a reported $14 million ARR, only about $3 million came from contracts that survived beyond the three-month trial period.

When Reality Catches Up

Product Promises vs. Performance just don’t Match!

As customers began using 11x's AI-powered sales tools, a gap emerged between expectations and reality. Many companies canceled after their trial periods, citing various issues:

• Unrealistic expectations: Some customers hoped 11x could replace entire outbound sales teams, a promise that proved too good to be true.

• Underwhelming results: The actual number of meetings, demos, and calls booked fell short of projections.

• Technical issues: Customers reported the product hallucinating or failing to load altogether.

• Manual intervention: Instead of automating tasks, customers often had to manually check and correct the AI's work.

One reviewer on Medium didn't hold back, stating that 11x's product was "far less effective and yet cost more than its competitors." A former engineer was even more blunt: "The products barely work."

The Human Cost: A Toxic Work Culture Emerges

Behind the scenes, 11x's work environment was taking a toll on its employees. Multiple sources described a culture of overwork and constant pressure:

• 60+ hour work weeks were the norm

• Employees were expected to be available at all hours

• Weekend and holiday work was common

• Public shaming on Slack for unavailability or mistakes

• Threats of dismissal for speaking out

One current employee said:

"There's a lot more under the hood. One day, there will be a documentary about this guy. I do believe that's how scandalous he is."

Lessons for Startups: Building on Solid Foundations🦄 (Lessons for investors below!👇 )

The 11x saga offers several crucial lessons for aspiring entrepreneurs and startup founders: