After turning down new funding amid employee exodus, HQ trivia pushes in-app subscriptions

Sources say the external response was just one facet: HQ employees had no idea about the new initiative, leading to confusion internally.

That’s just one example of the internal confusion at HQ Trivia, which in October 2017 was heralded as the future of TV. A few months short of two years later, the company’s future is in question, and the company has now turned down a new funding round from Lightspeed Venture Partners, Digiday has learned.

To its credit, HQ did become a viral sensation and made millions of dollars in revenue over the last year, unlike many consumer app startups that leave that for much later in their history. HQ had made $15 million since the company’s inception to February, the Wall Street Journal reported at the time. It launched sponsored games with Nike and Warner Brothers and later secured other big-name advertisers like NBC, ABC and CBS. This month, HQ’s sponsored show for “The Lego Movie 2” was nominated for an Emmy.

But HQ needs money, not just Emmy nominations. TechCrunch reported in April that HQ was burning through $1 million a month. The games may be free to play — for now — but they’re far from free to produce. To keep existing, HQ is looking beyond advertising to monetize its user base with more in-app purchases like gaming apps have done. (For HQ Trivia, extra lives go for $3.99 for one and $9.99 for three.) An HQ spokesperson told Digiday that the company has made $5 million from in-app purchases alone. Simultaneously, HQ is working on programmatic advertising, the spokesperson said.

HQ also sought to cut costs through layoffs. On July 1, HQ laid off 20% of its staff, shrinking to under 30 employees. It’s another step in low morale that has pushed other HQ employees to voluntarily leave for new positions, including its marketing manager and two brand partnership leads, per LinkedIn. HQ is hiring for engineering roles, according to LinkedIn.

All these efforts come as HQ recently turned down a term sheet of new funding from Lightspeed Venture Partners.

The new funds could have helped HQ make some big hires in charge of making more shows or be put toward marketing to boost its declining viewerships. But the deal came with a caveat. In February 2018, HQ raised $15 million at a $100 million post-money valuation, led by Founders Fund with participation from Lightspeed. This round would have been a down round, sources say.

Lightspeed and Founders Fund did not respond to requests for comment.

These moves come months into HQ’s reported search for a new CEO. Co-founder and former CTO Colin Kroll had taken on the role of CEO, previously held by co-founder Rus Yusupov, in September 2018, in part motivated by conflicts between the co-founders and under the advice of Lightspeed’s Jeremy Liew, Recode reported. But following Kroll’s death in December 2018, Yusupov was put back in charge as interim CEO. The board would search for a replacement, according to The Hollywood Reporter. But that replacement has yet to surface.

Since then, Yusupov has reigned over a series of unfortunate events. In February, employees circulated an internal petition to depose Yusupov from the CEO role which led to the firing of three employees, TechCrunch reported. In April, the show’s original main host Scott Rogowsky left for a hosting gig at DAZN. In July, the layoffs came.

HQ has still been running trivia every day at 9 p.m. (no longer at 3 p.m. too) along with less frequent airings of HQ Sports and HQ Words. But HQ is no longer the phenomenon that you see strangers playing at bars or hear people talk about in the office. A recent episode of HQ trivia with the theme of Netflix’s “Stranger Things” had under 300,000 viewers, a far cry from the millions of people the game used to attract daily.

Shortly after HQ made its public debut, Airbnb’s head of marketing Musa Tariq tweeted his amazement in the product.

https://twitter.com/MusaTariq/status/919371801838391297?s=20

Now, HQ is in a bind to secure its future with no buyer in view.