Discord Series H

Discord raised half a billion at a $15B valuation six months after turning down Microsoft's $12B acquisition offer, which should tell you everything about the judgment happening at both the company and LP level here. Dragoneer and Fidelity led this catastrophe in September 2021—literally the apex of the everything bubble—when crossover funds were lighting money on fire to get into anything with MAUs. The comparable set is nauseating: $15B put Discord at roughly 3x Slack's price-per-user metrics despite having zero enterprise revenue model, no clear monetization beyond Nitro subscriptions that maybe 5% of users actually buy, and a product that's essentially IRC with better UX. The core thesis seemed to be "it's popular with zoomers" which, congrats, so is depression.

The timing here is almost impressively bad. This deal closed right as the market started its slow-motion train wreck into 2022's correction. Anyone with a working brain could see the Fed was going to stop printing money eventually, but apparently Dragoneer's investment committee was too busy huffing their own supply to notice. Discord's monthly active users were plateauing after the pandemic WFH/gaming surge, user growth was decelerating, and competition from Microsoft Teams, Slack, and even Twitter Spaces was intensifying. But sure, let's price this thing like it's the next Facebook. The comparable trajectory everyone wants to ignore: Clubhouse raised at $4B in April 2021 and was basically dead eighteen months later. Discord has more staying power, obviously, but the valuation multiple was pure fantasy.

The investor quality here is whatever—Fidelity brings nothing except a big checkbook and a tendency to mark things generously until they can't anymore. Dragoneer made their name front-running IPOs and paying stupid prices in late-stage deals, which worked great until it didn't. Neither brings meaningful strategic value, distribution partnerships, or anything beyond capital that Discord didn't really need since they already had $480M in the bank from previous rounds. This was a vanity round, pure and simple. The company wanted to flex their valuation, the investors wanted to park money in a "safe" consumer social play, and nobody stopped to ask whether the unit economics actually supported this number. The signaling value went negative the moment the market corrected and this valuation became an anchor around Discord's neck for future fundraising.

Exit potential is the real nightmare. No strategic is paying $15B+ for Discord now—Microsoft already passed at $12B when the market was frothier, and that was probably Discord's best exit opportunity. Going public at this valuation would require revenues and a path to profitability that Discord simply doesn't have. Nitro isn't scaling fast enough, their attempts at monetization keep getting community backlash, and advertising would destroy the product experience. So you've got a company stuck between a bad acquisition price and an impossible IPO, burning cash to maintain infrastructure for 150M+ users who mostly don't pay for anything, with investors who need a 3-4x return minimum to justify this price. The math doesn't math, and everyone involved knew it but didn't care because 2021 brain poison made people forget that businesses eventually need to make money.