How a $1 billion TikTok challenger unraveled

Flip employees were riding high in mid-January.

The TikTok challenger had just cracked the Apple App Store’s top-five ranking. Downloads soared 855% month over month, Sensor Tower data showed, fueled by TikTok’s imminent ban in the US.

It was a dream scenario for an app that — with over $230 million in funding and a roughly $1.1 billion valuation — promised to reinvent social shopping through a mix of product reviews and entertaining videos.

Raging wildfires had forced Flip’s CEO, Noor Agha, to evacuate his Los Angeles home before he had time to retrieve his car or pack an extra pair of underwear. But in a January 15 interview with Agha and COO Eduardo Vivas, the executives sounded upbeat, if not a little frenzied.

“To be in the business that we’re in, given all the changes that are happening, is obviously very exciting for us,” Vivas said at the time.

Seven months later, Flip was dead.

This is the story of how Flip crashed, as told by nine former employees, along with investors, creator partners, talent managers, and brands. Agha, Vivas, and other company representatives did not respond to requests for comment.

Days after Business Insider’s interview with Flip’s top executives, President Donald Trump halted the TikTok ban. Flip raced to sustain its momentum, pouring money into ads and launching a $100 million equity fund to woo creators. With TikTok back in play, the buzz fizzled.

Things unraveled quickly from there. In April, Trump tariffs raised costs for some Flip vendors and brand partners. Then Flip slashed jobs and began clearing out its LA headquarters. In May, the company received an eviction notice for its LA warehouse.

By June, the company had slipped out of Apple’s US App Store top 100, and within weeks, it cut much of its remaining staff without severance, three ex-staffers said. Flip shut down its app in late August.

The company’s demise caught many off guard. Employees who had watched a spike in downloads and onboarding of new brands believed business was humming.

“I was as shocked as I could have been when that last round of layoffs came and how quickly it dissolved from there,” one former Flip worker said. “This year, there were very optimistic conversations about where we were going and the idea that this was going to become huge.”

Flip’s fate showcases the uphill battle that consumer startups face when trying to compete with tech giants like TikTok, Meta, or Google. The company spent millions of dollars to recruit creators and onboard new users via ads and referral credits. But competing with Big Tech companies, which have billions of users and the ability to outspend you at every turn, is no easy task.

“It’s actually crazy to build a new complete social platform from scratch,” Agha told Business Insider in January. “The amount of pieces to make a social platform work is so insanely hard.”

It also demonstrates how difficult it has been for US companies to blend social video and commerce. TikTok has struggled to live up to its leadership’s expectations for its e-commerce platform, Shop. Meta pulled back on some of its e-commerce bets, and Amazon killed its TikTok-like feed, Inspire, earlier this year.

“Changing shopping behaviors is a slow and gradual process,” said Sky Canaves, a principal analyst on the retail and e-commerce desk at EMARKETER, Business Insider’s sister company. “It takes time.”

The race to bring social shopping to the US

Agha, who was born in Iraq, launched Flip in 2019 alongside cofounder Jonathan Ellman.

Like many other founders, Agha is brimming with big ideas.

“This was his app, his dream, his world he wanted to create,” one former staffer said.

Flip’s original business idea was a try-before-you-buy social network where customers would receive clothing in the mail, take photos of the fits, and ask other users to vote on which items they should purchase.

Fashion tech was in vogue, with apps like Snapchat experimenting with virtual try-on technology. Some entrepreneurs were eyeing China’s massive social-shopping industry and considering how they might bring the business to the US. Live-shopping platform Whatnot had just kicked off in the US, later raising hundreds of millions of dollars at a roughly $5 billion valuation.

While TikTok hadn’t yet launched Shop in the US, it had begun experimenting with e-commerce features like in-video shopping links.

By August 2021, when Flip announced its $28 million Series A round, the company had pivoted from try-ons to user-generated product reviews and live shopping videos.

Flip was “well-positioned to follow in the footsteps of China and revolutionize social commerce in the US,” investor Ullas Naik of Streamlined Ventures said at the time.

Flush with cash, the company moved to grow its audience, unveiling a creator program in December 2021 that would pay users commissions on sales generated through their videos. Big social-media stars like Patrick Starrr, Hyram Yarbro, and Addison “Rae” Easterling joined the app.

The company was growing quickly, writing in a July 2022 press release that it had expanded its user base by 500% in the first half of that year. Flip fundraised on that growth, announcing in July a $60 million Series B round at a $500 million valuation.

That same year, the company moved into a new three-floor office in the El Segundo neighborhood of LA.

The office had many of the markers of a buzzy tech startup. Workers had access to free coffee and snacks like Uncrustables. There was even a trampoline, which no one used, three former employees said. Music blared over the speakers, with one electronic track on repeat that Agha particularly enjoyed, three ex-staffers said.

“The vibes in the building were always high energy,” a third ex-employee said.

While the company said it planned to use its 2022 funding to expand its team, it generally kept its head count lean. Much of the company worked in its El Segundo headquarters, where it required staffers to be in person five days a week. Some workers in functions like data entry were asked to work six days a week, with overtime pay.

“It was a very intense startup vibe,” said the first ex-staffer. “The people that work here are fully bought in.”

Flip makes a final push to take on the goliath, TikTok Shop

To keep growing in 2023, the company splurged on referrals, offering in-app credits sometimes worth over $100 to get new users signed up and scrolling more, The Information and The Free Press reported.

In April 2024, Flip raised a $144 million round with participation from the adtech firm AppLovin, doubling its valuation to around $1.1 billion. A couple of months earlier, it had formed a partnership with AppLovin to power ads for brands on Flip.

Around the time of the investment, the company also acquired Curated, a platform that connected shoppers with experts for advice on big purchases, for $330 million in stock. Curated’s CEO at the time, Vivas, became Flip’s chief operating officer. Vivas, a serial entrepreneur and high school dropout who previously sold a startup to LinkedIn, was on AppLovin’s board of directors.

The company was racing to expand Flip’s user base as it sought to take on the industry’s goliath: TikTok Shop. Like social-shopping competitor LTK, the company believed it had to expand beyond pure shopping content. Flip launched a new set of non-shopping videos, called Clips, in July 2024.

“We think of shopping as a form of entertainment,” Vivas told Business Insider in January. “People do it to have fun and enjoy themselves, but a feed cannot just be shopping content.”

Riding off the tailwinds of the looming TikTok ban, Flip downloads spiked. The company also invested in a stream of ads on TikTok to lure creators. Inside the company, staffers saw the surge of new users as a breakthrough moment.

“We all thought it was going to take off from there,” the first former Flip employee said. There was a feeling that “we made it past all of the hard parts of being a startup,” they said.

To boost non-shopping content, Flip pledged $100 million to its “Founding Creators Fund.” It promised creators “grants” of up to $100,000 that would scale with Flip’s valuation — so long as the creators kept posting to the app. Contracts set a five-year timeline for payouts, unless an acquisition triggered them earlier.

Overall, a mix of user acquisition costs and macroeconomic headwinds stunted Flip’s push to take on TikTok Shop.

“It was ultimately just unsustainable because they had these very high customer acquisition costs as well as customer retention costs,” Canaves said.

And as Trump delayed the TikTok ban multiple times, the desperate hunt for an alternative lost its urgency.

“It is really challenging for new apps to break through,” Canaves said. “I think they struggled to scale in the way that they wanted to.”

What happens after an app dies?

Flip wrote on its website last month that its mission of building a “social platform that gave everyone a voice” had come to a close. It said it had reached 16.5 million people, crossed 5 billion video views, paid $13.4 million to creators, and driven $375 million in sales for brands.

The statement didn’t provide a reason for the closure.

The app’s shuttering caught some brand partners off guard. Haak Wear, a hat seller, addressed the Flip shutdown in a blog post on its website. “This situation has reminded us of the importance of having multiple touchpoints with our community,” the company wrote.

Five former staffers said they felt out of the loop on the health of the business while working at Flip.

Flip is not the only tech platform to make big promises to partners and then shut its doors. Buzzy shopping app Nate abruptly closed its creator program in December 2022, for example.

“It wasn’t surprising that the app was going to shut down at some point,” said Tara Blair Ball, a creator in Flip’s Founding Creator Fund. “I don’t think it made sense how they were making money to warrant the pay that they were giving.”

Even as Flip’s downloads were surging in January, Agha acknowledged that merging social media with commerce is challenging in the US market.

“It’s definitely crazy freaking hard,” Agha said during the January interview. “Almost killed us a thousand times. No question.”

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