Inside ‘Briteland’: Stalled Growth and Slumping Morale at Eventbrite

Since the January meeting, resources for international expansion have been redirected to complete the integration of Ticketfly, an event-ticketing business Eventbrite bought in 2017 to sell more concert tickets. Insiders say many of the company’s current struggles can be traced back to the acquisition, which shifted the company’s focus from the core business that made Eventbrite a success.

“It’s been strategic misstep after strategic misstep,” a person familiar with the company said, adding that there’s been “a lot of brain drain.”

At least 11 key executives and managers have left Eventbrite since it went public in September. Dozens more employees have been laid off in recent months. At a staff meeting in April, Ms. Hartz told employees that “no one should fear for their jobs.” The following week, people were let go.

Morale at the company is declining, current and former employees say, in part because of the turnover and also because of the woeful performance of the company’s stock. Eventbrite shares have dropped steadily since hitting a high of $38 the week after the IPO. For much of the past two months, the stock has hovered around $16—well below the $23 IPO price and even lower than the $16.38 price set at the final round of private financing when many employees received their shares. In September the company was worth $3 billion; today it’s worth about $1.4 billion. 

After telling investors during its IPO roadshow that Ticketfly’s existing clients would be able to sell tickets through Eventbrite by the end of 2018, the company recently disclosed the integration won’t be complete until October—a full 10 months behind schedule.

The company reported revenue of $81 million for the first quarter of this year, up 9% from the same quarter in 2018. Operating losses, however, ballooned to $10 million, an increase of almost 230% from 2018’s first quarter. Eventbrite reports second quarter earnings on August 7.

To understand Eventbrite’s stumbles since its acquisition of Ticketfly and the public offering, The Information reviewed internal documents and spoke with 25 current or former employees, as well as others familiar with the company. They described a firm that, after more than a decade of growth fueled by dominance of a lucrative but narrow segment of the sprawling ticketing industry, has strayed from its core business. 

The story of Eventbrite’s rise and subsequent troubles highlights the difficulties that successful startups sometimes run into after going public, when they face near-constant pressure for growth and shareholders ready to pounce on missteps. 

Eventbrite declined to make either Ms. Hartz or Randy Befumo, the company’s former CFO who was recently demoted to chief strategy officer, available for an interview. 

“Our commitment to adapt to meet the evolving needs of our customers is the foundation of our growth to date and our future success. While building a high-performing company has its challenges, we will continue to ensure we have the right team with the right skills in place to continue to scale and capture the massive opportunities ahead of us,” a written statement from the company said. A spokeswoman declined to comment further.

Culture Clash

The online ticketing industry is made up of niche players that specialize in different kinds of events. Founded in 2006, Eventbrite allows organizers to promote events and sell tickets to them. The company found early success with an easy-to-use, self-service platform for smaller events, such as conferences, an approach that made it a dominant player in the “mid-market” of event ticketing.

Eventbrite’s platform sold tickets for almost 4 million events in 170 countries last year, the company said. Still, building market share hasn’t been easy. It’s taken Eventbrite 13 years to capture some 10% of the market across several areas of business.

Eventbrite sells tickets to most types of events except the largest live music concerts, which are dominated by Live Nation Entertainment, the entity created by the merger of Live Nation and Ticketmaster. The bulk of Eventbrite’s revenue comes from two streams: a commission of around 3% of ticket sales, which it must share with credit card and payment processing companies. Then there are customer fees—starting at about a dollar per ticket—for support from Eventbrite staff as well as promotion and, in some cases, on-site help.

Acquiring Ticketfly was meant to accelerate Eventbrite’s growth in the roughly $15 billion live music market. Instead, music growth flatlined this year to essentially zero.

“What is stopping them from growing? Right now it’s the music category,” said Shweta Khajuria, an analyst with RBC Capital Markets. The key question moving forward, Ms. Khajuria said, is, “Is the music market as big as they claim it is?”

Problems with the Ticketfly acquisition cropped up almost immediately. The two companies take very different approaches to the ticketing business, which has caused friction. Eventbrite devotes few resources to marketing and sales. Instead, it invests in improving its web platform, a product-focused approach it believes will attract new users and retain existing customers.

Ticketfly, on the other hand, was built with a traditional sales team that focused on closing deals for large, high-profile concerts. Its website features an array of must-have options for concert organizers—advanced analytics, general assignment and reserved seating options and tools to manage event entry—that have been difficult for Eventbrite to integrate into its self-service focused website, former employees say.

“You had this culture clash,” said a former employee who was involved with the merger. “It was like both sides were speaking two different languages.”

Despite these differences, Eventbrite’s senior leadership decided to move all of Ticketfly’s customers over to its own website as quickly as possible, an approach that others in the ticketing industry who have merged have opted against. People familiar with Eventbrite who have been through mergers say that integrating different software systems requires significant time and investment, which can create uncertainty and push customers away.

Both have been problems for Eventbrite. Competitors have recently undercut the company on price to woo music creators away while the integration drags on. A hack of Ticketfly’s systems in the summer of 2018, which caused the platform to go dark for days and which exposed the personal data of some 27 million customer accounts, didn’t help. 

Since then, some customers declined to renew their contracts with Ticketfly or migrate their business to Eventbrite. Chain Reaction, an all-ages music festival in Southern California, is one.

“We had a massive loss of sales [after the hack],” said Garrett Carroll, who runs the festival and has used Eventbrite’s platform for numerous other events. “They work well for very simple applications. But the dynamics of general admission and standard concert ticketing, it’s not a very good platform for that.”

Chain Reaction now sells tickets through Etix. Other prominent events that no longer sell tickets on Eventbrite or left Ticketfly since it was acquired include Burning Man and Wynn Las Vegas.

At least three shareholder lawsuits have been filed in recent months, all alleging that Eventbrite misled investors who bought at or above the $23 initial offering price into believing the integration of Ticketfly would be complete by the end of 2018 and that growth from the acquisition would boost the stock price this year.

Problems with the Ticketfly acquisition cropped up almost immediately.

Some investors, including Tiger Global Management, Eventbrite’s largest shareholder, have privately voiced concern about the company’s progress. Tiger’s stake, the result of an investment led by Lee Fixel, who recently left the firm, grew substantially in the last round of private financing, priced at $16.38 a share.

Growth slowdown 

Eventbrite’s product-driven approach to the ticket business was instilled early on by Kevin Hartz, Eventbrite’s former CEO and the husband of Ms. Hartz. Mr. Hartz now serves as chairman of the board and is less involved in the company’s day-to-day. He still spends time at the office, however, where he’s frequently spotted, sans shoes, working on his venture investments from a conference room.

In recent years, Mr. Befumo, who until recently was CFO, has taken on many of the daily management decisions as Ms. Hartz’ No. 2. Former colleagues describe Mr. Befumo, an ex-financial analyst with little experience running a company before joining Eventbrite in 2013, as “a force” who frequently butts heads with others. He and Mr. Hartz are close friends, which current and former employees say has shielded Mr. Befumo from internal criticism.

While CFO, Mr. Befumo played a key role in implementing a new pricing structure that led some customers to leave, according to two people familiar with the episode. Under the new structure, customers were charged based on how much assistance they needed from Eventbrite staff. The problem was that most customers didn’t want it, one of the people said. Further, while the change provided a short-term boost to revenue ahead of the IPO, it didn’t help long-term growth of Eventbrite’s core business: self-service customers who manage their own events.

“They really got out of their swim lane,” a former employee said, echoing what many others describe as a core problem: under-investment in a traditional sales team.

In fact, rather than investing in a sales team, over the past two years Mr. Befumo slashed the marketing budget in half, people with direct knowledge said. Resources have since been redirected to engineering and product headcount, much of which has been tied up resolving the messy Ticketfly integration.

Mr. Befumo is known internally for his steadfast belief that growth comes from improvements to Eventbrite’s website rather than investment in sales and marketing. The overall spend on these areas slowed to less than 24% of the company’s revenue last year, Eventbrite’s annual report shows. However, that figure includes the costly area of customer support. If you exclude customer support, Eventbrite spends less than 5% of its revenue on sales and marketing, five people familiar with the figure said, or about one-third of what comparable companies spend.

As investment in sales and marketing has dipped, growth in the core self-service business has slowed from roughly 30% in 2017 to 23% this year. Still, Mr. Befumo often urges colleagues not to worry about that part of the business, saying it will “take care of itself.”

Expansion distractions

The bulk of Eventbrite’s roughly 1,200 employees are based in its San Francisco headquarters, which employees refer to as “Briteland,” though it maintains offices in 11 countries. For years, the company’s international strategy focused on markets such as the U.K. and Australia, which have consistent demand for big events and festivals.

Eventbrite “only focused on places where they had critical mass of events. A smaller market just didn’t make sense,” said Eric Meyerson, a former marketing director at Eventbrite until 2016.

Under Ms. Hartz, who took over as CEO that year, Eventbrite shifted that strategy to try to win market share in smaller, less competitive parts of the globe. Overseas markets account for about 30% of Eventbrite’s revenue, growing at a much faster rate than U.S. markets.

But after two consecutive quarters of disappointing growth, Ms. Hartz decided to scale back on the plan in May, redirecting resources to core U.S. markets that generate the bulk of Eventbrite’s revenue, boosting short-term growth, which investors want to see.

Even former employees who remain bullish on Eventbrite’s outlook acknowledge the company faces significant hurdles to continued growth. “There’s so many smaller companies out there, because the business model is so obvious. But as soon as you hire a few people, the margins start to become difficult to grow,” said Parris Khachi, a former product manager who left in 2017.

‘Absolutely a concern’ 

Moving forward, Eventbrite must lean on a new group of managers after a clutch of key leaders left the company in recent months. Among the high-profile departures are Andrew Dreskin, the co-founder of Ticketfly who is also leaving Eventbrite’s board; Brian Rothenberg, who was VP of growth; former chief people officer Omer Cohen and former VP of global communications Terra Carmichael. Another executive, Deborah Sharkey, who was brought in as chief commercial officer after the company went public, left in April after less than six months on the job.

The string of recent departures is “absolutely a concern” for investors, said Ms. Khajuria, the analyst. She said her firm has tracked the aftermath of several recent tech IPOs, and that none have had close to the management turnover Eventbrite has endured.

The management turnover has contributed to some unusual hiring decisions in recent weeks. Eventbrite recently disclosed that it was paying board member Lorrie Norrington, who has worked this summer to rebuild the company’s sales team, as a consultant. The arrangement, which raised eyebrows among staff, is uncommon among publicly traded companies, said David Larcker, an accounting professor at Stanford University who studies corporate governance. 

Mr. Larcker said that since Eventbrite disclosed the arrangement to the SEC, there are likely no regulatory concerns with Ms. Norrington’s dual role. “But from a practical standpoint, you wonder about her independence.”

Ms. Hartz recently scored a much-needed win she had been seeking for a long time: bringing in Casey Winters to run the product team. Mr. Winters had advised the company for two years. Widely respected in Silicon Valley for his role in helping to grow GrubHub and Pinterest, Mr. Winters joined Eventbrite full-time in June.

In the weeks leading up to his decision, Mr. Winters discussed with colleagues his own pros and cons list, which he kept in his office, as he saw the company’s future. Positives included growth potential, product developments and the strength of Eventbrite’s brand. On the con side, Mr. Winters listed, simply, “Leadership.”