Air-powered sales automation startup 11x, which appeared to be on a rapid growth trajectory just last year, is now facing significant financial struggles, legal threats, and a mass exodus of customers and employees. According to nearly two dozen sources, including investors, current and former employees, the company's situation has become increasingly tenuous, with its lead Series B investor, Andreessen Horowitz, potentially considering legal action.

11x offers an AI bot for outbound cold sales duties, including identifying prospects, crafting custom messages, and scheduling sales calls. Founded in 2022 by Hasan Sukkar, the company claimed to have approached $10 million in annualized recurring revenue (ARR) just two years after launch. However, sources reveal that most of its early customers took advantage of "break clauses" in their sales contracts to discontinue using the product due to issues such as the emailing product not working as expected or hallucinations.

Moreover, the company has been accused of misrepresenting customer endorsements on its website. Multiple companies, including ZoomInfo and Airtable, have denied being customers of 11x, despite their logos being featured on the company's website. ZoomInfo's spokesperson stated that they did not give 11x permission to use their logo and are now threatening legal action over the false claim. Airtable also confirmed that they were not a customer and never gave 11x permission to use their logo.

Former employees have also spoken out about the company's shady tactics, including the practice of offering customers a break clause, which made it easy for customers to break the contract. However, when reporting annual recurring revenue (ARR), the company didn't differentiate between trial periods and long-term customers, leading to an inflated representation of its growth. The churn rate – the number of companies not continuing long-term – was high, with one employee estimating that the company was losing 70-80% of customers that came through the door.

The product itself has been criticized for underwhelming customers, with some complaining that it was hallucinating or wouldn't load at all. One reviewer on Medium panned the product, saying it was far less effective and yet cost more than its competitors. Former engineers have also spoken out about the product's limitations, stating that customers would have to manually check and correct the work, defeating the purpose of buying 11x's product in the first place.

In addition to customer and product issues, employees have described a toxic work environment under founder-CEO Sukkar. Employees were expected to work at least 60 hours a week with heavy pressure to be constantly available, and were often threatened with dismissal if they spoke out. The company has experienced significant employee churn, with many employees waiting for the nearest payday to pass before quitting due to concerns over backpay.

11x has responded to the allegations, stating that it "promptly removed any undesired or inaccurate customer mentions on their site and within their products when requested" and that any inaccuracies were due to human error. The company also claims to use contracted ARR (CARR) when reporting to the board and that its investors were aware of this metric. However, venture capitalists have expressed concerns that startups should disclose potential opt-out revenue and customer churn.

The situation at 11x serves as a cautionary tale for startups and investors alike, highlighting the importance of transparency, accountability, and a healthy work environment. As the company navigates these challenges, it remains to be seen whether it can recover from this setback and regain the trust of its customers and employees.