Feb 7, 2024 · 1h 23m · news
Erik Allebest: Scaling to $100M Revenue, 150M Members and 700 People, All with No Vc Funding | E1113 · 20VC with Harry Stebbings
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In this deep-dive interview on the 20VC podcast, Chess.com co-founder and CEO Erik Allebest shares the unconventional blueprint behind scaling his platform to over $100 million in revenue without venture capital. He details Chess.com's organic growth tactics, remote work model, and progressive wealth-sharing strategies, alongside profound personal insights on leadership, self-awareness, and fatherhood.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 24.1% of the talking time here. How this is scored →
Harry as informed peer 3.2 Guest teaching 3.8 Guest disagreement 1.9 Harry pushing back 3.3
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:03:31 Erik demands secondary pool for non-equity workers and warns GA
Erik forcefully describes blocking secondary liquidity deals until tens of millions were allocated to non-equity staff, warning current board partner General Atlantic that he intends to do it again.
Hardest push from Harry ▶ 18:50 Harry challenges Erik on VC return calculationsHarry refuses to accept Erik's narrative that VCs were foolish to pass on Chess.com, using financial multiples to demonstrate that VC return requirements justified their rejections.
Biggest teaching moment ▶ 22:45 Erik re-frames daily work tools as micro-dosing mind-altering drugsErik educates Harry on his realization from an Ayahuasca retreat, showing how everyday notifications on Slack and email function like micro-dosing mind-altering substances.
Harry holds his own ▶ 1:00:50 Harry cites regulatory and tax barriers to global profit sharingHarry counters Erik's idealistic view on corporate wealth redistribution by citing explicit legal complexities like K-1 tax filings across 37 states and international jurisdictions.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Early Entrepreneurial Hustle and the DNA of Founders | 3 | 2 | 2 | 3 | Harry proposes a theory that exceptional founders demonstrate entrepreneurial hustle early in life. Erik broadly agrees while gently noting later-in-life exceptions, leading Harry to tease him about lacking venture investor biases. | |
| Stanford GSB and Learning to Be Self-Aware | 4 | 4 | 1 | 2 | Erik shares feedback he received at Stanford GSB about being overly dominant. Harry relates with his own feedback about being direct and asks Erik for advice on balancing concision with relationship building. | |
| Acquiring Chess.com: The $56,000 Domain Name | 2 | 3 | 1 | 2 | Erik explains the progression from teaching chess to acquiring the Chess.com domain name for $56,000 in a bankruptcy auction. Harry asks about the domain's impact on early growth. | |
| Building the Community, Finding Product-Market Fit, and Defining the Mission | 3 | 3 | 2 | 4 | Erik outlines how Chess.com built community before playing features and defined its mission. Harry challenges standard corporate mission statements as mostly fluffy and meaningless. | |
| The Myth of Non-VC Funding: Trying and Failing to Raise Capital | 5 | 4 | 3 | 6 | Erik reveals they tried and failed to raise VC funding for five years because investors thought the market was too small. Harry plays devil's advocate, calculating exit multiples to argue VCs may have been right mathematically. | |
| Self-Worth, Digital Micro-Dosing, and the Ayahuasca Retreat | 2 | 5 | 1 | 3 | Erik discusses his detachment from money and lessons from an Ayahuasca retreat about digital micro-dosing on Slack and email. Harry asks reflective questions about grounding self-worth outside work. | |
| Bootstrapping Chess.com: Doing the Opposite of Silicon Valley | 3 | 4 | 2 | 3 | Erik contrasts his bootstrapped, remote-first model with Silicon Valley's capital-heavy approach. Harry jokes about being rendered obsolete as a venture investor. | |
| Creative Customer Acquisition: A 100% Commitment to Content | 3 | 3 | 1 | 2 | Erik details their strict avoidance of paid acquisition in favor of continuous content investment across emerging platforms. Harry inquires about transition timing between platforms. | |
| Partnering with Creators and Letting Young Voices Lead | 4 | 3 | 1 | 2 | Erik details creator partnerships and step-back management that lets younger team members lead social strategy. Harry compares the model to Logan Paul's Prime flywheel. | |
| Product Inflection Points: Puzzle Rush and the Psychology of Early Wins | 3 | 4 | 1 | 2 | Erik tells the story of creating Puzzle Rush and explains why early wins heavily impact retention. Harry lightheartedly probes the ethical dilemma of pairing beginners against easy bots. | |
| Transitioning to a Smart Metrics Balance | 4 | 4 | 2 | 5 | Erik explains how Chess.com traditionally relied on intuition over key metrics. Harry presses on how investor General Atlantic handles this approach and how success can be measured without metrics. | |
| Key Performance Indicators and Subscriber Stickiness | 4 | 4 | 1 | 3 | Erik breaks down key metrics like DAU, CURRENT retention, and the ratio of learners to players. Harry probes the distinction between 30-day retention and habit-based metrics. | |
| The Impact of Cultural Events on Subscription Cohorts | 4 | 4 | 2 | 4 | Erik outlines how events like Queen's Gambit brought high-converting subscriber cohorts. Harry pushes back on whether viral moments attract low-quality users who churn rapidly. | |
| Capitalizing on Black Swan Moments | 3 | 3 | 1 | 3 | Erik attributes growth to preparing product features right before black swan events hit. Harry asks what Erik would have done differently to capitalize even more. | |
| Navigating Secondary Sales and Liquidity | 4 | 4 | 3 | 3 | Erik clarifies that bringing in General Atlantic was secondary liquidity to buy out earlier passive investors rather than a primary capital raise, sharing how he rejected investor preferences. | |
| Regret and the Realities of Institutional Investors | 3 | 5 | 3 | 4 | Erik expresses deep regret over ever selling initial secondary equity. Harry asks him to defend fully remote work against common criticisms of lost productivity and culture. | |
| Attracting Passion Over Paychecks | 2 | 4 | 2 | 2 | Erik explains that Chess.com deliberately filters out candidates seeking top-of-market compensation, hiring instead for mission and lifestyle fit. | |
| Global Compensation and Navigating Capitalism | 5 | 4 | 3 | 5 | Erik critiques wealth flow under modern capitalism. Harry pushes back with technical challenges around global equity distribution, including multi-state K-1 tax filings and vesting issues. | |
| Geopolitics, Workplace Politics, and Ethical Boundaries | 4 | 4 | 4 | 6 | Erik describes blocking investor transactions until tens of millions were set aside for non-equity employees, warning General Atlantic he will do it again. Harry directly challenges Erik on whether this confrontational style risks alienating board partners. | |
| Fatherhood, Autonomy, and the Balance of Power | 2 | 4 | 2 | 3 | Erik recounts receiving an FBI notification regarding a dark web hit contract after taking a stand against Russia's invasion of Ukraine, as well as managing young fatherhood. | |
| Parenting Wisdom and the Positivity Ratio | 3 | 4 | 3 | 5 | Erik details granting his 15-year-old son total autonomy rather than enforcing strict rules. Harry pushes back, arguing children inherently need structure and parental guardrails. | |
| Validation in Marriage and the Vulnerable Leader | 2 | 4 | 1 | 2 | Erik shares relationship principles centered on emotional validation before problem-solving. Harry admits his own difficulty showing vulnerability. | |
| Work, Escapism, and Seeking True Self-Acceptance | 3 | 4 | 2 | 3 | Harry candidly confesses to working non-stop out of fear of mediocrity. Erik gently advises Harry to cultivate self-acceptance rather than using work as an emotional buffer. | |
| Quick-Fire Questions: Milestones, Mortality, and Motivation | 2 | 3 | 1 | 2 | In a quick-fire round, Erik reflects on becoming a millionaire at 28, his fear of mortality, and the timeless appeal of chess over the next decade. |
Statements from this episode (42)
Allebest: Chess.com is his third chess-focused business
“Chess.com is my third chess business, which is totally absurd to say.”
Allebest: Chess.com prioritized immediate monetization over typical Silicon Valley spending
“Everything I saw going on in Silicon Valley was like spend, spend, spend. We did the opposite. We thought about monetizing immediately.”
Allebest: Raising venture capital psychologically feels like earning revenue for founders
“I think raising money feels a lot like earning money. It's a self-validation.”
Stebbings: Pursuing an MBA is a low-risk move driven by security
“An MBA is, Is a non-risky move. It is seeking security, actually, by definition.”
Allebest was rejected from every graduate school he applied to in 2001
“I didn't get in anywhere because it was like right after the.com You know, bubble boost bubble burst in 2001. And I got rejected to every school”
Allebest: Directness requires building relationship credit through positive interactions
“It's not an either, or it's not like be nice and then don't be direct. It's like you can be both. And I think a lot of it has to do with like the number of deposits and withdrawals you make in any relationship. And so it's like your bank account. So you need t…”
Allebest's pre-Chess.com e-commerce site reached $2M in annual revenue
“We were doing Between one and two million dollars a year in, I think a little over two million a year in revenue and was making good money.”
Allebest: Exact-match domains were essential for web startups, unlike today
“Ridiculously large role, especially at the beginning and the beginning sets the tone for later. Now, I mean, in today's world, if we hadn't done it, if you, would you have to start on chess.com? Probably not, but given the time that we started and how it worke…”
Allebest: COVID and The Queen's Gambit 5xed Chess.com overnight
“When COVID came and the Queen's Gambit hit and our numbers like five X overnight, it grew the game of chess five X.”
Allebest: VCs including Peter Thiel rejected Chess.com for five years
“We tried for like the first Five years to raise money. We tried many times. We tried angels. We tried, I met Peter Thiel. I went, I met a bunch of different angels. I went up and down. I used all my connections up and down Silicon, you know, Sand Hill road to …”
Allebest: Silicon Valley wrongly believed the chess market was capped at $10M
“Well, I mean, now knowing what I know, I mean, chess is a much bigger market. I don't think I did anything wrong. I think everybody was wrong. I think consensus, including from me, was that chess was too small, and so why would you invest in a business that yo…”
Allebest: A mobile snow survival game made $400M in nine months
“There's just, there's a mobile game that launched literally last year in the last nine months that in that, in those nine months did four hundred million dollars in revenue, some kind of like snow survival game or something.”
Allebest: Chess.com instituted a firm rule against paid user acquisition
“We'd totally been burned on, on paid acquisition, and we pretty much made You know, a very firm rule that we weren't going to do paid acquisition. And so instead we said, we're going to take any money that we have and we're going to put it into content because…”
Allebest: Chess.com was live streaming on Justin.tv before Twitch existed
“We were doing live streaming back when it was justin.tv long before it was Twitch.”
Allebest: Short-form video completely drove Chess.com's latest growth wave
“Our most recent wave was Completely driven off of short forms, whether it's YouTube shorts, Instagram, you know stuff or reels or, you know, TikTok. It is totally driven.”
Allebest: Winning first chess game doubles or triples user retention
“It pains me to say this, but somebody who wins their first game of chess is two to three times more likely to stay around than someone who loses their first game.”
Allebest: Chess.com pushes new users to play coach bots first
“What we're trying to do is push people toward not playing a person first, but knowingly playing a coach bot personality where they will win and feel good But not to just throw them in the pool of players against other people where there's a fifty-fifty chance …”
Allebest: Chess.com historically operated without metrics-driven management
“We are, we have not historically been a metrics-driven business. We are, we've been a heart and mission and chess-driven business.”
Allebest: Chess.com offers free play while monetizing educational features
“Our business is funded by learners. Playing is free. Learning is Behind the paywall.”
Allebest outlines Chess.com daily user engagement across playing, puzzles, and lessons
“You know, it's actually a strangely low number, but it's like, 60% of our active users come in on a day and play. Half of them will do a, will do puzzles. So half of that number will do puzzles, and then half of that number again will do lessons. Game review i…”
Allebest: Chess.com has 150M+ registered members and 15M weekly active users
“So just, we could say we've got about a 150, a little over a 150, a hundred and sixty million registered members. We have Take a weekly active users is probably around 10% of that. Around fifteen million. About 10% of that are active subscribers.”
Allebest: Most Chess.com paid users choose annual billing and highest tier
“The majority of people pay yearly. And most people do tend toward our highest paid product because they get the most access and our retention on paid users is really good.”
Allebest: Queen's Gambit subscribers converted at higher rates but retained worse
“They subscribed at a higher rate, but then retained at a lower rate, to your point. And that kind of, we swallowed that, but it's not like it went up and back down. It went up and stayed up significantly. So yes, it was net massive growth, but yes, they later …”
Allebest: Younger Chess.com users convert to paid subscriptions at lower rates
“But now you have a whole bunch of high school kids and junior high kids and younger people getting into chess, and they subscribe at a way lower rate. And so registration numbers went through the roof, but our subscriber numbers didn't follow.”
Allebest: PokerStars founder Esai Scheinberg acquired over 20% of Chess.com
“His name is Esai Scheinberg, founder of PokerStars. He loves chess. He wants to meet you. I meet with him. He's like, hey, I want to buy in. I want 50% of the company. We're like, get out of here. We're like, no chance, no way. And so, and he's like, okay, I'l…”
Allebest: Chess.com's General Atlantic deal was 100% secondary equity
“That's when we met GA, but again, it was to buy out existing equity. It was not to raise money. There was no primary money put in whatsoever. It was all just buying founders' equity and equal ownership.”
Allebest regrets selling equity to Chess.com's first investor
“Totally. Every day. Every day I think about it. I have so few regrets in life, but that is one.”
Stebbings: No job role is executed better remotely than in person
“Because I can't think of a role which is done better remotely, and people disagree with me. And I'm always open to have my mind changed.”
Allebest: Geographic hiring constraints shrink talent pools and inflate compensation
“First of all, talent is all over the world. And if you are geographically confined on talent, you have a smaller hiring pool and you are now competing in ways, you know, that are hard. It's hard to compete against these massive dangled comp packages in certain…”
Allebest: Remote work removes performative behavior and drives employee loyalty
“They don't feel trapped in the office. They don't feel like they have to show up early to do FaceTime. They don't feel like they have to be the last one to leave. They don't have to pretend like they're busy. It's so life enabling to them that they're grateful…”
Allebest: Chess.com intentionally filters out applicants seeking top market salary
“We are nobody's highest paying job. We immediately filter for highest pay. Like if you are looking for your highest paying job, it will not be chess.com.”
Allebest personally hired the first 300 to 400 Chess.com employees
“I probably hired the first. 300 to 400 people myself who worked at the company.”
Allebest set early salaries by asking candidates what they needed to live
“I would just say to them, Hey, how much money do you need to do this job? And if we can make that, we'll do it. And if not, I'll let you know, but really, what do you need to do this? Because I'm not going to make you an offer. Cause I don't know your life. I …”
Allebest: Global remote market access has dramatically raised Serbian tech wages
“What's been great is to see globalizing, like people wages have gone up because someone who used to in Serbia work for nine dollars an hour. Now they have a global marketplace to work so that their wages have gone up a ton.”
Allebest: Investor returns are disproportionate to value created by workers
“Look at the people who invest in there in the finance industry and look at the, where the value flows versus where the work is being done. And it's just disproportionate.”
Allebest: Tax prep for tiny global equity stakes exceeds equity value
“The moment you are an equity owner, you have a K one in 37 states and 12 countries and the tax bill alone for managing the equity, tiny equity stake you have can be worth more than the equity itself.”
Allebest forced exiting investors to pool tens of millions for staff
“When our PokerStars investor, you know, the Sheinberg family, when they exited to GA, I said, I am going to block this transaction as hard as I can, unless We set aside a huge percentage comparatively of the sale. Everybody is going to pay. I think it was seve…”
Allebest: Chess.com avoids taking corporate stances on political issues
“We are not out there trying to have a stand on any particular issues, but our belief is that chess is for everyone, and that's an inclusive message.”
Stebbings: Fear of mediocrity prevents pursuing life beyond work
“I worry that I will be mediocre if I have anything else.”
Allebest became a millionaire at age 28 selling his second business
“When I sold the second business, and I had a seven-figure Bank statement.”
Allebest: Chess will remain the preeminent strategy game as media proliferates
“People go back to the classics and for a little bit of just like safety. I mean, my kids listen to music from generations past because there's something that's like just classic about that. And I think that chess will be the fallback Of the greatest strategy g…”
Shorts cut from this episode
▶ Threatened by Russia 😱🇷🇺 · 20VC with Harry Stebbings (@1:05:29)
▶ How Chess.com built their best product ♟️🥇 · 20VC with Harr (@0:41)
▶ How much did Chess.com REALLY make from Queen’s Gambit? 🤔💵 (@44:03)
▶ Full Story of Chess.com with CEO #ErikAllebest ♟️ · 20VC wit (@0:00)
▶ First Live Chess Tournament ♟️💵 · 20VC with Harry Stebbings (@32:37)