Inside Twitter rival Bluesky’s first major crisis, as investors pressured CEO Jay Graber to speak out about racist incident

The pointed feedback was from two investors in Bluesky, the Twitter-like social media app that launched its beta earlier this year to great fanfare. With Twitter under the thumb of Elon Musk, Bluesky has emerged as an alternative platform welcoming those allergic to the Chief Twit’s troll-y antics. But in June, Bluesky found itself embroiled in its own controversy after a user signed up for the service with a racist handle incorporating the N-word, and had apparently been permitted to use the platform for weeks without anyone at the company seeming to object.

Equally as bad as the incident, in the eyes of investors and many Bluesky users, was the response—or lack thereof—from Graber and the Bluesky team. Although the offensive username was eventually removed, Graber kept mum for 10 days aside from a post reiterating Bluesky’s community guidelines, offering upset users little clarity or remorse about the situation.

“We have been bombarded with people asking why a simple apology hasn’t been offered,” the investors wrote in an email viewed by Fortune. “We want to support you. We have shown you this by giving you money, social capital, and most importantly, the thing we have the least of and is most precious to us: offers of our time. This is becoming increasingly hard as we feel ignored, and we can’t help but feel like your actions are anti-Black by not addressing the issues and your part in them.”

The incident marked the first major crisis for the buzzy social media app, and reflects growing tensions between Bluesky and its stakeholders as the platform’s audience continues to expand. The clash between the idealistic notion of using technology to address social issues and the practical realities of managing a social network are becoming evident, just as they once did at Facebook, and Twitter itself, the platform from which Bluesky originated.

In just a few months, Bluesky has achieved significant growth, ballooning to 400,000 users and a wait list of 3 million people. There are fewer than 20 full-time employees, and despite securing $21 million in funding from a who’s who of Silicon Valley insiders—including Neo partners Code.org founder Ali Partovi and former Stripe executive Suzanne Xie, Red Hat cofounder Bob Young, Replit CEO Amjad Masad, and Twitter cofounder Jack Dorsey—there are no designated heads for trust and safety or a communications department in place.

When Bluesky started to gain traction in April, its staffers were embraced by the community, playfully interacting and becoming influencers in and of themselves. Software engineers on the team regularly joked with users, one posting pictures of themselves in cat ears, and responding to users to fix the litany of bugs they tended to find. 

But that carefree spirit that once characterized the early days of the app and its burgeoning community has become harder to come by as time has passed and the company attempts to scale.

Graber, who has been Bluesky’s CEO since 2021, described the change in the staff’s demeanor and engagement with users as a natural evolution. “What works at 10,000 users” is very different from what works at 400,000 users, she told Fortune in an interview. With all the demands of running a fast-growing social media service, Bluesky’s small team has adapted to its new scale, Graber said.

“The engagement is probably going to be more limited because people don’t have quite the time and attentional bandwidth to engage with as many people anymore,” she said.

Bluesky’s investors speak up

Over the past month the Bluesky team and Graber’s leadership have been put to the test.

After the racist slur surfaced and the software was patched to prevent that word from being registered in other usernames, more usernames with slurs seeped through the cracks, in a game of Whac-A-Mole between trolls and developers. After a series of short statements from the company, including an update on fixing the username code, as well as an update to its community guidelines emphasizing that users are prohibited from engaging in targeted harassment including the use of slurs, there was still no official word from Graber or her staff—except for one engineer, who took it upon himself to apologize.

Many questioned how such a well-known racist slur could have made it through the system in the first place, given Bluesky’s outspoken commitment to creating a safe community.

One investor in the startup, cocreator of Kubernetes Joe Beda, posted on the platform two days after the incident to tell users he had written an email to the Bluesky team “advocating for them to address the valid issues around racism and moderation” and hoped “they engage with the community in a more human way.” 

When asked about the size of the startup’s moderation team, a Bluesky staffer told Fortune that the company has enough experienced staff to ensure a 24-hour response time to most moderation reports. “I say ‘most’ because some need extra attention and time. For a benchmark, for years, Twitter had eight to 10 weeks response times,” the staffer wrote.

Still, Twitter’s moderation team is “a fairly sizable portion of the company,” a former executive at the firm told Fortune. Mastodon, more comparable to Bluesky, follows a decentralized and community-driven approach, in which individual servers maintained by various groups handle their own moderation instead of relying on centralized staff.

In any case, for Bluesky stakeholders, the problem was deeper than a moderation snafu. Investors and users alike were looking for a sincere apology, for the hurt caused and for breaking their trust. The anti-Black perception from the incident also took a toll, causing a loss in high-profile users, some of whom helped build the Black community on Bluesky, such as Angie Jones, Kelsey Hightower, and Pariss Athena.

“I’m not sure why anyone is waiting on the Bluesky staff to apologize,” software developer Angie Jones posted. “Obviously, they aren’t sorry, nor regretful. You think they forgot to exclude that word?! Of course not.”

Two days after the incident, with no formal apology in sight, several of Bluesky’s investors had a call with Graber and urged her to break her silence. One investor on the call said they didn’t perceive it as being confrontational. “We gave them clear suggestions to use their voice, and they didn’t push back,” the investor said. “They just said they wanted to do it right.”

The letter from the two investors followed six days later, with a more urgent tone. “The perception is that Bluesky is anti-Black, and frankly that’s now the reality,” the investors wrote in an email.

Two days after the email exchange, and 10 days after the initial incident, Graber published a formal apology to the community along with a timeline. Graber acknowledged in her apology how the once-chatty and freewheeling team’s extended silence had aggravated the issue. “This change in tone was a noted contrast to the way team members casually interacted with the community from individual accounts in the past,” Graber wrote.

Bluesky’s two-pronged mission

The next steps for Graber, and for Bluesky, will be critical as they seek to rebuild trust and regain some of the departed users, while continuing to grow the app.

Graber, a 32-year-old Tulsa native, is a part owner of Bluesky. An engineer and entrepreneur by background, Graber had been running Happening, a Twitter-like social network for events, before she was tapped to run Bluesky. Under her leadership, Bluesky has chosen a deliberately cautious approach to growth compared with other social media apps focused on rapid expansion—and yet, despite having implemented measures like an invite and wait list system, the company wasn’t able to completely shield itself from the hazards of social media.

Since the episode, Graber says her team “has been making sure that we have a lot of different voices in the room, advising us, and we’re also taking in the voices of the community in a form that we can absorb.”

The startup’s playbook for handling moderation issues on a large scale appears to remain a work in progress. Recently, for example, TechCrunch reported that some users received personalized apologies from Bluesky regarding their submitted reports. 

Graber told Fortune that those apologies did not come directly from the company, and she wasn’t aware of where they came from. Later, the Bluesky team explained to Fortune that the emails were sent by a newly hired agent who took it upon themself to respond to as many tickets as possible. The team clarified that it is not Bluesky’s policy to conduct personalized or private communications on general issues through support emails.

“We’ve been encouraging people to put in their feedback through GitHub or the support channels so we can kind of take it all in, prioritize it, sort it, and take it into account,” Graber said.

Part of the challenge facing Graber and Bluesky is that they are working on two tech projects simultaneously: the user-facing app as well as an underlying protocol designed to establish an open-source framework for creating social apps by other developers. Graber and the team have not been shy to reiterate that the protocol is their vision for solving the issues that plague centralized social media companies.

“The app right now is really just the first building block in a much larger vision for how we want the social web to work,” Graber said.

But Bluesky’s vision of a decentralized social web is just one of many out there, with other groups pushing competing protocols to make it happen. Facebook parent company Meta launched Threads, which will eventually be compatible with Mastodon’s ActivityPub, a competing standard to Bluesky’s AT Protocol.

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There’s also Nostr, a rival standard funded by Twitter cofounder and Bluesky board member Jack Dorsey. Dorsey has also been quite open about his disapproval of certain decisions made by Bluesky, taking jabs at the company for its character limits and the trend toward centralization as it grapples with how to address moderation issues.

Graber emphasized that the small company is bound to make more mistakes, but is committed to doing its best and achieving its goal of creating a healthy and safe community on the app. And because of Bluesky’s decentralization plan, users who don’t think the app is doing a good enough job will be free to try another app based on the protocol.

“If we make too many mistakes, if people lose trust in us, there’s potential for people to migrate with their friends, relationships, and data that they’ve built on Bluesky to other services,” Graber said.

Those decentralized services don’t exist yet, which means the mistakes—and corrections—Bluesky makes today will be all the more critical.