How They Started Page 11

  Another fundamental disagreement soon arose between Gary and the board over the wider direction that ECI was to take. The board was increasingly at odds with Gary over strategy: they wanted to use ECI as a vehicle to sell classifieds technology to newspapers, a process that Gary fundamentally disagreed with.

  “[Newspapers] were slow moving and I could see how long it took them to do anything at all. Even though some of them were a hundred thousand times bigger than us, I always knew we could take them on ourselves. I always knew working with the newspapers would turn out to be a dumb idea.”

  These incidents and disagreements over strategy led to Gary leaving his post as Match.com CEO in mid-1995. “We had a big fight. I left,” says Gary, simply. “It was a great time to be starting other things, so I moved on to new ventures.”

  “It’s the exception rather than the rule that the founder is a good CEO,” Gary says. “The guy that has the idea is not normally the guy with the skills to manage 300 people.”

  Gary remained on the ECI board as the chairman, helping with the overall strategy and vision until the Match.com business was sold off to Connecticut firm Cendant in 1998 for $7 million. Again, it was a decision that Gary strongly resisted, believing the brand to be vastly undervalued. From the investors’ point of view at the time, it was a canny piece of business, selling a brand for over three times what they bought it for just a few years after investing. But Gary’s estimation of the true worth of the business proved to be much closer to the mark, as Cendant sold the site on to US giant Ticketmaster for the eye-watering sum of $50 million just one year later. Gary resigned from the ECI board after the sale to Cendant, pocketing just $50,000—as well as a lifetime account on Match.com.

  Despite the acrimonious split, Gary believes his experience at Match.com was an instructive one. He learned that despite having a knack for good ideas and keen business insight, he was not born to be a CEO—a lesson he says can serve as a cautionary tale for other would-be entrepreneurs.

  “It’s the exception rather than the rule that the founder is a good CEO,” Gary says. “These cases of Amazon, with Jeff Bezos being the founder and CEO, or Mark Zuckerberg—these aren’t normal. The guy that has the idea is not normally the guy with the skills to manage 300 people.”

  Gary also learned to take a more inclusive approach with investors rather than the combative style he adopted while at the company. He advises: “When the process begins of building and getting a CEO in, you may as well be part of the process as opposed to fighting it.” He adds that you have to “kiss lots of frogs” to get the “right” investors and only regrets his choice in hindsight, if not the investment itself.

  Electric Classified’s sale of the Match.com brand proved to be the beginning of the end for the business. Changing its name to Instant Objects, the company persisted with the doomed goal of selling backend technology to newspapers, and, despite raising an additional $25 million in venture capital, finally shut its doors in 2001.

  However, this wasn’t quite the end of the ECI saga. In 2004, the defunct company’s outstanding debt was bought by none other than Gary himself, who then sold off some patents he had filed while at the company for a handsome profit. “I bought the debts for maybe $300,000 and made a couple of million dollars from the sale,” he says. “It’s a nice story.”

  Where are they now?

  Today, Match.com competes with PlentyOfFish.com as the world’s leading dating site and established the template for many other imitations, fulfilling the potential that Gary always knew it had.

  It claims to have over 20 million members (1.3 million of whom are paying subscribers) with a 49:51 male:female ratio. It’s also a truly global affair, with sites in 25 different countries in eight languages. The company is still under the control of IAC (InterActive Corp.) and would comfortably be valued in a multiple of hundreds of millions of dollars.

  “I’m happy it’s done so well,” Gary says. “I knew as soon as I had the idea it was going to be huge—I’ve got my vision wrong many times but I got this one right.”

  And Gary’s life after Match.com has proved just as eventful. After leaving the company, he started NetAngels, a venture that offered early collaborative filtering technology that was merged with another company, Firefly, and was eventually sold to Microsoft.

  In the late 1990s, Gary became embroiled in one of the longest running and most notorious disputes in Internet history when fraudster Stephen Cohen stole the Sex.com domain—which Gary had registered for free when starting Electric Classifieds—and used it to form the basis of a multi-million-dollar pornography empire. This battle to save what was rightfully his would take Gary many painful years, with Cohen’s evasiveness almost leading to his ruin. Eventually, Gary obtained some of what was owed to him, receiving a $65 million judgment that included Cohen’s mansion in the prestigious San Diego neighborhood of Rancho Santa Fe. Gary now lives in the mansion, and Cohen bought himself a lengthy prison sentence.

  Today, Gary devotes his time to investing in ethical and sustainable businesses and estimates he is an investor in 15 such ventures. A notable recent investment success has been Clean Power Finance, founded in 2007 as an online service that enables solar buyers and sellers to connect with financial products. Kleiner Perkins and Google were some of the other investors, and the company reportedly channels $1 million into the solar industry every day.

  But did Gary ever achieve his original goal of finding love? “I finally got married about four years ago—but it wasn’t through Match.com!”

  Gary explains. “It was a hybrid model—I offered a reward on the Internet of a trip to Hawaii for two if you set me up with my future wife. This guy I know set me up with my wife, and he got his holiday, so everyone was happy.”

  Twitter

  How 140 characters changed the world

  Founders: Jack Dorsey, Christopher Isaac “Biz” Stone and Evan Williams

  Age of founders: 29, 31, 33

  Background: Software developers/Google employees/serial entrepreneurs

  Founded in: 2006

  Headquarters: San Francisco, California

  Business type: Social media/microblogging

  In five short years, Twitter grew—and grew—into a tool that revolutionized global communications. It became so ubiquitous that using it became a verb: to tweet. The brief status updates of Twitter would change the way news is reported, governments are toppled, and charitable donations are solicited.

  But Twitter is almost as famous for what it hasn’t done: turn a profit. Despite attracting a huge audience and raising over $1 billion in venture capital, Twitter continues to struggle to find a business model that will let it cash in on its popularity.

  Three geek dropouts and how they grew

  As a teenager growing up in St. Louis, Missouri, Jack Dorsey created software that helped taxi and ambulance dispatchers locate their vehicles. Jack attended Missouri University of Science and Technology, then transferred to New York University before dropping out in 1999.

  He moved west, taking up residence inside the former Sunshine Biscuit Factory in Oakland, California, and he began working on a Web-based dispatch start-up idea. In July 2000, inspired by the Web-posting service LiveJournal, he got an idea for a simple, real-time update service—a more “live” LiveJournal.

  He sketched the idea on a sheet of wide-ruled notebook paper. There would be a small box for writing what you were doing, room for a bit of contact information, and a search bar for finding others on the service.

  That was it. Jack wanted to call it Stat.us.

  Evan Williams grew up on a farm in Clarks, Nebraska. He lasted a year and a half at the University of Nebraska before dropping out in favor of a string of tech jobs. In 1996 he moved to Sebastopol, California, to work for technology publisher Tim O’Reilly and his O’Reilly Media. He began in marketing but floundered as a staffer and switched to writing code as an independent contractor. “I was bad at working for people,” Evan wo
uld later say.

  In 1999 he co-founded Pyra Labs with ex-girlfriend Meg Hourihan. Pyra’s hit product was a simple, early Web-logging platform called Blogger, a term Evan coined.

  Blogger lacked a business model—the platform was free. Evan wanted to focus on improving the user experience and building the audience first, then figure out how to make money.

  Unsurprisingly, funds soon ran out. The small staff continued without pay for weeks but eventually staged a mass walkout that included Hourihan. Evan ran the company solo until securing an investment from VisiCalc creator Dan Bricklin in April 2001, after Bricklin learned of Blogger’s woes from a post on Evan’s blog, Evhead. The staff was rehired, and Blogger’s software was rewritten so that it could be licensed to other companies.

  In 2002, Evan’s next-door neighbor Noah Glass introduced himself after spotting the Blogger logo on Evan’s computer monitor. Noah’s startup, Listen Lab, was working on a way to post audio recordings on Blogger, a feature Evan added as Audioblogger.

  Google acquired Blogger for an undisclosed sum in 2003. Evan spent about a year overseeing Blogger at Google before leaving in 2004 to create a new startup with Noah.

  Biz Stone studied writing at Northeastern University and the arts at the University of Massachusetts Boston, near his hometown of Wellesley, but he lasted just a year at each institution before dropping out. He worked as a designer for publisher Little, Brown and Company for three years before getting the entrepreneurial urge.

  He launched the free journaling service Xanga in 1999. When Blogger’s paid version came out, Xanga licensed it and Evan and Biz formed a long-distance friendship. In 2001, Biz left Xanga (which continues to operate today), and when Google purchased Blogger, he was recruited by Evan.

  Hello, Odeo, goodbye

  Evan and Noah saw how difficult it was to find and organize podcasts. In early 2005, they launched a startup designed to solve this problem. They called it Odeo.

  Evan’s Blogger success made it easy to find investors. Odeo quickly raised $5 million from Charles River Ventures and an A-list of angel investors including Evan’s former boss Tim O’Reilly and Google investor Ron Conway.

  Two early Odeo hires were Biz and Jack. Unfortunately, there was soon a rather large fly in Odeo’s ointment: in March 2006, Apple’s iTunes podcasting service launched and appeared certain to dominate the market. Moreover, Odeo’s technology proved difficult to execute. The 14-member team became demoralized.

  Meetings were needed to discuss Odeo’s next move. Since software developers tend to work remotely and keep odd hours, getting together wasn’t always easy. Staffers were constantly being messaged or emailed to ask: “What are you doing?”

  This problem rang a bell with Jack. He dug out his old sketch of Stat.us.

  The birth of twttr

  At a playground near Odeo’s offices in San Francisco’s South Park neighborhood, Jack pitched the Odeo execs. They debated the merits of a Web-based communication platform that would bring together email, instant messaging, and mobile-phone texting.

  “He came to us with this idea: ‘What if you could share your status with your friends really easily, so that they know what you’re doing?’” Biz later recalled.

  Giving himself the handle @jack, Jack created the first post on March 21, 2006: “just setting up my twttr.”

  The first-ever tweet.

  A team of four got the go-ahead to work on Jack’s idea. Jack, Noah, Biz and Florian Weber—a Berlin-based expert in the emerging, open source Web-development framework Ruby on Rails—worked for two weeks to create a prototype. To enable the service to work with text messaging’s 160-character limit, they set a 140-character update limit. At first, it ran on Noah’s IBM Thinkpad laptop.

  The team brainstormed for a name, as Stat.us was taken. “Jitter” and “Twitch” were nominees. Noah finally came up with the name Twitter, which was originally written “twttr.” Giving himself the handle @jack, Jack created the first post on March 21, 2006: “just setting up my twttr.”

  Odeo’s meeting-schedule problem was solved. More significantly, everyone found twttr fascinating and couldn’t resist sharing it with friends. By the end of the first day, there were 20 users.

  Shortly afterward, Biz got an insight about twttr’s value after a hot August day spent ripping up carpeting in his stuffy apartment with his wife, Livia. Exhausted, Biz took a break and checked his twttr feed. He found Evan had posted a link to a photo of himself.

  “Sipping pinot noir after a massage in Napa Valley,” was Evan’s tweet.

  The sharp contrast between their weekend activities gave Biz a laugh—and he realized twttr offered a uniquely engaging way to communicate.

  In short order, everyone at Odeo spent more time working on and using twttr than they spent on Odeo. A change was clearly in order. But Odeo had raised money for a podcasting product, and twttr was a text-based service. Also, twttr was an unknown quantity: “It’s too early to tell what’s there,” Evan wrote on his blog.

  Evan took a highly unusual step: he gave all of the Odeo investors their money back in late 2006.

  After the buyout, Evan and Biz founded a new company, Obvious Corp., which would develop twttr and find a buyer for Odeo. A key hire was former Blogger product manager Jason Goldman, who would become Twitter’s product vice president. (Odeo was purchased by startup SonicMountain for over $1 million in mid-2007.)

  One of the first things Evan did after buying out the investors was to fire Noah Glass. It was the Golden Rule of business in action—Evan had the Blogger gold, and though Noah had played a key role in Twitter’s creation, the two clashed, and Evan made the rules.

  Being a punchline

  Two months after launch, Twitter had just 5,000 monthly users. While a few techies were instantly hooked, others didn’t understand how it worked, or chafed at the 140-character limit. It was difficult to describe: was it microblogging? a device-agnostic message-routing system?

  “For the first nine months, everyone thought we were fools,” Biz later told Terry Gross, on her national radio show Fresh Air. “People would say, ‘That’s the most ridiculous thing we’ve ever heard of.’ The criticism at the time was Twitter is not useful. To which Ev would say, ‘Neither is ice cream—should we ban ice cream and all joy?’ We were having fun building it.”

  Besides the fun factor, what kept the team going? “From the very beginning, Ev described it as a communications platform that had revolutionary potential,” says early employee Jason Stirman, who was Twitter’s engineering manager. “It was this simple little website that kept breaking, and people were posting what they had for breakfast, but he had a vision for this thing, even in its infancy.”

  The original twttr site—which boasted a green-and-white color scheme—was replaced in the fall with a blue color scheme and revamped name: Twitter. A year after it was created, in March 2007, Twitter had 20,000 users.

  “For the first nine months, everyone thought we were fools. People would say, ‘That’s the most ridiculous thing we’ve ever heard of.’”

  Following Evan’s Blogger model, Twitter was free for users. The company philosophy: build value before seeking profit. All energy went to keeping the site running and users happy. The company supported two important features created by Twitter users: the hashtag (#), enabling users to track popular or “trending” topics, and the forwarding “retweet” button.

  Twitter’s iconic bird logo.

  Rocking Austin, Texas

  To grow its subscriber base, the Twitter team made plans to attend the Austin music and technology conference South by Southwest (better known as SXSW). The previous year, a competing mobile-texting service—Google-owned Dodgeball—had won Best Product of SXSW. In a risky move, Evan and Biz would face down their better-funded competitor before SXSW’s tech-savvy audience of more than 100,000.

  Twitter’s marketing plan was to install two large, high-definition plasma-screen monitors in the Austin Convention Center hallways and
display attendees’ Twitter updates. There would also be T-shirts emblazoned with the faux status update “wearing my twitter shirt.”

  Initially, the monitors didn’t work, and Biz and Evan sweated through much of Friday night fixing them. Saturday morning, Twitter’s server in San Francisco crashed. Then, finally, the screens worked. Attendees stopped to gawk at the message scroll—then chose which sessions to attend based on what they read. Many presenters began their sessions by announcing their Twitter handles. Attendees live-tweeted about what they heard.

  In a risky move, Evan and Biz would face down their better-funded competitor before SXSW’s tech-savvy audience of more than 100,000.

  But Twitter made its biggest impact at night. Crowds turned like a flock of birds in the Austin streets as mobile-phone users read tweets directing them to the hottest venues and away from dull events.

  Twitter was doing exactly what Evan envisioned. “It was the first time people were able to coordinate in real time,” Biz recalled later. “This was spine-tingling stuff for us.”

  Stirman recalls, “SXSW was fertile ground for this product. You had all these tech people in the city without good ways to communicate with each other, especially at night. They had this ‘aha’ moment—Twitter is useful.”

  Twitter won Best New Product of SXSW 2007 and users tripled to 60,000. The team returned home to spin Twitter out of Obvious and incorporate it as Twitter Inc. By year-end, Twitter had 200,000 users. Twitter also captured the attention of the media and influential tech bloggers. It quickly permeated pop culture: in the fall, the forensic techs of CSI would solve a crime after following a tweeted clue.