Hatching Twitter: A True Story of Money, Power, Friendship, and Betrayal Read online

  Goldman looked skeptical. Biz rocked on the legs of his chair. They sat silently for a few seconds thinking about it. Jack looked at them all with a sense of yearning.

  “Okay. Here’s the deal,” Ev said, pausing again. He dictated that Jack would be CEO. Biz, Jack, and Ev would be cofounders. Goldman would be the vice president of product.

  Biz and Jack immediately felt a sense of elation.

  As Ev had personally financed Twitter with his own money to date, he told the group that he would retain a 70 percent stake in Twitter. Jack, as CEO, would be given 20 percent of the company. Biz and Goldman would receive around 3 percent each. The rest would be split up among current engineers and new hires.

  Eventually, Ev explained, Twitter would need to seek venture funding from investors, which would dilute some of their stock, but as the company consisted of only a handful of engineers, that conversation could wait.

  As the meeting wrapped up, they slid the glass door to the office open, and Jack walked out into the office as an official boss. He was beaming with pride and excitement. The CEO of Twitter.

  At least for now.

  The Hundred-Million-Dollar Offer

  Blaine looked up from his desk, leaning back in his chair as Ev walked briskly by, heading toward the front door. “Hey, Ev,” Blaine yelled, his long, pin-straight hair hanging down over his shoulders. “Don’t take less than a hundred million dollars!” Ev smiled, nodded as if to say okay, and then closed the door to 164 South Park behind him.

  It was mid-June 2007 and Jack, Biz, and Goldman were already outside on the curb as Ev emerged. Small pockets of fog lingered on the grass as they started to walk, turning right onto Third Street. Their destination was a mere 350 feet away. As their sneakers tickled the concrete sidewalk, Goldman broke the silence. “This’ll be interesting, if nothing else, to see what our value is,” he said. “We really don’t have a sense of what we’re actually worth.”

  Biz and Ev agreed. Jack was silent as he walked, deep in thought and excitement about his first acquisition meeting.

  They could hear car tires thumping on the grates of the freeway up the block as they approached the large gray building on the corner of Third and Bryant streets: the home of Yahoo!’s offices. Although Yahoo!’s company headquarters were in Sunnyvale, forty miles south of San Francisco, the company had recently set up this satellite office, called Brickhouse, as an incubator for entrepreneurial Yahooers to develop entirely new start-ups. The Twitter employees had all been to the office before, often for some of the company’s popular Web 2.0 parties. Usually mundane affairs—beer, wine, cheese, crackers, and lots of networking—the parties were meant to celebrate the resurgence of the Web after the cold winter of the early 2000s bubble pop. Most events were the same. People wandered around aimlessly, constantly peering down at the name tags stuck to everyone else’s shirts, searching for a venture capitalist, a blogger, or one of the esoteric “famous” people who had sold their start-ups already (like Ev).

  But this morning’s meeting was different. There would be no cheese, beer, or name tags. Instead, Yahoo! wanted to buy Twitter. “They want to talk acquisition,” Ev wrote in an e-mail to Jack and Goldman at the time. “Says that if our price is not hundreds-of-millions, but tens-of-millions ‘even several tens-of-millions’ [Yahoo!] doesn’t think it’ll be a problem.” Although Twitter had no revenue and no projected business model at the time, Yahoo! envisioned this new start-up as an extension of its mobile offerings.

  More than a year after it had begun as an experiment, Twitter had grown to nearly 250,000 active users. While the internal debates over who was in charge had been sorted out—at least for now—outsiders still often reached out to Ev, whom they knew and trusted from Blogger. It annoyed Jack, who was technically the CEO, to hear that someone wanted to buy the company through Ev, but he never let on.

  When the request to meet with Yahoo! came in, Ev had been lining up meetings with five prospective venture capitalists and was preparing to put five hundred thousand dollars of his own money into Twitter to continue funding it until the company decided who would finance it. He had also talked to angel investors who came with lots of connections and could help Twitter grow. Among them was the legendary Ron Conway, a wheeler and dealer who came with a slew of connections in Silicon Valley and access to a team of private investigators, if needed.

  Although lots of investors, including the big names like Fred Wilson, had started lining up with term sheets offering millions of dollars to finance the company, some investors immediately opted out, telling Ev that they didn’t see a business model in 140-character updates about people’s lunches. All of these discussions were put on hold when Yahoo! called.

  Brickhouse was a cavernous, loftlike space. Huge white columns randomly interrupted the floor like giant linebackers standing on a football field. At one end of the room, floor-to-ceiling windows looked out on the city; at the other, a wall had been meticulously covered with thousands of fluorescent Post-it notes, creating an image of a giant pixelated hand. Engineers lay about on beanbags programming on their laptops. It was a nerd’s paradise.

  As the Twitter team wandered in, Bradley Horowitz, who ran Brickhouse, greeted them with some other Yahoo! executives. “Hey, man!” Bradley, said as he patted Ev on the back, then shook his hand. “Great to see you.”

  Bradley wore his signature dark glasses, the frames as thick as his brows. The creases in his cheeks made him look more like an army general than a computer engineer. He lead them to the right, toward the conference room, where they shuffled inside, grabbing unassigned seats. As everyone got comfortable and introduced themselves, Ev began talking. He had learned how offers to buy start-ups work when he went through the process with Google and Blogger. It was more like trying to negotiate with a high-level escort than selling your company. In the end it almost always came down to the highest price.

  Ev ran through the numbers, explaining that at the end of February, days before the company had set off for Austin, the Twitter Web site had been receiving about two hundred thousand new visitors a month. By the end of March, after the South by Southwest award, the number of people coming to the site had quadrupled, quickly zooming past one million visitors as April rolled in. He explained that there was no revenue at Twitter yet, but that would come later, he said, “possibly through advertising or some new kind of business model.” For now, Ev was paying all the bills to keep the lights on.

  Jack clasped his hands together on the table, barely saying a word. He was nervous but attempted to portray an air of confidence that didn’t come across to the others in the room. He simply watched Ev walk Bradley around the Twitter garden. Then the discussion turned to what Twitter actually was.

  “So it’s a social network?” Bradley asked.

  Silence filled the room.

  Almost a year into the service, there was no consistent answer to the question. Even since March, after South by Southwest, the site had continued to take on a life of its own, not just for status updates but also for news. The technorati were clearly obsessed with the site, using it mostly to talk about themselves. But other people, and companies, were using it differently. Major news outlets—including the New York Times, Dow Jones, and the Defamer blog—had set up on the streets of Twitter, all sharing breaking, local, and gossipy news. There were now a fake Bill Clinton, Homer Simpson, and Darth Vader who posted jokey fake statuses. A few “real” celebrities had also joined. Janina Gavankar, an actress from The L Word, had been the first celebrity to start tweeting—although Biz had spent a few hours trying to figure out if she was real or an impostor. John Edwards, the presidential candidate, sent messages from his campaign trail. There were also “things” on Twitter. Fire departments had joined. Police scanners. Baseball games. Food trucks. Yet even with this flood of distinctive use cases, no one in the press really seemed to understand what Twitter was. Some in the media had taken to calling it “hipster narcissism,” “self-absorption,” “self-obsession
,” “egotistical,” and more than a few people who had tried Twitter called it a “complete and utter fucking waste of time.”

  But the question made Jack pipe up for the first time and start speaking, referencing a blog post written by Fred Wilson in late April. “What exact role is Twitter going to play?” Fred had asked in the post, discussing its place in the future of the Web. “It will be the status broadcasting system of the Internet.”

  “I see Twitter as a utility,” Jack said. “A broadcasting system for the Internet.” Then he began to describe his vision for Twitter, noting that it was “like electricity.” All of this confused Bradley, who looked around the room, perplexed by the idea of a social-media company as a utility.

  As the meeting came to a close, they all shook hands, and Bradley walked everyone out. He thanked them for coming, then looked over at Ev and said, “We’ll be in touch soon.”

  As they plodded back toward 164 South Park, Ev spoke up. “What did you guys think?” he asked. There was a certain air of excitement from the meeting.

  “I like Brickhouse,” Biz said as they wandered back. “It seems like it’d be a fun place to work.”

  “Me too,” Goldman said.

  “So what’s the lowest price we sell for?” Goldman asked.

  “A hundred million?” Ev hazarded. Biz and Goldman would each get about two to three million dollars if a sale went through at that price. Although such a number is like winning the lottery for most of the world’s population, a million dollars in Valley terms is like finding a quarter between your couch cushions. Such a number would give Ev more money and leverage to continuing putting start-ups on the Obvious Corporation conveyor belt.

  Given Twitter’s growth and attention, though, Ev was thinking about pausing his idea incubator and focusing on the 140-character machine. Prior to the Yahoo! meeting, in an e-mail to Goldman and Biz, he had noted that he was prepared to “double-down on twitter,” pushing Obvious Corporation to the side. That still left the question of what to do next: whether to take money from an outside investor or try to sell Twitter to Yahoo! or a similar suitor. Jack didn’t have the confidence, or the power within the company, to make that type of decision, so he quietly looked to Ev for guidance.

  Jack had the most to win from a sale. Although he was making seventy thousand dollars a year, he was still flat broke, living paycheck to paycheck, paying off credit-card debt and student loans from a year of college at New York University before dropping out years earlier. A sale for one hundred million dollars would give him twenty million, a gargantuan sum that could change his life forever.

  “Maybe we would take eighty million?” Jack asked. (This would be a sixteen-million-dollar win for Jack.)

  “Eighty million is the absolute lowest,” Goldman said as they pulled the door open, walking back into the offices.

  They didn’t have to wait long to find out the real number. In the late afternoon Ev got a call from Bradley. They spoke for a few minutes, then hung up.

  “Hey,” Ev said to Jack as he walked over to his desk. “Let’s talk outside.” Goldman followed them.

  “So?” Goldman asked as they stood on the sidewalk. “What’s the number?”

  “Twelve,” Ev said bluntly, his arms folded as he toed the edge of the sidewalk with his sneaker.

  “What’s twelve?” Goldman asked, now slightly confused. Jack started to giggle.

  “They offered us twelve,” Ev said, his voice pitched higher with slight disbelief.

  “Twelve million dollars?” Goldman asked, his eyes widening slightly when he said the number aloud to himself.

  “Yep,” Ev said. “Twelve million dollars.”

  They weren’t upset by the offer, as investors were begging to fund the company, but they did think it was comical that Yahoo! would offer such a low number.

  “We should really take the deal,” Jack said sarcastically as they all laughed.

  The comical tone was interrupted as Ev told them what Bradley had said on the phone: that he believed Yahoo! could easily build the technology behind Twitter, that it was “simply just a messaging service” and “a few engineers could do the same thing in a week.” He had concluded that if Twitter didn’t sell, Yahoo! planned to build and release a competitor.

  It was a typical relationship offering in the Valley: Either you fuck us, or we’ll fuck you.

  But hearing such an offer, followed by the fearful threat of attack by a much bigger company like Yahoo!, was also a relief. Now that they knew they weren’t going to sell Twitter, they had a clear path. They could move forward and raise their first real round of venture capital, money they needed right away to expand the servers and hire engineers to help with the company’s growth. Before the Yahoo! meeting, they had already decided that their first choice for investment would be Fred Wilson. This was partially because Ev and Jack believed Fred understood what Twitter could be. But more important, Fred didn’t care about a business model and wouldn’t pressure the founders of Twitter to come up with one—that, he told them, would come later.

  As Goldman, Jack, and Ev walked back into the office, there was a rare esprit de corps among them. In a single day they had almost sold their company, then found out the suitor was now coming after them. Although they didn’t know it yet, it was one of the few moments they would agree on a direction for Twitter. By the end of the coming summer, it would no longer be Twitter versus its competitors. It would be Twitter versus itself—Jack on one side, Ev on the other.

  “Twelve million?” Goldman asked again as the door closed behind them.

  “Yep,” Ev said, laughing. “Twelve million dollars.”

  Is Twitter Down?

  The blog post appeared on the Twitter Web site at 11:53 A.M. on Thursday, July 26.

  “First, Twitter was a fun side project, then it was cared for lovingly at Obvious until it was time to form Twitter, Inc.,” Jack wrote in the blog post. “Today, we’re excited to announce an important moment for Twitter. We’ve raised funding from our friends in New York City at Union Square Ventures.” Fred Wilson, a partner at Union Square, would be leading a five-million-dollar round of funding that would value Twitter at just over twenty million dollars.

  Then in a separate blog post, Fred explained why his firm was investing in a company with no income. “The question everyone asks is ‘What is the business model?’ To be completely and totally honest, we don’t yet know,” Fred wrote on Union Square’s Web site. “The capital we are investing will go to making Twitter a better, more reliable and robust service. That’s what the focus needs to be right now.” Revenue would have to come later.

  Fred was right. There was no time to worry about business models while Twitter was in its current state: broken.

  Each morning had been the same for the Twitter employees. A scene of Jeremy’s wife finding him on the couch at home in the same position as the night before, his laptop still glowing a warm blue haze on his chest, a small waterfall of drool coursing down the side of his cheek, his fingers lying on the keyboard as if he had been shot in a break-in gone awry. Blaine was found in the same position at his apartment.

  They had both been working through the night, trying to keep Twitter up and running—but often to no avail. The Web site was continually breaking and nothing could be done to stop the outages.

  Because of the way the site had been built—hacked together over two weeks—the influx of people on Twitter was making it fall apart. It wasn’t just one aspect of the service that was breaking; it was every aspect of it. Posts weren’t showing up in the timeline. Accounts were disappearing. The site was off-line for hours or sometimes more than a day at a time. The servers were collapsing. And because everything was in such disarray, the employees were revolting. Twitter had been built as a small rowboat designed to carry a few people across a pond; now the same vessel was being used to carry the same number of passengers as a cruise ship across an ocean.

  As a result, it was sinking.

  The out
ages also had a domino effect, with the failure of one aspect of the site knocking down everything else. The third-party tools Twitter gave to developers were being harnessed by hundreds of companies and apps that used Twitter’s content (Twitterrific, Twitteroo, Twitterholic, Tweetbar, Twittervision, and Twadget, to name a few). This influx of applications was straining resources away from the Web site. The site itself, which was still stuck together with the digital equivalent of plastic wrap and Scotch tape, would often bring down the servers. The servers would get clogged up with all the tweets waiting to be sent to the Web site and, bringing it back around to the beginning, the third-party tools would stop working. Almost daily, the entire operation would just come to a halt.

  Although the site’s problems should have slowed the flood of people signing up, they were only making it worse, adding bad press that would pique more curiosity about this Twitter thing—“If everyone else is signing up and breaking it, then surely I should see what this thing is about”—a pile-on of hundreds of thousands of people on one tiny little company.

  When the site reached one of its daily snapping points, the biggest problem was that the engineers had no idea where the breakage had originated. To solve this problem—or at least try—Jeremy and Blaine built code into the servers that would notify them via text message and e-mail when the site was suffering from one of its many issues. Like a patient put on life support, tubes and wires and cords sticking out and beeping about his health, the new code was designed to help engineers determine where the patient had fallen ill. Then they could go in and operate. This worked for a short while, but as they soon found out, the road to chaos can be paved with good intentions.

  In a matter of days the notifier was sounding a series of alarms that couldn’t be turned off, and the engineering team was inundated with bulletins. Their phones woke them in the middle of the night—sometimes every few hours, other times every few seconds—vibrating, ringing, and buzzing on the nightstand, with Twitter begging for help, as it had flatlined again. On several occasions, the problems were so severe that Jeremy and Blaine woke up to find more than a thousand text messages from Twitter servers complaining about a problem that had shuttered the site.