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Jason travels to Founders Den in San Francisco to sit down with its founder, Jonathan Abrams. In addition to Founders Den, Abrams is famously known as the founder of Friendster. On this episode we hear first hand about the history of Friendster, Jonathan’s latest project, Nuzzel, and the ambiguous future of entrepreneurship as seen from 2012.
1:20 Let’s welcome Jonathan Abrams of Founders Den
2:00 Thanks to SnapTerms for their sponsorship. We use their products and they use witty funny language, it’s a great service. Enter the term TWIST and you will get a free NDA with your order
5:30 What was the moment you got the idea for Friendster?
6:20 What was San Francisco like in those dark days for you? What were the streets like?
8:20 At the time of Friendster the idea of using your real name on the internet was wild?
9:00 Explain what a bulletin board system was.
12:45 Some of the relationships were strange back then though right? People didn’t understand why married people should be connecting
13:15 How fast did Friendster grow though? It was the first thing that went viral.
14:20 When did you know that the viral loop had started?
16:55 Who was the first investor and what was their reaction?
19:45 How long were you CEO for? What did it peak at in terms of employees?
19:20 Did you want to be replaced as CEO at that time?
21:40 How do you reconcile the disruptive VCs and the revolving door of CEOs as an entrepreneur?
22:00 MAILCHIMP. Thanks to mailchimp for their partnership. It’s the Gold Standard. The free plan is always free.
25:00 How do you reconcile the disruptive VCs and the revolving door of CEOs as an entrepreneur?
25:45 Did you get anything out of the deal?
28:20 Was it a great feeling when you found success again with Friendster?
25:20 What was the bad technological decision that hurt Friendster?
29:45 Why was it so bad to switch between technologies?
31:10 Even though Zuck basically stole Friendster, he was at least a great technologist right?
31:45 Did Zuckerberg ever try and hire you?
32:40 Please explain what Founders Den is to us.
33:15 When and why did you want to start this coworking space?
34:00 So people aren’t coming to Founders Den to get your advice?
35:20 So how does the pricing work at Founders Den
35:45 Who are the sponsors?
37:30 Tell me about Nuzzel.
40:00 So you coded this entire service yourself?
41:00 Did you feel like to a certain success Friendster’s success came from your coding?
43:00 How is Nuzzel going so far?
43:30 How exactly does it work?
45:00 What do you have to worry about if you’re entering the market not as the first company?
50:10 What do you think of Path?
51:10 What do you think about Facebook now, as it approaches its 10th birthday?
53:10 What has Facebook done that is innovative? They are really just executors, not innovators.
54:45 What do you think the key of entrepreneurship is?
58:30 Do you think it’s too easy to be an entrepreneur today?
58:55 Why would someone lie about founding a company they didn’t found.
63:40 Where do you think the value will be in 10 years? Is entrepreneurship is over?
64:55 I’ll say a company and you tell me what you think about it.
69:45 Thanks to the sponsors See you next time.
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Jason: Hey, everybody. Hey, everybody. It’s Jason Calacanis, here. A very special episode. Jonathan Abrams, the original founder of Friendster, Nuzzel, Socialize, and Founder’s Den. And, an angel investor in more than a dozen companies. He’s going to be with us for the hour. Stick with us. It’s going to be an amazing entrepreneurial, startup discussion.
TWiST title sequence.
Jason: Hey, everybody. Hey, everybody. Welcome back to ThisWeekIn Startups. Finally, I have Jonathan Abrams on the program. I’ve been wanting to have him on for years. Well, for the whole 3 year lifespan of the company.
Jonathan: I’ve been wanting to be on since I was a kid. Growing up in Canada, I’ve always been dying to be on the show.
Jason: Yeah. Well, you know, we were big in Canada, in the 70s.
Jason: You, of course, are most well known for founding Friendster. Which, really was the first social network, to hit critical mass. I can only remember two instances of the concept of social networking. One, was, 6 Degrees, which, was, just poorly executed, in the late 90s. It was more like a contact database.
Jonathan: Yeah. I didn’t know much about it. But, my recollection was, it was more like Plaxo.
Jason: It was like Plaxo. It was, like, here’s your contacts. That’s it, manage your contacts. To call it social networking, though it had the name 6 Degrees, it wasn’t. Then, there was something called Rise? Which, existed for a brief moment.
Jonathan: I think Rise may still be around. Rise was started by a buddy of mine, Adrien Scott. It was focused on business. I think, it was more like LinkedIn, or attempting to be.
Jason: Right. It was the original LinkedIn. Then, you started Friendster. Take us back to the spark. You really are the godfather, in a way, of social networking, years and years, before all these other sites, hit critical mass, you hit critical mass, with Friendster. What was the moment when you said this site needs to exist. Cause, I remember, Xeni Jardin, now, from BoingBoing, then, working with me on Silicon Alley Reporter, showing it to me and telling me how cool it was. Just being one of the first people to log into the service, and having my mind blown that I could click on somebody and I could see their friends, and they could see my friends. What was the ‘moment in the shower’, where you thought this was a good idea. What was the inspiration behind Friendster?
Jonathan: There were multiple inspirations. Everybody, always, wants the ‘shower moment’ I call it the ‘Pez disposer moment’, sort of, Ebay.
Jason: Which, by the way that story…
Jonathan: …is probably fake.
Jason: It is in fact, fake. From what I’ve been told.
Jonathan: So, everybody, always, wants that story for Friendster. Then, when you don’t supply it, they create a story. So, there’s always been the fake story that, I started Friendster to meet girls. Which, is not true. So, I don’t, really, have, a single ‘shower moment.’ It was 2002 and, as you remember, well, things were pretty bad, back then.
Jason: It was the worst years of our collective lives. Would you agree?
Jonathan: It wasn’t the worst year of my life, but, it was certainly, probably, the deadest period of the Silicon Valley and San Francisco scene, since I moved here, to work at Netscape, in 1996.
Jason: What was it like, when you walk up and down the streets that are now, packed with huge rents?
Jonathan: Quiet. It was quiet. People, actually, left Silicon Valley. They moved back to Canada or Texas or wherever they went. Or, they went to business school or became a realtor. People just, sort of, gave up… abandoned their interest in the web and the internet. It’s not like people stopped using the internet. But, certainly, in the San Francisco and Silicon Valley scene, for that year or two, enthusiasm went down to zero. But, I had a lot of time free, because I had sold a company, then, I was working at another company. They merged with a company and moved to southern California. There just wasn’t a lot going on in 2002. That gave me the freedom to work on a bunch of goofy ideas that, sort of, came together, in the prototype of Friendster. It was not a single ‘shower moment’. It was a combination of being inspired by a whole bunch of other…before there was social, there was community… a whole bunch of sites. Rise, was one. There was Match.com and Evite and eGroups and GeoCities, and Hot or Not. There were a bunch of things.
Jason: There used to be a lot in the ‘group’ genre. Like: message boards and forums. That was the state of the art.
Jonathan: Right. Those sites were all, online community, online communication. They did have some of the concepts of Friendster. But, they were still part of what came before Friendster, part of the inspiration. Another part of it was the Stanley Milgram stuff. The six degrees of separation thing. It’s called, The small world theory. Friendster was not my first company, it was my second. So, I had, already, moved to Silicon Valley from Canada and had to do a lot of networking. I hadn’t gone to Stanford or Berkley. So, I had been someone who had been networking: meeting people through other people, as an entrepreneur. So, the concept of meeting people through other people was ingrained in me. I started coming up with the idea of: what if online, instead of being anonymous, instead of being Cyberdude307, I’d be Jonathan, and I’d bring the real world social context that I had with me, online.
Jason: At that time, the idea of using your real name was considered secondary or weird. I, obviously, had a handle. I was the Cybersurfer, when the internet first came on. Did you have a handle? What was your handle?
Jonathan: I probably did. I had a BBS, in my teens, on my Commodore 64, in Toronto.
Jason: Wow. Me, too. I had a BBS in the 80s. What was your first modem? A Hayes?
Jonathan: It was, probably, some crap. I probably couldn’t afford the Hayes. So, it was probably a crappy, Hayes-compatible clone.
Jason: What BOD?
Jason: I had a 300+. That’s legit. I give you a fist pump for that. To have a 300 BOD modem, I don’t think people realize how slow that is.
Jonathan: Our kids are never going to understand the concept of (imitates modem dial up noises) “Oh, it’s busy. I can’t log into the BBS. It’s busy.”
Jason: Bulletin Board Systems were the precursor to the internet. Explain what a bulletin board system was, technically.
Jonathan: People watching this are probably too young to understand. You’re computer was not online, all the time. We didn’t have broadband or Wi-fi. You’d dial up and your modem would call some other modem. If it was a big BBS, instead of just one line, like my crappy BBS, maybe they’d have ten lines. Sometimes, they were all busy. So, you’d have to keep redialing to get in. Do you remember FidoNet? It was the way BBSs were linked together, with other BBSs, before the internet. So, you could send an email to somebody and a series of BBSs would call other BBSs and forward it around to reduce the long-distance charges. They’d daisy chain it and four or five days later, the guy in Minneapolis would get my email from Toronto.
Jason: It’s amazing. What an amazing time. I was a bulletin board SysOp and a junior SysOp. What was the name of the software? Powerboard? It’ll come to me.
Jonathan: What computer was this? TSR-80, Apple…?
Jason: It was PC Board.
Jonathan: Mine was on my Commodore 64.
Jason: Wow! That’s legit.
Jonathan: It probably had a total of ten users.
Jason: Just so people know: if you had 300 BOD, then it went up to 1200, 4800, 9600. Then you had 48k, 56k,128, then 256k. Then DSL came. Then you got into megabits. Right now, on your phone, if you’re using, like, LTE 1,2,3, up to 20mb. Twenty million. We had single hundreds.
Jonathan: This is 1984. So, it’s a long time ago.
Jason: That’s exactly what I was doing at the same time. That magic, in a way… At that time you didn’t use real names. That was forboden, in a way.
Jonathan: When the web came online, I was a ComSci student, in college. Still, MUDs AND MUSHs AND MUs and Usenet, and all that kind of stuff, like you said, before Friendster, were message boards and group things. People would, still, often used handles. Like, on GeoCities, they called it community, but if you and I, both, joined GeoCities and created our own page, they would put us in an arbitrary street or village. Even if you and I, actually, in real life, were somehow connected, in any way, that wasn’t reflected, in the way an online community was built.
Jason: You would have, like, a cigar store and I would be a dominatrix. They’d be, like, right next to each other. Then, the math tutor.
Jonathan: I don’t think it was that racy in GeoCities. They would group you in these streets or cities. It was an arbitrary, virtual set up.
Jason: So, you’re into networking. You’ve read the studies.
Jonathan: I also read Malcolm Gladwell’s “Tipping Point”. Around that time, it came out and that had got me thinking. All the Stanley Milgram stuff: connectors. How people were connected to each other. I came up with a bunch of goofy ideas.
Jason: What were some of the other ones, that didn’t come together, to make it?
Jonathan: One of them was the idea of real names. I wanted to create something that was… One of the things people would use it for was to date and hook up. But, it wasn’t a dating site. It wasn’t a hooking up site but, that’s one of the things that people would use it for. People would also, use it for other things. People, who weren’t single, who weren’t dating, would also, use it. That was, sort of, a weird concept, too.
Jason: That was a weird concept: Why are we socializing if I’m married or in a relationship. I shouldn’t be on one of these sites. I remember, at the time, you had to go through a painstaking process of explaining to people, that this is for everybody: business and contacts.
Jonathan: Sometimes, you might get a Friendster invitation and not until your fifth one… you might have also, seen it on T.V., or something, then, sort of , succumbed and said, “maybe this isn’t spam”. You’re like, “what is this thing?” Your friends would, sort of, nag you into joining it.
Jason: How quickly did it grow? It was one of the first sites to, literally, go viral, right? This is where the term viral came from, was Friendster.
Jonathan: Well, I think that Hotmail came before Friendster and that was viral, in a different way. People would see, “Get your own, free Hotmail.”
Jason: I think that, because, you were the second, they called it a trend, then came up with the word for it.
Jonathan: Maybe. A lot of things, that have been viral since then, have been based on the Friendster concept. Cause, it was, sort of, the Metcalfe Effect (Metcalfe’s Law): Friendster was more useful to you, if you got your friends to use it with you. Therefore, people would bug their friends to use it with them. There were some game mechanics. I didn’t use the term then, but, you could see, in the early days, if you had eight friends and I had 20 friends, you would, then, be probably more inclined to get five of your friends to sign up for Friendster, so that you would have more friends than me. It would just keep going and going.
Jason: You didn’t intend on there being a friend race. It just happened and you noticed it.
Jonathan: I did. I mean, it wasn’t as explicit and cynically manipulated as some game mechanics, today. But, I showed the number of friends. I showed certain numbers. You would see all of the person’s friends. There were things that were highlighted. Partially because, it was interesting. But, I wasn’t completely unsurprised that it would encourage some of that kind of behavior.
Jason: People liked the idea that you showed the number of friends. Some people thought it should have been private, at that time?
Jonathan: I don’t think many people thought that. There were all sorts of weird adages. Just the idea of having a profile with your real name and picture on the internet, at all, was weird. So, as you said, there was Rise, which, never got huge, but, they were trying to be a business networking site, sort of, like LinkedIn. If you were an entrepreneur, maybe you’d put your profile on the internet. Of course, dating sites existed, like Match.com. You’d put your profile on the internet, for that. Of course, you’d hope none of your friends, actually saw it. We flipped that upside down with Friendster and said, ” invite your friends, now, to do this with you.” That was a weird concept. The idea that regular people, not entrepreneurs, not people looking to date, just anybody would put, even a picture on the internet, was not intuitive. It was not normal at the time.
Jason: When did you know that the viral loop had started. What impact did that have on the business itself. People hadn’t really seen that since Hotmail. I don’t think that everybody was aware that this could even happen: that a website could spread like that. We had word of mouth, as a society.
Jonathan: As we said, in 2002, nobody wanted to hear about another internet company. Everybody was, sort of, anti-consumer internet, in 2002. But, it started growing, immediately, but, that was invisible to everybody. When I had a password controlled, private beta prototype of this goofy thing that I’d built, which, of course, I had no idea if anybody would like it or not, but as soon as I invited some friends on it, they started inviting their friends. They started inviting their friends and it really was like the shampoo commercial. It started growing exponentially, right off the beginning. When it was going from 100 to 150 people, then 200 to 500, obviously, nobody was noticing this. When it started going from thousands to millions, in 2003, people started to notice. It really grew from the very beginning. I had no idea. It was an experiment. So, I just invited friends to play with it. I had no idea if they’d actually bother their friends with it. It was, sort of, a goofy idea that you would list who your friends are on the internet, then bug them and they’d have to confirm, ‘yes or no’. Then, you’d see all of the names and pictures. It was, by no means, something that I ‘knew’ was going to work.
Jason: Fast forward a couple of years. You raised money for it. Who was the first V.C. you showed it to or the first investor? What was their reaction? Or, did they start calling you?
Jonathan: Well, the first two investors, that were angel investors. One of them was a woman named, Melissa, who had been the V.P. of marketing at my previous company, HotLinks. The other that I remember, amongst the first two, was Dave Baszucki, who is now the C.E.O. of Roblox. They were amongst the first angel investors. Then, in the fall of ’03, we raised a venture round.
Jason: Who were they?
Jonathan: Kleiner Perkins, Venture Capital, and Battery, were in that round.
Jason: That was in 2003? You go see John Doerr, Bill Gurley, and who was the third fund?
Jonathan: Battery (Ventures).
Jason: I thought you said battery. What was the reaction of VCs to this? It was brave, let’s say ‘ballsy’, in 2003 and say, “I have an internet company and I need money.”
Jonathan: Actually, by the time this was taken place, Friendster had already grown, exponentially. It had, already, broken over a million users, without being institutionally funded. It had already been on, almost, every magazine and newspaper in the country. It had been on T.V. Actually, almost, every venture capitalist, in Silicon Valley, was calling me. It was one of those unique situations. So, raising VC funding for Friendster, in the fall of ’03, was very easy. Many VCs were, actually, mad at me when, they were not selected to be investors in the company.
Jason: Wow. That’s amazing to reconcile, given the fact that, after 9/11, all funding was turned off and nobody cared about it. Not only that, correct me if I’m wrong, people hated the internet people. They thought it was a scam. They thought, the internet was most associated, most closely, with fraud. Like, the whole industry was considered a fraud.
Jonathan: There were a lot of ‘.com era’ companies (1999 era companies) that had gone public, then, lost, like 99% of their value. In ’02, if I had gone to raise funding for Friendster, I would have had the door slammed in my face. By the time Friendster got the VC funding, it was a little later. It was now the end of ’03, and Friendster was growing, very fast. That was, actually, inspiring the beginnings of web 2.0 hysteria.
Jason: It was, sort of, the start of it, cause I remember in 2003, I started thinking about doing a blog network and Friendster was, in a way, inspiration. Cause, I was like, the web wasn’t a fraud. It was a trend.
Jonathan: The whole time, people didn’t stop using the internet. People were still using Google, Yahoo!, and Amazon, and it was growing, but for that one or two year period, between the collapse of the .com and ’03, nobody wanted to fund or start companies. The internet was still being used.
Jason: It grew very quickly. What did it peak at, in terms of employees? How long were you C.E.O. for?
Jonathan: I was only C.E.O. for a few months, after the venture financing. From the venture financing, in the fall of ’03, to the company being sold in ’09, the company went through six C.E.O.s in those six years. Six years, six C.E.O.s. I was C.E.O., for the first year of the company from the beta launch, a little more than a year, in ’02 to being replaced in early ’04. That was the period when it was going like this: upwards.
Jason: Did you want to be replaced, or was that the board’s push?
Jonathan: Well, it’s a complicated thing. At the time in ’03, this was, really the ‘dark ages’, in some ways. Even though, this was my second company, this was before Y Combinator, Venture Hacks, AngelList, TheFunded, before, a lot of these blogs. Before a lot of stuff. It never crossed my mind that I should attempt to retain control of the company. I thought the right thing to do was to recruit very experienced, successful investors. The ones who’d been involved in Google, Yahoo!, and Amazon, and trust them and they would help take the company to the next level.
Jason: And, founder control didn’t exist, as a concept. If you did launch it, today, you, probably, would have had founder control, by default: being who you are, and your track record. You could get any level of control that you wanted.
Jonathan: I think, Friendster may have also been an example that people learned something from. I guess, at Google, they did do some stuff. It wasn’t until they went public that we learned, a little, about how the Google guys had put some weird stuff into the bylaws.
Jason: Yeah, to keep control. So, the, sort of, sideways trajectory of Friendster and the six C.E.O.s, what do you attribute it to and how do you reconcile that as an entrepreneur? You created something, obviously, world changing, on very big scale. Then, you watch the revolving door with the C.E.O.s, the ‘meddling’ VCs, I’m using that word, not you, but meddling VCs, perhaps, the best ‘meddling VCs you could have, in fact. If you’re going to have VCs meddle, it might as well be them. And, it doesn’t reach the level everyone had hoped for, how do you reconcile that as an entrepreneur? Is it hard?
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Jonathan: On one hand, I’m proud of some of the things we did with Friendster. On the other hand, it’s disappointing that the early early employees, the early angel investors, who, correctly, believed in me and the vision of Friendster, long before, everyone in the world got it, I would have hoped that they would have been rewarded for being right. Unfortunately, that didn’t, really, happen. Friendster was sold for, around, $40 million, in ’09. The Malaysian company that bought it, then, promptly sold the patents, that I’m the inventor of, to Facebook, for more than they paid to buy the company. Which, was, like, the final chapter of the mismanagement of that company. So, it’s frustrating. MySpace was bought for $600 million. Bebo $800, something, million. Clearly, the early people at Friendster should have done a lot better. It’s frustrating.
Jason: How about you? Did you get anything out of the sale?
Jonathan: A little bit. But, I was more frustrated that all the early people: the angels and the employees did not do well. That’s on me for, maybe being too naive and trusting the wrong people. But, you know, ultimately, that’s my responsibility. That’ll always be a disappointment for me.
Jason: But, you carry on. You still make companies. You still invest.
Jonathan: Of course.
Jason: It’s interesting. I’ve had rough times, too: Silicon Alley Reporter, crashing and burning, and having to sell it.
Jonathan: You have to remember, this was my second company, Friendster. I’d already gone through running a company as a first-time founder and C.E.O., through the ‘.com’ boom, then, during the ‘.com’ crash. Dealing with that was a tough time for me.
Jason: That’s extremely tough.
Jonathan: For most folks. I was a first-timer.
Jason: What was the toughest thing, the first time? You had to lay off a lot of people? Shut the doors?
Jonathan: For me, it just so happened, as the ‘.com’ crash was going on, I was dealing with the challenges at the startup. I, also, had stuff going on in my personal life, and my family, that was difficult, all at the same time. It just happened to be one of those periods that you go through, when you have a bunch of bad stuff at the same time, unfortunately.
Jason: When it rains, it pours.
Jonathan: That was tough. After that ended, I was left thinking, “Did my career peak at thirty?” The company, HotLinks, was not a huge success. I was the founder of my own venture-backed startup in the ‘.com’ boom and for all I knew, that might have been the peak of my career, forever. I had no idea that, a couple of years later, I’d invent Friendster. I had no idea. That was a weird thing to think, “boy, at thirty, is my career is downhill, for the rest of my life?” You never know.
Jason: It’s funny that you say that. I had that same experience. After Silicon Alley Reporter: I’d been on Charlie Rose, I’d been profiled in the New Yorker, I had 70 employees, $12 million a year in revenue, then it all went away. Then, I thinking, “I have to do something with myself.” At the same time period, I started the Blogging Network. I said, “Maybe, I can make some blogs.” Engadet, AutoBlog, etc. I did have that profound sense that, “that was as good as it gets.”
Jonathan: Yeah. I was wondering if that was the case. Instead, I ended up inventing Friendster. Of course, when I was working on it, I had no idea how it would go.
Jason: When that happens, is it like this incredible rush, like, O.K., I wasn’t a one trick pony? I’m, like a home run hitter. I’m going to keep swinging that bat. I’m going to make contact with that ball, again.
Jonathan: It was like many entrepreneurs go through: a real roller coaster. Like I said, I had no idea Friendster would be anything. Then, it took off and I was shocked. Then, it started growing so fast that, me and the original small team were, desperately trying to keep the site up.
Jason: I remember that. That was a big part of the legacy. Because nobody had viral growth, nobody had ever had to have a system that had tens of millions of people, like this, overnight.
Jonathan: Yeah. As we started fixing some of the things, then, unfortunately, we ended up having leadership, who were less technical than me, and some of the technology got replaced with worse technology. So, then, that created a big opening for MySpace. That was frustrating as a technologist. Just to see things go backwards on the technology.
Jason: What was the bad decision? They went to Oracle or something, .Net?
Jonathan: Do you really want me to nerd out, here?
Jason: Yeah, nerd out. Tell me.
Jonathan: One was: all the software was rewritten from scratch, from Java to PHP. Which, makes no sense from a technology or business perspective. That’s one of the things that you’re never supposed to do. That’s one of those things a lot Joel Spolski and Steve Blank write about those things: that’s one of the worst mistakes that you can make.
Jason: Why is that?
Jonathan: Because, everybody wants to start fresh, but, you, basically, lose all of the institutional knowledge you’ve captured with the old technology. The new technology never works, as well as, it’s supposed to. Then, it ends up taking longer than it’s supposed to be built. You end up going backwards, in so many different ways. There’s blogs that have been written about this, that go into great detail, and they’re right.
Jason: Just power forward with the platform that you picked.
Jonathan: That was a mistake. If you really, want me to geek out, here… Instead of scaling out, rather than up and, sort of, adopting the model that was, already, becoming the new way of doing things, from Google, where, you chopped up your data into shards and put it on commoditized hardware, the V.P. of engineering, that our investors recommended, and his team, ended up putting us on a Hitachi San, which, costs millions of dollars…
Jason: Single point of failure.
Jonathan: Then, other mistakes, instead of being fixed, were made worse. We had, too much, MySQL replication, that was introducing slave lag. Then, they daisy chained MySQL replication. There’s a lot of mistakes, that instead of being just fixed… startups move quickly, if you make a mistake and you fix it, great. But, if you just keep adding to your mistakes…
Jason: In a way, watching Zuckerberg photocopy the site, he just, basically, stole it whole sale, and he admits that, among the stuff that he stole from people, wholesale, including equity, and other things. He was a great technologist and an executor, right?
Jonathan: I think, he had great technologists on his team. The company ended up going through a few different presidents and C.O.O.s, instead of having some hollywood guy, C.O.O., there was more consistency and they did a much job executing technically, than Friendster or MySpace. They had PHP, which, is not perfect, but, instead of jumping from that into something else, they made PHP work for them. They’ve got MySQL and a lot of the same boring, standard technologies that people use, but, they incrementally improved and improved and scaled.
Jason: Did Zuckerberg ever try to hire you? He must have looked at you and said, “Wow. This guy created it all.” Did he ever try to make a run and say, “Be president.”
Jonathan: At the time that I met him, it was, sort of, the other way around. Facebook was still, very small. Scott Sassa, who was one of the many C.E.O.s of Friendster, he’d been a hollywood guy from N.B.C., wanted to try to buy Facebook. I think, if someone had offered something, substantial, there might have been interest. But, he made an uncompelling offer for some part of Friendster stock. That was the context, when I met him. That was, probably, ’04.
Jason: So, you keep plowing ahead. You launch, at some point, Founder’s Den, where we are now.
Jonathan: Welcome. Thank you, for coming to Founder’s Den.
Jason: It’s amazing in here. I just walked around the place. It’s my first time being here. It’s long overdo. What a gorgeous facility, you have, on 3rd. Street, here, in the heart of San Francisco. It’s buzzing with startups.
Jonathan: Yep. As we were, just, walking around from lunch, we saw our buddy, Naval.
Jason: Yeah, we saw our buddy Naval, from AngelList.
Jonathan: That’s pretty common. We’re right at 3rd and Townsend. You, really, cannot walk around here, without seeing people in the industry.
Jason: You decided, at some point, “I’m going to open a co-working space.”? When and why? How did this whole thing start?
Jonathan: I think, I have to blame it on my partner, Jason. He and I, both, had small kids, at home. We were in transition between different projects and wanted a place where we could, really, concentrate and get some work done. We weren’t interested in going to one of the existing co-working spaces. The idea was proposed: what if we created a place where, some of our friends could hang out and work, together. Which, sounded fun. Then, of course, like most entrepreneurs, we lack the part in our brain, that should have told us, “boy, that’s going to be a lot of work. We were crazy for trying to do that.” It ballooned, from there. We ended up envisioning this curated, co-working space and private club for entrepreneurship, and ended up putting in a lot of work. Now, it’s up and running. It’s been less than two years. A lot of great companies. We’ve got some great sponsors, great advisors. Companies come in for, around, six months.
Jason: What’s the deal? Would you say that you’re like i/o Ventures?
Jonathan: Well, i/o, also, has an accelerator program. We don’t do anything like that. We’re not providing funding. There’s no class. There’s no accelerator program.
Jason: So, people aren’t coming here for Jonathan’s advice on stuff?
Jonathan: If there’s a company that I’m an advisor to, I might deliberately approve them to be at Founder’s Den, so that, when they want my advice, I don’t have to go somewhere. It’s convenient for me. It goes both ways. There are companies that, the four of us, have been an advisor or investor in, then, we will try to get them in here.
Jason: Who are the other two founders?
Jonathan: There’s four of us: Zack Bogue, Michael Levit, Jason Johnson, and myself. Sometimes, it goes the other way around: sometimes, the four of us, meet a company, because they’re at Founder’s Den and we might become an advisor or an investor. But, all of that happens on an ad hoc basis. It’s all purely organic.
Jason: You’re not trying to say, “Come to my accelerator. Give me 60%, then, we’ll go from there.”
Jonathan: We don’t have time. This is for entrepreneurs, by entrepreneurs. Zack has a fund: Data Collective. The other three of us are running companies: our own startups. We’re not interested in competing with Y Combinator, i/o, and AngelPad, because, those programs, already, exist and they’re great. You have a lot of YC companies at Founder’s Den. We were trying to fill an unmet need for ourselves and some of our friends.
Jason: Pretty brilliant. Someone came up and told me what they were paying for a desk, $500, or something. The fees seem, a little, less than what someone would pay in San Francisco.
Jonathan: Our model is to charge, pretty much, an industry standard rent. There’s, probably, a couple of crappier places than me, that charge a little bit less. A lot of places charge more. We, deliberately, tried to be average on the rent. Half of the space, isn’t even rented out. It’s used for events and parties and lunch and our advisors and sponsors to hang out. We have subsidies from our sponsors and partners and they are helping out.
Jason: Who are the sponsors?
Jonathan: They’re all listed on the website. I don’t want to forget anybody. We have: Norwest Venture Partners, Bullpen Capital, Wells Fargo, DLA Piper, Hood & Strong, SecondMarket, RackSpace… hope I didn’t forget anybody.
Jason: That’s a good list. So, you’ve got them to commit for a couple of years, to put the space on. They can host events, here.
Jonathan: They host events. They’re active in the community. They use the space. We, also, have some firms that are, like, members that come and hang out at the Den, as well.
Jason: This is really the gestalt of Silicon Valley and why it’s special, isn’t it? You create something like this, somebody, like, yourself, and your partners, without some onerous or predator expectation on the startups. You go to some other places, whether it’s, Japan, China, or France, or even in some other places, where, rich people, who create something, like this, are then, trying to control or own a large percentage of the companies that would go hang out in them.
Jonathan: Our model is that, it’s very much, boutique. It’s not intended to be a real business and it’s for entrepreneurs, by entrepreneurs. We get emails, every week, in other countries, like Asia. I guess, they read TechCrunch and want to come and visit Founder’s Den, tour it and find out what we do. We, really, don’t have time to accommodate, most of them. It’s bizarre, the emails, we get.
Jason: What do you say? We let people work here. Thank you, very much.
Jonathan: It’s a pretty simple model. I think, often, people think it’s more complicated than it is. It’s an invite-only, referral-only, co-working space. Then, sort of, this hang-out and club for entrepreneurs, with our advisors, and sponsors. People, like, Gavin Newsom, rent a desk. Some other interesting folks that are on our advisory board or who work at the partner companies.
Jason: Interesting. So, tell me about your latest company.
Jonathan: Great. Nuzzel.
Jason: Nuzzel. We’ve finally got there.
Jonathan: Yes. I have to apologize. You’re one of two people that I haven’t sent a beta invitation to. You and Robert Scovill.
Jason: We’re called the whales. Not because of our size, but, because of our follower and our following sizes.
Jonathan: The problem is not the number of people that are following you. The problem, for me… maybe, it’s a problem. I don’t know. I was a little worried to have it tested by an engineering team, before the site crashes. It’s not just me… It’s the number of people that you’re following. You and Robert are two pretty unique people, in that, you follow a lot of people.
Jason: I follow, probably 100,000 and have 150,000. He has something similar.
Jonathan: Which, is very unusual.
Jason: He and I, were never put on the suggested user list. So, we never got the artificial spike. In the early days of Twitter, if you didn’t reciprocate a follow, people got very upset. Like, “I followed you. What the “F”?” So, I emailed, Ev, Biz, and Rob about it. We were all in an email chain. They said, “We’ll create something.” I have to follow like, 20 people a day, cause 20 people a day are joining the service and following me. It was only the tech community.
Jonathan: You must have spent a lot of time, manually, following that many people.
Jason: No. Twitter made a tool for Robert and I, that auto-followed everybody.
Jonathan: That explains it.
Jason: Then, we turned it off. They stopped doing that. Now, I use a product, called, Tweet Adder, to follow anybody that follows me.
Jonathan: Is that kosher?
Jason: I think, it’s allowed, because I limit it to, like, 1000 a week or a couple hundred people a day, or something. It just runs, in the background on my desktop. The only reason I do that, is that, it makes people feel good. I have a list of my ‘peeps’. The way you get around it is, the first ten thousand people the I ever followed, would be my real hard core people. First twenty thousand.
Jonathan: I follow around 1,000 people. Interesting people that I have carefully curated, over the last few years. Most people follow less than that. Most people, that I am friends with, have only 200-300 people. Nuzzel still works for them. It’s really great for me at 1,000. But, I was really worried, during the beta. Nuzzel is a social news service that let’s you see the news stories that your friends are sharing on Facebook and Twitter. It’s really fast, simple, and easy. But, right now, it’s just me. I’m very soon going to be hiring employee number 1, 2, and 3. Until I do, I was a little worried. I just, literally, didn’t know, whether or not, I needed to add a few more servers. If it would, sort of, explode, if I plugged in your account.
Jason: So, you coded this whole project, yourself. You set up the servers and everything? So, you can, basically, wake up one day and say, “I’m going to start a company.”
Jonathan: Yeah, I guess so. It’s a little harder to do Founder’s Den, because we had to go out and find the space, then, figure out the furniture, and all of these physical things.
Jason: It’s a great feeling to be a coder. As famous as you are and your ability to raise money and be a coder. If you look at Pincus, or Ev Williams, or any of the other entrepreneurs, who can wake up and say, “I’m going to start a company,” and actually, get a check from somebody, you can, actually, get the check and you can write the code.
Jonathan: I think, a lot of entrepreneurs are technical. If you look at the Google guys, Yahoo! guys, and so many people I know, most of them, do code.
Jason: I don’t think that the Google guys have written a line of code in a decade.
Jonathan: Well, maybe not, recently. That’s maybe true of me. It’s the reason why I enjoy building the prototype, myself. I know that, very soon, when my time is spent being on shows and talking to investors, then, hiring and firing, and managing people, and guiding a team, I’m not going to be able to spend my time, actually, writing the code. It’s fun for me to do.
Jason: Was there something more to it, this time. Did you feel like, to a certain extent, your success in Friendster came from coding, that this is how your success comes, when you, actually, are the product?
Jonathan: There’s something to that, yes. All the companies: I’ve done a night club, the co-working space, and four internet companies, and I did all the coding for those, myself and enjoy doing it. But, what was interesting, with Friendster, because it was 2002, we followed the ‘lean’ ideas. Not because we’re smart, but, because of necessity.
Jason: You were ‘lean’, before ‘lean’. ‘Social’, before ‘social’.
Jonathan: Nobody was going to fund Friendster in ’02. We threw this thing up and it turned into an “MVP”, if you will. People liked it and it grew from there. With Socializer, I actually, raised money. I built a prototype, first. I didn’t raise money off of a power point. I built a prototype. But, we didn’t really test it in the market place, before we raised money. It turned out that the event space sucks. It’s really hard to grow a service that connects to physical, real-life events. Somebody was not going to go and have a baby shower the next day, just for an excuse to use Socializer. So, I think, I realized, that it is good, like at Friendster, to decide before having a whole team and outside investors, really, get some feedback, before that.
Jason: The reason is: you don’t want to waste two or three years of your life on it, then, have that obligation to the investors?
Jonathan: Yeah, and to yourself. Some people think that you can start with anything and just pivot and pivot and somehow, you’ll get to some miracle. I don’t subscribe to that theory. I love coding, but, as I said, when the company gets big, I can’t be doing that, myself. So, it’s fun to start off, that way. But, I think, if I looked at Friendster and Socializr, getting that MVP out there, to real users and getting feedback, first, before deciding if this should be a funded project, is a good idea.
Jason: How is the project going, so far? How does it, actually, work? What’s the value proposition to users?
Jonathan: I wish I could have shown it to you and we’ll have to fix that. Scovill has offered to give me his password and let me plug it in and see what happens. But, I think, what we’re going to do is, pretty soon, we’re going to hire engineer one and engineer two. You know have some other folks, so it’s not just me, if things crash. Then, we’ll figure it out.
Jason: I can have one of my people lend me their account. Maybe, Kirin Kalia, from the Launch Ticker.
Jonathan: So it’s very, very, very simple. You log in with your Twitter account. Currently, it’s, still, invite, only. It scans your Twitter, it also connects to Facebook, and shows you, in a very simple interface, news stories that your friends are talking about, linking to, sharing, tweeting, liking, and retweeting. It’s, deliberately, very simple.
Jason: So, I know every news story that my friends have talked about. This exists in FlipBoard, in a way. So, how is it different than FlipBoard or how will it be different?
Jonathan: There’s other stuff, that’s, sort of, similar. I think, FlipBoard is really cool and does a lot of things that Nuzzel is not going to do and vice versa. That one’s a little more different. I get asked, “how’s it like this, or different than that?” It’s, kind of, funny, because, when I did HotLinks, it was social bookmarking in 1998/1999. Way too early. Before Delicious. I think, even Delicious was, probably, too early. The concept was people sharing links with each other. That’s what people are doing on Twitter and that’s a lot of what Nuzzel is about.
Jason: Wow. So you’ve come full circle.
Jonathan: The concept makes sense, but, social bookmarking, per se, may be, a little, too nerdy, too literal. You’ve seen it expressed, now, in StumbleUpon and Pinterest. So, the concept makes sense.
Jason: It’s just cool stuff.
Jonathan: 1998 was way, too early. Then, with, Friendster, it was the first mover with this idea. I had this idea a couple of years ago, but, I was in the process of selling Socializr, then starting Founder’s Den. I was, really, busy and wasn’t able to focus on it right away. Then, some other stuff came up. I said, “I’ve been too early. I’ve been a first mover. None of those were, necessarily, guaranteed success. So, I’m not going to worry about that”
Jason: Worry about what, then? What do you have to worry about if you’re not first? If you’re coming into a market where people have played, a little bit.
Jonathan: I think, there’s two things that I want to worry about. 1. Is it a good market, at all? Social networking was a good market and, even, excluding Facebook, there were over $1 billion of other companies of venture backed exits. Not too shabby. Events is a bad market and still, every week, people email me for advice. So, I email them the links to what happened with Socializr, PlanCast, Going.com, and seven others and say, “read these.” They, usually, don’t.
Jason: So, you really want to know if there’s a market there, because…?
Jonathan: A big market that is, also, easy to tap into. It’s not like events is not a big market, just a crap market. It’s got the real life latency: every year you have a birthday and every year people have retirement parties, and baby showers, and all types of stuff. Most of the sites that have tried to do stuff in events, I think, have realized that’s a difficult market. There are other markets that are big, like, music. For every Pandora and Spotify, there’s a lot of other companies that have been burned through. You want a big market, but, something that is not impossible for a startup to, somehow, grow into, quickly.
Jason: Some markets are prickly, in a way. They seem like, they are too hard to get a handle on, get into. Of course, if you do that would be brilliant.
Jonathan: There are some markets that involve legislation. If you have specific core competencies and you can somehow manage that, that might be an advantage. But, I, personally, would not get into that.
Jason: It’s interesting. I was just thinking, what other market would be hard to get into and I was thinking, real estate. Then, I’m like, “Wow. There has been so many great companies in real estate, in the last couple of years.” That one seems to be, very much, accepting the disruption, in a way. Or, open to advancement and evolution. It’s almost, like, “Are they open to evolution, or not? How hard do they fight it?” Are they strong enough to fight it, to the death?” The music industry does seem strong enough to fight it to the death. You mentioned Spotify and Pandora being successful. They’re successful, correct me if I’m wrong, until the music industry decides that Pandora is no longer successful.
Jonathan: Different markets have different issues. With events, it’s the latency that makes it hard to grow virally, quickly. So, that’s one of the issues: are you in a market that’s big and not impossible for a startup to, somehow, conquer and scale, cost effectively. The other issue, really, is, if it is a good market, can you be a break out success, in that market, or not. Most companies, don’t. Part of the things that I look at, also: is there somebody already, synonymous with the market. Trying to do a new search engine, now, and compete with Google is really, really hard.
Jason: I’ve been there. It sucks.
Jonathan: Even trying to compete with Evites…
Jason: A horrible product. Garbage.
Jonathan: Even though it has, so many, flaws, it’s still, synonymous with the category. Somebody might say, “I’ve got a baby shower, I’m going to put up an invitation.”
Jason: When they use it like a verb, then you’re f’d.
Jonathan: Right. They might have used Evite for something seven years ago, and they’re just going to go into the computer and type ‘Evite’. Even if …Wired or Oprah Magazine says, “Use Socializr, it’s better!”, they might not even think to research it. They’re just going to go and type in “Evite”, habitually.
Jason: You did get a ton of press for Socializr and people did love the product.
Jonathan: And, probably 99% of the people who use Evite, never read any of those articles.
Jason: And, if they did, it just, goes in and out.
Jonathan: Competing with somebody who’s synonymous with the market is tough. So, in social news, I don’t think there’s anybody’s who’s there. Digg, could of, and, maybe, should of, been the ubiquitous brand in social news. Unfortunately, like, Friendster, they had their ups and downs.
Jason: And, technical, as well, in a way. They had a huge 4.0 debacle: couldn’t technically, get the new product to work.
Jonathan: When the new 4.0 product came out, I’d, already, thought of the idea for Nuzzel. When I heard the rumors, I thought, “Oh. I’m, probably, not going to end up doing this.” Cause, It sounds like, they’re going to end up doing, this idea that I have. I thought, “they’re going to end up doing something, like this.” They, sort of, did. There are, always, these debates in the blogs about whether, it’s the idea that’s important or not. My idea is not ‘social news’. That’s not the idea. My idea is, ‘social news’, with a multitude of subtle details: of how I’m going to do ‘social news’, why, and how it going to look, how it’s going to work, and what it’s not going to do, what it’s going to be called. All these important, subtle details.
Jason: All those subtle details, really, make the difference. You saw that: from Rise to Friendster, to MySpace to Facebook, and then, to Instagram and now, Path. They’re all social networking but, they’re all so different, in terms of details. What do you think of the latest? What do you think of Path? Do you use Path?
Jonathan: I like it. I don’t use it, a ton, because, Path is supposed to be your smaller: 100 real friends, perhaps, because, your friend graph on Facebook, got, really, diluted. So, for me, the people who are my closest friends and family members, are not the strongest technology adopters in my life. Those people are, a little less sophisticated.
Jason: They’re laggards.
Jonathan: But, since, I am an entrepreneur, who lives in San Francisco, I have thousands and thousands of not as close friends, who are all over Path and Instagram and all this kind of stuff. When I go on a site, like that, I have thousands of interesting friends, who are using it, so for me, it’s like… Unfortunately, for me, Facebook and LinkedIn are, sort of, the same, because, I live in this world.
Jason: Your network is business.
Jonathan: Right. I live in San Francisco and I’m friends with most entrepreneurs, here. I’m not a normal user of social media, obviously.
Jason: What do you think about Facebook, now, year, whatever it is? It’s getting close to ten. People, always, say it’s younger than it is. If you count it from when it started in his room, it’s pretty close to nine or ten, right? Is it ten?
Jonathan: I think, it’s almost ten years.
Jason: So, what do you think of it at ten years old?
Jonathan: I think, Facebook has done a phenomenal job, overall. Also, overall, I’m surprised how little things have changed, since, the prototype of Friendster, ten years ago. You could, probably, take one of the 2003 articles about Friendster and replace Friendster with MySpace, and it would have been an ’06 article, or replace it with Facebook, and you might not notice a difference, today. Obviously, it’s evolved and there’s the platform, but, given the ten years, prior to Friendster, we had Tim Berners-Lee, sort of, inventing the web, around ’91. I remember downloading the first beta of Mosaic, with Marc Andreessen at the University of Illinois, then, downloading the first beta of NetScape, then NetScape and Yahoo! going public, and I decided, I’m going to Silicon Valley. I emailed my resume to NetScape and Yahoo!. I never heard back from Yahoo! but, NetScape hired me. Then, we had the ‘.com’ boom, then, the ‘.com’ crash. All of that happened in a ten year period. We, basically, went from the web starting to all of that. Then, 2002.
Jason: Social networking, seems to be this execution play, right?
Jonathan: I don’t know, but, in 2002, that’s when I came up with the concept of Friendster, it’s now ten years later and it doesn’t seem to have evolved, ten years worth. I mean, obviously, it’s evolved.
Jason: It seems to be the same experience to me. I go in and I update, then, people write comments about it. It’s the graffiti wall.
Jonathan: It doesn’t seem that, as much has happened in the last ten years, as has happened from ’92 to 2002.
Jason: The criticism of Zuckerberg and the criticism of Facebook is that they’re, really, not innovators. They’re executors, sure. But, what did they do that was so innovative in the space, that wasn’t, already, done before?
Jonathan: That’s, kind of, like MicroSoft and most of the most successful companies in technology are the ones that execute the best. That’s the standard.
Jason: Right, but, it seems that there was some originality, in some of those cases.
Jonathan: Not in MicroSoft, for example.
Jason: Yeah. Very little in MicroSoft, I guess.
Jonathan: Silicon Valley is full of companies, like, NetScape, that were innovative and pioneers.
Jason: It’s almost, a liability, isn’t it?
Jonathan: Yeah. When I was working at NetScape, I later looked back and realized, the whole company was full of all the people who had worked at all the other cool companies, like: SGI, Next, Telligent, koleida, General Magic, and Xerox. There were people, at NetScape, from all those hot companies. In retrospect, we all got our asses kicked by MicroSoft. With them copying stuff and, basically, making mediocre technology, but, still winning.
Jason: They made it the default. Facebook has become the default. I’m just surprised that they don’t seem to have many original ideas. Like, they do Q&A, long after Yahoo! and Quora. They do the gift thing long after others have done gifting: Amazon gifting.
Jonathan: Well, it’s a big company, now.
Jason: You’d think they’d have some unique feature that didn’t exist, before they started, by now.
Jonathan: Do they do the 20% time, that, Google does? They do Hack-a-thons, right?
Jason: Definitely not. They do Hack-a-thons. But, I think, the Hack-a-thons have been, like, let’s get all of the Android versions, the last 15% of Android, done. When, I talked to an insider, very high up at Facebook, they said, “Jason, the reason we don’t innovate is because getting that Android version or this browser compatibility or this country online, in this language, at their scale, has a bigger impact than, though, than the new feature will.
Jonathan: They’ve done a great job. Scaling is hard. They have, incrementally, executed on their engineering, better than anybody and they’ve done a really good job. Maybe, they don’t want to break what’s working. Maybe, it would be cool if, like, Gmail Labs, had some, weird tab on Facebook, where Facebook engineers could build some weird crap… and you’d have to go to this weird place to see… that would be fun to see what they come up with. It’d be some special tab.
Jason: Yeah. Some randomness would be awesome.
Jonathan: Obviously, what they’ve done has worked, very well.
Jason: What do you think the key to success as an entrepreneur is, now that you’re in decade two of it? You’ve gotten your ass kicked: had the highest highs, the lowest lows. When you break it down to it’s essence, what do you think makes a great entrepreneur?
Jonathan: I think, one of the big problems is that every story is different. There are so many blog posts, these days, that say, “These are the five secret tips to entrepreneur success.” You can’t, actually, copy someone else’s story. If you look at the history of Facebook, people are inspired by it, but you can’t go and copy that path of how Facebook came to be. There are a lot of interesting twists and turns. It’s not something that someone can, really, emulate. That’s what everybody wants to do, now: distill it into a formula. So, there’s that, you need a designer, a hacker, and a hustler. You need 2.3 founders. Everybody’s trying to come up with some magic formula and that’s not how it works. There’s a lot of luck and randomness to it. We’ve had great entrepreneurs, who are on the board of Founder’s Den, come here and give talks and, sometimes, it’s amazing how much luck, almost failure and randomness occurred. Phil Libin, from Evernote, told the story of how they almost went out of business. The economic crisis happened, Sequoia, rest in peace, bowed out. The funding that was just about to happen, fell apart and they were days away from closing down the company. Then, somebody from Sweden, or something…
Jason: A super fan.
Jonathan: … and a huge user, gave them some money.
Jason: Half million dollars to keep going.
Jonathan: Dennis Crowley gave a talk, here, about many of the features of FourSquare, this happened to Twitter, too, the mayors and things organically unexpectedly happened. Part of, what I think people need to realize, is that you can read all of the books and blogs that you want but, you can’t, just, copy some other startup’s path or entrepreneur’s path, trying to decipher a ‘magic’ formula, nowadays.
Jason: Sort of, like, making a great movie or rock n’ roll band. It may not be that formula. It changes, over time, doesn’t it?
Jonathan: You have to play to your personal strengths. So, you know, I have a software engineering background. Different entrepreneurs have different strengths. Different companies are in different areas. Timing and marketing, what’s going on, out there, play a factor. A lot of the advice is generic advice. It doesn’t really, work for everybody. So, you can say all of the trite things about the lean startup approach and being resilient and all that, but, anybody who’s going to do it, probably, instinctively, knows that stuff.
Jason: Do you think it’s too easy to be an entrepreneur?
Jonathan: Maybe, it’s too easy to pretend to be an entrepreneur.
Jason: O.K. Unpack that.
Jonathan: Like, a 19 year old writes a blog, then, TechCrunch says, “one of the best entrepreneurs.” Whatever.
Jason: People throw the title around?
Jonathan: There are people who lie, these days, about founding companies that they didn’t found. That seems to be really popular, these days. I don’t know why.
Jason: Why would somebody do that?
Jonathan: It’s very common, lately.
Jonathan: Sure. All the time.
Jason: Who lies about…
Jonathan: I’m sure you can think of examples. I’m not going to suggest some. I know you can think of some. Everybody wants to say that this is a bubble. They’ve been saying that for about 3 or 4 years. This is not like 1999.
Jason: Why is it not?
Jonathan: There’s not a million companies, that went public, that are complete crap, that are, probably, going to lose 99% of their value. That level of stuff is not going on.
Jason: In fact, the companies that have gone public, seem to be very much under-valued, in a lot of situations. In Zynga’s case, trading below book value.
Jonathan: There are, at least, two companies, that I can think of, that have gone public that may not have had sustainable businesses. But, that’s two, not two hundred. There’s issues with those.
Jason: Can you say?
Jonathan: I think you can guess.
Jason: Do you think Zynga’s not sustainable or do you think it is? I mean, a billion dollars in revenue. The games are, obviously, fleeting, in a way, but, gaming isn’t.
Jonathan: I’m not going to speak to that company, in particular, but, I value innovation. Companies that copy all their stuff from other people, then, hypocritically sue people from copying them, scam the users, and mistreat their employees. That, to me, is not representative of what has made Silicon Valley, historically great. What is similar, now, to 1999, is the, sort of, fetishizing of startups. Everybody wants to be a founder, right now. Obviously, in 2002, that stopped. Now, of course, everybody wants to do that, again. That gets to be, a little, excessive. It’ll, probably, self-correct, at some point.
Jason: I did hear that Y Combinator hit high 80s, in terms of the last class. Now, coming down to the 60s.
Jonathan: I think, part of it was, just, the feedback at Demo Day. I was there. It’s that people can’t remember all of the companies, after sitting through 80 demos. There’s not any graceful way to solve that. It’s not like people want a B-to-B day and a B-to-C day. I think, much bigger than the growth of YC has been the growth of all of the YC clones. Cause, YC going from 40 to 80 is not, nearly, as much a delta as, like 200 YC- like clones popping up in every city, across the planet.
Jason: Now, is that a bad thing or a good thing? They’re, clearly, not going to have the density and success that you see, here, in the Valley, for obvious reasons, but, comparing it to a college education, which costs, whatever it is, $100,000-$200,000, going to a founder collective, in a second-tier city…
Jonathan: That is a good point. Because, if you come out of it and your thing failed, you don’t have 100 grand in student loans.
Jason: And, you burned someone else’s money.
Jonathan: Yeah. Worst case scenario is that you have some interesting stuff to put on your resume and Twitter or Google will be excited to hire you.
Jason: Yeah. You tried and failed. Join us.
Jonathan: That’s a good point. I don’t know if it’s a good or bad thing. Obviously, in San Francisco, right now, there’s so many seed-backed startups and it’s so difficult to hire people, because all of the engineers, that you know, that are the startup types, all want to run their own companies, now. That, sort of, dilutes the talent pool for everybody. That’s tough, but, that’s the kind of thing that’s got to self-correct itself. I would imagine.
Jason: A lot of these companies are going to get to the point where they make no revenue. Ultimately, their business is going to be decided, based, on how much top-line and bottom revenue, it has. Ultimately, that’s what the public market does, right?
Jonathan: Yeah. But, it can go very long when you’re being scrappy and lean. We saw some of these weird, abhorrent examples, lately of two companies that raised these huge amounts of money, pre-launch.
Jonathan: Yeah and another one.
Jason: What was the name of that one that raised a ton of money, pre-launch?
Jonathan: There’s a couple, recently. But, that’s statistically not what works.
Jonathan: I don’t know. But, most of the companies, working at Founder’s Den, are so lean and efficient.
Jason: $50,000 and burn them up. $100,000 and burn them up.
Jonathan: Even if they don’t get, immediate, traction or they struggle to get their series A, if they really are working on something that is promising, they can hunker down, with so little, and keep going. That’s in sharp contrast to 1999 era companies that had huge data centers. That were paying $10 million, alone, to sign in Oracle in license fees and Super Bowl commercials, and all that.
Jason: And, the big, million dollar parties in Vegas. It’s a totally different world. Where do you think the Valley will be in ten years? Bigger and better? I guess, David Sachs, was saying, “There’s going to be a big four and that’s it.” It’s that entrepreneurship’s over, perhaps?
Jonathan: I, definitely, don’t think, that’s true.
Jason: It’s a convenient time for Dave: sell your company for $1 billion. Entrepreneurship is now over. He’s like, “I’m done. It’s over.”
Jonathan: You know, which are the big four, the big five, whatever? That seems to change, at least, every decade.
Jason: So, you don’t buy that there’s no hope of ever building another Google or Yahoo! or Amazon?
Jonathan: Hell no. Absolutely not. All the companies, that are the great companies, today, someday, will be the IBMs and MicroSofts, themselves, at a later date. It’s inevitable.
Jason: They will slow down and lose their innovation. In Facebook’s case, they, really, haven’t been innovative. Who knows if they can inject innovation.
Jonathan: And, there best engineers will, eventually, leave to start their own companies.
Jason: They already have in droves. It’s getting easier and easier to take Facebook engineers.
Jonathan: They’ll keep doing it. That’s not going to stop.
Jason: O.K. I say a company, you tell me what you think. Here we go. First time I ever did this on the show. I don’t have a list, I’m going to pretend that I have a list. Air BNB?
Jonathan: I don’t know much about it. All my friends use it. I’m too old, I think. I have friends, who work there. Everybody loves the company. I hear, they’re going to raise some huge, new round.
Jason: Square? What do you think of the idea?
Jonathan: Again, I don’t know. I’ve got one of the little things. I haven’t, actually, used it. People, certainly, love the company.
Jason: Marissa, at Yahoo!? Is she going to make a come back?
Jonathan: She definitely needs more advice from idiots on blogs, who’ve never run a company.
Jason: That would be helpful, wouldn’t it? Seriously, she’s going to go in a tech direction, it seems, it’s come out. Today, was the 10Q earnings. She’s gonna go tech, not media.
Jonathan: I know, very little about running huge companies. It seemed to be a hire that, really, excited a lot of people. I think Yahoo! needed that. Mahalo?
Jason: Soon to be Inside.com. I’m supposed to say?
Jonathan: Yeah. Can’t I put you on the spot?
Jason: Sure, you can. Best product and best team in the history of the company. Ultimately, will be a large success. That’s what I believe, at least. You have to be, a little bit, delusional, don’t you?
Jonathan: You do. Otherwise, it would be way too much work.
Jason: Right. Like what you said, with Founder’s Den: if you knew how much work it took to build this place, you’d be like, “Why would I do that?”
Jonathan: Yeah. I think, a normal person would just be dissuaded. How many times have you had somebody walk up to you and say, “I made the effort of doing some of the things you’ve done.”?
Jason: Oh, God. If I had a nickel… I’ve had people copy my bad ideas. I did human-powered search and these germans copied it, down to the pixel level. Then, this guy in Organized Health, copied it and stole the HTML.
Jonathan: There were Friendster clones, that still said, on the about us page, that, it was started by Jonathan Abrams, back in the day.
Jason: That’s the thing about these thieves. This guy from Organized Wisdom, stole my, actual, HTML code. We had this device that said these are the Mahalo’s top seven links. They crossed out Mahalo then, put Organized Wisdom’s top seven. The seven were the same, in order, but the HTML underneath it, still had the Mahalo top seven, because, we had tagged it.
Jonathan: I, usually, put, in my HTML, as an easter egg, to any technical people looking at it, “if you’re reading this, email me your resume.” So, I’d be curious to see if they’d email the original company.com.
Jason: The scum-bag guy, from Organized Wisdom, I called him up. I’d known him in New York. I was like, “We knew each other, in New York. We had dinner. You were at some of my parties. Why would you steal our stuff?” He was like, “Oh. We didn’t steal it. We were inspired by you.” I was like, “Here’s the content, here’s the code, and here’s the design.”
Jonathan: I’m used to it.
Jason: I don’t care, anymore, because, now, I have a platform that I can call anyone out on it. To: The Organized Wisdom people. You failed. You’re scum-bags. Kill yourself. I’m not supposed to say, “Kill yourself”, anymore, on the show.
Jonathan: Probably not.
Jason: It’s the Brooklyn in me, that comes out sometimes. I hate stealing.
Jonathan: Can I ask, if there’s anybody who works for Coca-Cola to send me some free soda, at Founder’s Den?
Jason: Absolutely. They should. Continued success. You’ve been very honest on the program. You’ve been a great guest. I look forward to seeing Nuzzel when it’s ready. What’s the domain? What’s the Twitter handle, so we can follow.
Jonathan: It’s Nuzzel.com. Like you, I only like .coms.
Jason: Why is that?
Jonathan: I, actually, sent your post on ‘Naming and Branding’, to a lot of people. I like naming things, too. I came up with: Founder’s Den, Friendster, and Nuzzel. I don’t, really, like non-dot com domains for consumer internet companies.
Jason: It just screams, “I don’t get it.”
Jonathan: If you don’t have it then, somebody else is going to get it.
Jason: How do you like the name: Inside.com?
Jonathan: Inside.com? I like anything .com., if it’s short. I, also, like anything that is, a little, weird and goofy, like, Twitter and Google are, sort of, words, but, they’re, sort of, not. So, when somebody says, “Twitter” and “Google”, you know they’re, probably, talking about them. When you here someone talking, at the coffee shop, down the street, they’re probably going to be talking about me. Whereas, somebody’s talking about “Color”, that’s such a generic word. They could be talking about anything. I like simple, short, and playful ‘.coms’.
Jason: This has been incredible. Everybody follow Nuzzel.com or check it out. Follow @nuzzel. Thanks to our sponsors. We will see you, next time on ThisWeekIn Startups.
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