How to Turn Down a Billion Dollars: The Snapchat Story

Begin Reading

Table of Contents

About the Author

Photos

Copyright Page

Thank you for buying this

St. Martin’s Press ebook.

To receive special offers, bonus content,

and info on new releases and other great reads,

sign up for our newsletters.

Or visit us online at

us.macmillan.com/newslettersignup

For email updates on the author, click here.

The author and publisher have provided this e-book to you for your personal use only. You may not make this e-book publicly available in any way. Copyright infringement is against the law. If you believe the copy of this e-book you are reading infringes on the author’s copyright, please notify the publisher at: us.macmillanusa.com/piracy.

To my mom, Eileen. Thank you.

AUTHOR’S NOTE

I first interviewed Snapchat cofounder and CEO Evan Spiegel over six years ago, as Snapchat was just gaining traction and Evan and I were both still undergraduates at Stanford University. I have been following the story ever since. Because no one reads book dust jackets, and I occasionally use the first person in this book, let me tell you a bit about myself: I was two years behind Evan Spiegel and Reggie Brown at Stanford University. They were the class of 2012; I was the class of 2014. Bobby Murphy, Snapchat’s other cofounder, was the class of 2010. Most of the principals in this book, especially the early Snapchat team, went to Stanford between 2010 and 2013.

While at Stanford, I joined the same fraternity that Evan, Reggie, and Bobby were members of, although they had all left the fraternity by the time I joined (more on this later). I was the editor in chief of the school newspaper and a writer for one of the major tech blogs, TechCrunch. I interviewed Evan several times for TechCrunch during Snapchat’s early days in 2012; however, he stopped granting me interviews in 2013 when I covered ousted cofounder Reggie Brown’s lawsuit against Snapchat. After I graduated from Stanford, I worked on the investing team at Khosla Ventures, a prominent Silicon Valley venture capital firm (though not a Snapchat investor).

This book is based on nearly two hundred interviews, thousands of pages of court documents, and hundreds of articles. I personally visited (and in some instances lived at) many of the locations in this book; I reviewed primary characters’ emails, text messages, internal Snapchat documents, calendar appointments, and more. Evan, Bobby, and Snapchat, alas, declined many requests for interviews for this book, which is of course their prerogative. Why didn’t they want a book written about them? You’d obviously have to ask them, but I suspect the answer is a mix of a company culture that is very protective of its secrets and the fact that they were working long days during most of the period of writing this book, fending off significant challenges from competitors and driving the innovations necessary to keep Snapchat relevant in advance of taking the company public. You will find more on both in the pages that follow.

As often as possible, I have let the principals share this story through their own words, in speeches, emails, interviews, or other forms. In a few instances, I have made minor edits to these texts to correct misspellings or grammatical errors. Most quotes in this book are from recorded interviews, lawsuit documents, emails, text messages, and other permanent records; others are based on what multiple sources said another person said at the time. Beyond the permanent records, this book is necessarily based on anonymous sourcing. It simply wasn’t possible to do it any other way. I needed to get the unbiased truth from sources, and since the principal characters chose not to participate and asked employees and friends not to participate, those who spoke to me risked their livelihoods, significant amounts of money, and relationships, both professional and personal. Many of these sources only agreed to speak under the condition of anonymity. I have not shared the names of anyone who spoke on the record for fear that doing so might help expose, by process of elimination, those who chose to remain anonymous.

I would caution readers not to assume that just because I have written about a person’s thoughts or actions that that person is the direct source. People typically share their thoughts and feelings with friends and colleagues, especially during times of high stress and notability, which many of the events in this book were. There are often discrepancies between sources’ memories, as they have different recollections and versions of the truth. I have done my best to triangulate on the truth from witnesses’ memories and other documents. In some cases, I have had to use my best judgment as to what happened based on the information available. I have changed some minor characters’ names and personal details to both protect sources and private citizens who have nothing to do with our main story.

Other excellent reporters have worked hard to crack Snapchat’s tough shell. I have included a works cited list detailing the articles I have referenced. I am particularly indebted to the excellent work of Josh Constine, Jordan Crook, Alyson Shontell, Mike Isaac, Austin Carr, and Kurt Wagner.

I do not claim that this is an impartial account. This is one version of the Snapchat story, undeniably colored by my experiences and those of my many sources. If Evan has his way, there will be many books written about Snapchat and Evan Spiegel.

It has been a significant challenge to write about a medium as visual as Snapchat, especially knowing that many readers have never used the app. I urge you to download Snapchat if you haven’t and try it out as you read this book. At the very least, you’ll understand what those damn teenagers are doing.

PROLOGUE

Initial Public Offering

MARCH 2, 2017

NEW YORK STOCK EXCHANGE

NEW YORK, NY

Smiling in their navy blue suits, Evan Spiegel and Bobby Murphy stood next to New York Stock Exchange president Thomas Farley on a balcony at the exchange. A large yellow screen with the black letters SNAP INC., the parent company of the hit app Snapchat, hung behind them. The company’s logo shined on seemingly every screen in the building. In a few short moments, Snap would go public on the New York Stock Exchange.

Farley turned and took a selfie using Snapchat as Evan and Bobby smiled and looked out at the crowd. Evan’s fiancée, supermodel Miranda Kerr, stood on the floor of the stock exchange, as did early Snapchat employees Dena Gallucci and Nick Bell and Snap chief strategy officer Imran Khan. Bobby and Evan pressed a button together and a bell rang out loudly, signaling the opening of the day’s trading. The assembled throng of Snap employees, friends, and reporters cheered. Farley encouraged the crowd to cheer louder. Evan, in a white shirt and gold tie, and Bobby, with a blue shirt and darker blue tie, smiled at the crowd, then turned and shared a moment. Bobby patted Evan on the back in celebration as Farley turned and shook hands with them each in turn. This was actually happening.

$SNAP was priced at $17 a share, but it opened at a much loftier $24. Snapchat CFO Drew Vollero watched the stock jump and exclaimed, That’s crazy!

After Snap began trading, Evan, Bobby, Kerr, and Khan headed over to the fourth-floor equities trading desk at Goldman Sachs on 200 West Street. When Snap’s stock jumped up to $24 right out of the gate, the Goldman trading floor broke out in jubilant cheers. The stock closed at $24.48, up 44 percent, with a closing market cap of $34 billion, on par with Marriott and Target. By the end of the day, Evan and Bobby were worth more than $6 and $5 billion, respectively.

Never before had so much economic value been created by a consumer product, used by millions of people daily, that was still so misunderstood.

As Snapchat rose from a silly photo-sharing app with a bad reputation for sexting to one of the hottest startups in the world, it became an increasingly common topic of conversation, particularly in the media. But it was little understood. A 2016 New Yorker cartoon depicted a man whose head had exploded, leaving behind his corpse holding his phone with Snapchat on it; in the caption a coroner explained to a cop, Looks like another case of someone over forty trying to understand Snapchat. In a 2015 New York Times article, Campaign Coverage via Snapchat Could Shake Up the 2016 Elections, the writer, commenting on Snapchat’s seriousness as a platform, still referred to Snapchat as a company known for enabling teenagers in various states of undress to send disappearing selfies to each other. Another New York Times writer said, The user interface and design looks like the cross between a weird Japanese animation and a 1980s sitcom.

Evan occasionally tried to control the narrative surrounding Snapchat. In June 2015, he posted a video on YouTube titled What is Snapchat? In the video, Evan is wearing his usual white v-neck t-shirt, sitting in what looks like a windowless room. He spends four minutes awkwardly using slides written on a pad of paper to discuss the history of social media and how to use Snapchat. The video did not do much to clear up the perplexity surrounding the app.

But Evan has also embraced opaqueness at Snapchat. The app is designed for existing users rather than new ones; this helped early growth at Snapchat as users showed friends how to use all of the app’s features in person. Confusion also lets Snapchat work in private, building hardware, computer-vision software capable of analyzing Snapchat pictures, and other moonshot projects that are key to the company’s future. This attitude, combined with Snapchat’s youth-focused design, has led outsiders to question how serious the company is.

As Snapchat set out on its IPO roadshow, Evan, Bobby, and the team found themselves pitching the company to potential investors far outside Snapchat’s core demographic. There is a generational divide that Snapchat illuminates. As with many new social apps, Snapchat’s user base skews very young. Some of this is inherently age based—young people tend to experiment more and have wider social circles. But a lot has to do with what age you were when you initially joined Facebook or Myspace. Older people who arrived to Facebook in its more constant state don’t understand the appeal of Snapchat. Indeed, it was easier for me to write this book than teach my mom how to use Snapchat.

So what is Snapchat? To fully understand the company, you have to understand Evan Spiegel and how the thinks. Evan and Snapchat are inseparable. So we must go back to the beginning and examine how Evan approached his previous ventures, how Snapchat was created, and the environment it was born into. We will look at how the Snapchat team approached problems when they were a scrappy underdog with few resources and how that approach changed over time as their assets grew exponentially. By understanding the company’s challenges and decisions, we can explore how the tech world’s most creative product minds are approaching the future of communication.

As eventful as Snapchat’s story has been to date, the company still has far to go to carry out Evan’s grand ambitions. The night before the IPO, Evan emailed Snap’s two thousand employees, noting that the IPO was merely a milestone and that the company had much left to accomplish. The next day, three thousand miles from the New York Stock Exchange, employees at Snapchat’s headquarters in Venice, California, celebrated with doughnuts and champagne before returning to work.

One notable figure was missing from the celebrations: the guy who came up with the idea behind Snapchat.

Part I

AN EVAN SPIEGEL PRODUCTION

CHAPTER ONE

RUSH

APRIL 2010

STANFORD, CA

Sam leaned against the shopping cart, forearms bulging as he pushed with all his strength, picking up his pace from a trot to an all-out sprint. On most days, he used his athleticism to play wide receiver for Stanford’s football team. Tonight, he was using that same athleticism to push his friend Stuart in a shopping cart because they were freshman boys trying to get the older guys’ attention at fraternity rush.

Pushing Stuart off a makeshift ramp designed for frat bros to tricycle over seemed like a good way to make an impression. It was working. As they rounded the corner of Kappa Sigma’s parking lot, several fraternity brothers standing on the concrete steps and sidewalk realized that these freshmen weren’t using the normal Target-bought tricycles.

Where the hell did they get a shopping cart? one of the guys thought as he joined his brothers and started cheering as Sam steered the cart around the turn of the parking lot.

Stuart, a thin, goofy kid with his dark brown hair in a bowl cut, sat in the cart, looking diminutive next to his friend Sam and wondering why he’d thought this was a good idea. The Jack Daniels had initially calmed his nerves, but Sam was pushing him pretty damn fast. He didn’t have time to rethink things.

Sam whipped the cart around the corner of the parking lot, its wheels rattling over bits of broken beer bottles. The parking lot’s lone light cast a faint orange glow over the scene. The cart went up on two wheels as it turned; Stuart almost fell out, but Sam grabbed it and slammed it back down.

Steadying the cart, Sam sprinted toward the hastily constructed ramp and threw the cart forward into the warm California night.

The plywood ramp sagged atop its cinder block supports. Rather than soaring gloriously into the air as the boys had intended, the cart slid right off the end, its old wheels digging straight into the asphalt with a harsh screech. The cart violently ejected its cargo—Stuart flew through the air and tumbled end over end against the hard asphalt.

The onlookers paused.

Rolling over, Stuart rose gingerly. He turned and looked back at the group watching him and triumphantly raised his fists in the air over his head, like a snowboarder who had just won Olympic gold.

The older brothers exploded into hollering and cheering. This kid was getting a bid.¹

Evan Spiegel smiled and sipped his beer from a red Solo cup, watching the chaos from the crowd. Tall and lanky, Evan had brown hair that he kept short and styled up across his sharp, angular face. He was often seen partying on campus in a tank top and shorts. As a sophomore rush chairman, Evan held the keys to the kingdom for these potential newcomers. All around him, nervous freshman engaged in the same small talk with active brothers: Where are you from? What freshman dorm are you in? Did you play any sports in high school? How’s freshman year going?

All told, there must have been more than a hundred people there, milling about between the makeshift tricycle track in the parking lot and the fraternity house. The freshmen had come sporting a variety of attire, from the East Coasters in polos to Southern Californians in tank tops, most trying too hard to look cool and casual at the same time. All the brothers were wearing yellow t-shirts for rush; the front depicted Curious George passed out next to a tipped-over bottle of ether. The lower right side of the back showed a small anchor with the fraternity’s letters, KΣ, on each side—it was Evan’s signature. The anchor was his way of saying, This is an Evan Spiegel production.

Evan was born on June 4, 1990, to a pair of highly successful lawyers. His mother, Melissa Thomas, graduated from Harvard Law School and practiced tax law as a partner at a prominent Los Angeles firm before resigning to become a stay-at-home mother when Evan was young. His father, John Spiegel, graduated from Stanford and Yale Law School and became a partner at Munger, Tolles & Olson, an elite firm started by Berkshire Hathaway’s Charlie Munger. His clients included Warner Bros. and Sergey Brin.

Evan and his two younger sisters, Lauren and Caroline, grew up in Pacific Palisades, an upper-class neighborhood bordering Santa Monica in western Los Angeles. John had the kids volunteer and help build homes in poor areas of Mexico. When Evan was in high school, Melissa and John divorced after nearly twenty years of marriage. Evan chose to live with his father in a four-million-dollar house in Pacific Palisades, just blocks from his childhood home where his mother still lives. John let young Evan decorate the new home with the help of Greg Grande, the set designer from Friends. Evan decked out his room with a custom white leather king-size bed, Venetian plaster, floating bookshelves, two designer desk chairs, custom closets, and, of course, a brand new computer.

From kindergarten through senior year of high school, Evan attended Crossroads, an elite, coed private school in Santa Monica known for its progressive attitudes. Tuition at Crossroads runs north of $22,000 a year, and seemingly rises annually. Students address teachers by their first names, and classrooms are named after important historical figures, like Albert Einstein and George Mead, rather than numbered. The school devotes as significant a chunk of time to math and history as to Human Development, a curriculum meant to teach students maturity, tolerance, and confidence. Crossroads emphasizes creativity, personal communication, well-being, mental health, and the liberal arts. The school focuses on the arts much more than athletics; some of the school’s varsity games have fewer than a dozen spectators.²

In 2005, when Evan was a high school freshman, Vanity Fair ran an exhaustive feature about the school titled School for Cool.³ The school, named for Robert Frost’s poem The Road Not Taken, unsurprisingly attracts a large contingent of Hollywood types, counting among its alumni Emily and Zooey Deschanel, Gwyneth Paltrow, Jack Black, Kate Hudson, Jonah Hill, Michael Bay, Maya Rudolph, and Spencer Pratt. And that’s just the alumni—the parents of students fill out another page or two of who’s who A-listers. Actor Denzel Washington once served as the assistant eighth grade basketball coach, screenwriter Robert Towne spoke in a film class, and cellist Yo-Yo Ma talked shop with the school’s chamber orchestra.

Evan was attracted to technology early on, building his first computer in sixth grade and experimenting with Photoshop in the Crossroads computer lab. He would later describe the computer teacher, Dan, as his best friend.

Evan dove into journalism as well, writing for the school newspaper, Crossfire. One journalism class required students to sell a certain amount of advertising for Crossfire as part of their grade. Evan walked around the neighborhood asking local businesses to buy ads; once he had exceeded his sales goals, he helped coach his peers on how to pitch businesses and ask adults for money.

By high school, the group of 20 students Evan had started with in kindergarten had grown to around 120. Charming, charismatic, and smart, Evan threw parties at his dad’s house that were notorious in his words. Evan’s outsized personality could rub people the wrong way at times, but his energy, organizing skills, and enthusiasm made him an exceptional party thrower. He possessed a bravado that could be frustrating and off-putting but was great for convincing everyone that the night’s party was going to be the greatest of all time.

Obsessed with the energy drink Red Bull and the lifestyle the brand cultivated, Evan talked his way into an internship at the company as a senior in high school. The job involved throwing parties and other events sponsored by Red Bull. Clarence Carter, the head of the company’s security team, would give Evan advice that would stand him well in the years to come: pay attention to who helps you clean up after the party. Later recalling the story, Evan said, When everyone is tired and the night is over, who stays and helps out? Because those are your true friends. Those are the hard workers, the people that believe that working hard is the right thing to do.

In the fall of 2008, Evan burst onto the campus scene at Stanford. Known as The Farm because Leland and Jane Stanford founded the school on their old Palo Alto farm, Stanford has an idyllic 8,000-acre campus in northern California, just south of San Francisco. He lived on the top floor of Donner, a three-story all-freshman dorm. Evan quickly became friends with the guy who lived right across the hall from him, Reggie Brown. Evan could not possibly have imagined it at the time, but meeting Reggie would become one of the most important things he did at Stanford.

Reggie was born on January 17, 1990, in Isle of Palms, an affluent coastal town just outside of Charleston, South Carolina. Reggie had a masterful way of making people feel welcome and comfortable around him, like he was genuinely interested in getting to know you. He could come across as a goofball at first, as he smoked and drank and made lowbrow jokes, but he was deeply intelligent and creative. Reggie knew from the day he got to Stanford that he wanted to be an English major and focus on writing. Reggie was a beefy, good-looking kid with shaggy blonde hair that was typically tucked under a backward cap. A wide, silly smile usually brightened his face. His Southern manners set him apart in Northern California, as he would frequently address professors and friends’ parents more formally.

Evan and Reggie spent a lot of time partying together. The group in Donner was unusually social that year, not least because the two fast friends frequently threw parties in their dorm. This was not common for freshmen because it was frowned upon. These gatherings were typically lubricated by handles of vodka and Red Bull Evan had shipped to him, as he was still working for the company as a brand manager, giving out free samples.

Most freshmen did not have a car and were adjusting to life without their parents. Evan drove a Cadillac Escalade and thrived in his new environment. In addition to his ever-growing group of friends he met through his and Reggie’s parties, he started dating a pre-med student named Lily, and they were soon attached at the hip.

Lily was a steady, positive influence on him. She was a very patient, understanding girlfriend and put up with some of his absurdity because the good times—from fraternity parties to adventures for just the two of them to a spring break trip to Cabo San Lucas in Mexico—were so much fun.

Throughout the year, Evan designed and printed tank tops for his Donner crew. He had befriended the owner of a printing shop and was able to negotiate discounted prices and short turnarounds on orders. Evan created a tank top mimicking the Stanford athletes’ Nike gear. The shirts said STANFORD across the chest, but instead of a team sport underneath Stanford, it read HUSTLING. In the spring, a friend tossed out the idea for a Sun’s Out, Guns Out tank top; later that day, Evan emailed the dorm a Google doc to collect people’s orders and sizes, and by Friday everyone who paid him could rock their shirt.

By the time spring quarter arrived, Evan’s reputation had grown—he was the kid from LA who liked to throw parties. Most of his Donner crew joined a fraternity or sorority that spring. Reggie, Evan, and their friend Will rushed the Kappa Sigma fraternity.

The Kappa Sigma brothers had a work-hard/play-hard ethos; they prided themselves on being able to excel on campus while drinking and throwing ridiculous theme parties. The leaders of the house typically did very well academically and balanced sports teams and other extracurricular commitments with heavy drinking binges. The Stanford Flipside, the school’s beloved Onion wannabe, summed up the culture best with an article titled, Kid Vomiting in Stall Next to You to Run Fortune 500 Company Someday.

In April 2009, Evan, Reggie, and Will were awoken in Donner by Kappa Sigma brothers, offering them Natty Lights and little manila bid cards—invitations to join the fraternity. They were in.

Evan and Reggie took widely divergent routes through the fraternity pledging process. Most of the new members went with the flow during pledging and did what the older brothers told them to do. Evan constantly questioned: Why do we do it this way? Why are we letting other people tell us what to do? Why can’t we go do this? Reggie, on the other hand, simply couldn’t be bothered to show up or take pledging seriously. During the process, the older brothers frequently wrote out the pledges’ names on a big whiteboard and gave them points for tasks well done, events they showed up to, and generally how much they were liked by the active members. Reggie was always at or near the bottom of the list.

While he didn’t put any effort into the setting up, cleaning up, or planning of parties, Reggie excelled at one part of the process: the parties themselves. All pledges were given tasks: one had to carry a lunchbox around to classes, another had to roller blade around campus, and a third had to wear a bike helmet to every party. All received nicknames as well: Reggie earned the nickname Blue Suit, given every year to the pledge who parties the hardest. He was handed down a baby blue men’s suit that was rarely, if ever, washed. He had to wear it to every party, adding more layers of liquor stains to its illustrious history.

Evan moved into the Kappa Sig house his sophomore year and was assigned a room in the Mid, so named because it was located right in the middle of the house, where the bedrooms met the kitchen, lounge, and chapter room to form a T. Five pledges lived in two small bedrooms, with a larger common room connecting them in the middle.

Choosing to live in the Mid meant committing to a quarter⁴ where keg stands would take precedence over classes. Mid residents who wanted to get homework done had to escape the fraternity for the library. And it was difficult to get to bed before two o’clock in the morning most nights, as fraternity brothers would drink and party or smoke and play Super Smash Bros. on a beat-up N64 in the middle room. In the larger common room of the Mid, Evan and his friends would throw regular weeknight parties, inviting everyone they knew.

Evan had a private text group with a bunch of the girls in his year to which he’d regularly send mass texts like, Raging tonight at Kappa Sig, be there. Almost inevitably, Evan’s Thursday-night parties would explode into all-campus events. Sorority girls, overeager freshmen, and jaded-but-drunk seniors alike would wander over and cram into the Mid to slam back Natty Lights, take pulls from plastic handles of bottom-shelf vodka, and forget that they had class the next morning. During these parties, Evan was in his element. He could often be found sitting on top of a speaker DJing in a tank top, gauging the mood of the crowd, and making sure everyone was having a blast. He even came close to getting LMFAO, a hip-hop duo best known for their Party Rock Anthem hit, to come play at one of the fraternity’s parties.

Fraternity life posed a continual challenge for Evan—he always wanted to take things to the next level. Instead of planning mere parties, he constantly increased their vision and scale until they became planned events with specially built props and specifically designed tank tops. Spiegel, we can’t do that became the most common phrase uttered at house meetings. Evan would type up ridiculous event descriptions for emails and Facebook invites, describing parties in the most absurd, dramatic ways.

Evan was elected a social chair and quickly went way over budget. As Stanford’s football team embarked on their first winning campaign in nine years and the busy student body started to pay attention to the games, Evan pushed to make tailgates into bigger spectacles. For every home game, he would cart his own enormous speakers down to the dirt parking lot next to Stanford Stadium. The Kappa Sig