More Awesome Than Money

by Jim Dwyer

  He urged them to hop off the venture capital treadmill for the moment because it was getting them nowhere. Instead, once they had 500,000 users, they could do market research on what kinds of apps would appeal to them, and get funding for those specific elements.

  Finally, Yosem promised Max he would stick with them. “I realize that my email may come as a surprise to you, but I want to make sure that I’m being as clear, direct, and honest as possible about what I see as Diaspora’s prospects at this crucial crossroads. And I prefer to write it as an email because it’s easier to chew on, whereas over the phone it’s always possible that I may forget an important detail or simply not communicate as well as I should. I want to reiterate that I’m fully committed to Diaspora and its vision, and I want to do everything possible within my means to help you succeed. I’ll be with you until the end, wherever that takes us, i.e., the next Google, a spectacular failure, or something in between. But it’s important for you guys to discuss these issues internally among yourselves and decide whether you agree with my assessment and want to proceed in the ways I outline above, or see things differently and prefer to do something else. Regardless of what you ultimately decide, I will be there to help as much as I can.”

  CHAPTER NINETEEN

  At the weekend gatherings, it was inevitable that Bobby Fishkin, broad and tall, with a shock of black hair, would emerge as a person drawn to Ilya, and vice versa. Fishkin was twenty-eight and, with his father, was running Reframe It, a successful consultancy that guided groups, companies, even countries, through a decision process. It had won the 2011 McKinsey/Harvard Business Review Management 2.0 Challenge for the Best Process in the World to Reinvent Complex Decision Making.

  Before that, he had worked on a project at Yale University on the marginalia of great authors, tracking down what had been scribbled in copies of Hamlet by Tolstoy, Charles Darwin, E. E. Cummings, and C. S. Lewis, among others. He created a digital annotation company with the same aims.

  Technical chops were not, however, what made them so interesting to each other. Ilya gave Bobby a few verses from his aria on slaying dragons. It was brain waves at first sight.

  “I’ve been wanting to change the world for the last ten or eleven years,” Fishkin said. In college, he had visited, on what he hoped would be a romantic errand, a woman living in Barcelona. A year there had cost her $180. He had no idea such a feat was possible, but his friend had settled, for free, in an old cabaret that had been busy through the 1930s. It had since become a squat. Clothing herself was not a problem: in storage were thousands of costumes from its days as a theater.

  His romantic prospects dashed quickly, Bobby continued to explore Barcelona, and those days had helped set his path for the years to come. He discovered a collective squat called La Makabra. “There were 190 acrobats occupying three or four warehouses led by a Soviet circus master. They’d created a squat university there and taught punk acrobatics to all the kids. They taught me acrobatics for the next two weeks. It was a utopian experience.”

  After leaving Barcelona, he started an informal association of Visionaries and Revolutionaries in the Bay Area, assembling its membership from “about 290 gurus, social geniuses, social theorists, system theorists, alternative history of the future people. Semantic web people. Free-culture people. We met for a while in an old convent. Then we went to the Yerba Buena Center for the Arts.”

  Ilya was intrigued. He did not put himself into any of those categories, but was more than ready to listen to people who had ideas for disruption and dragon slaying. Soon he and Bobby began hanging out.

  —

  Some Diaspora money remained in the bank, but it was all spoken for. They were technically broke and hitting up their families for support. All eyes were on Max. The guys were giving him flak for his constant assurances that “money is coming.”

  Max, in turn, looked to Yosem for advice. How could Max let the others feel that they had traction? Should he forward every e-mail? No, Yosem counseled. Burying the others under blizzards of e-mail about meetings, promises of meetings, hopes for promises, and so on wouldn’t move the project forward. It was important, though, for the others to know what was going on, and to let them know regularly.

  The assumption that Max was the CEO was a highly sensitive question with the others, Dan in particular, who had made it his postcollege goal not to work for someone else. As a practical matter, Max was listed on the incorporation papers as the CEO, and his name would appear with that title on slide pitches presented to financiers. Not only had they all seen the slide, it was agreed among them that this was simply for the purpose of having a named CEO on the slide. There seemed to be little doubt that any serious venture investor would also require that they bring in an experienced person to watch the operation.

  Max had been the driving force in getting the Kickstarter campaign mounted; he had made sure that T-shirts were sent to people who had contributed money; he had set up meetings with the VCs. By agreement, when talks and presentations were given, each of them got a speaking part; all the interview and conference invitations were passed around equitably. Yet Max seemed to be acting as the leader in many important settings, and Yosem had no sense that his role was in question. The important part in the dynamic, he said, was to make sure the group had a routine for sharing information, especially if the group expanded to include Sarah Mei and Yosem, as was expected.

  “The meeting should have an agenda, and everyone should have a set amount of time to talk about whatever issues they want to talk about,” Yosem wrote. “This will extend to Sarah and I and anyone else who comes on board at an executive level role. The idea is to make sure the whole organization is on the same page. Right now, you guys are all friends and cofounders, so daily might be overkill. You may want to do weekly instead.”

  He also suggested that they scale back drastically on the amount of funds they were seeking in the short term. They had yet to collect a nickel of venture capital funding, and had not sought any public donations since their Kickstarter appeal. The tenor and morale of the other three would be propped up by any fresh investment.

  “Go for the low-hanging fruit: ask for a $500K angel,” Yosem advised. “Better to get the money sooner than later, lest the guys start to question their commitment to the enterprise. Remember that the longer you go without raising money, the more they might begin to question whether the idea is good enough. So the key is to try to present a continuous stream of positive news, even if that means that after raising the round, you’ll have to start raising a new one.”

  —

  Not long after the Fourth of July, the Diaspora Four and Yosem gathered at the Sofaer house in Palo Alto for a summit. Yosem did a flash survey of their ambitions: did they want Diaspora to be a business run for profit or as a nonprofit? This was a question he had posed to them a year earlier, when they first met in California. The world had not stood still. The rise of Google+, the continuing failure of their pitches, meant they had to do something different.

  They could no longer tread water. They had to move to a public beta release—the second stage of software development, when a product is distributed in a rough-finish form so that it can be tested by many users. The idea was to get it to break: to fail faster and succeed sooner, as David Kelley, one of the tech world’s leading design gurus, has put it. It was part of the maturing process. Google, in fact, had kept some of its most well-known products in beta for years, reflecting the view that applications from the web were dynamic creations, constantly evolving and being released in improved versions. This was done, in large part, to distinguish the Google age from the era when software was sold over the counter in boxes with disks in them; that software was never going to change until you bought a new box. But Google gave its software away, and kept improving it, making search and mail and photo storage ever better; with each application, as its products became more useful, the mesh of its data dragnets became
finer, collecting more personal information.

  For months, though, Max believed that Diaspora was never going to have the polish it needed to release even a beta version of its application unless experienced software engineers were brought on board to help. Sarah Mei, the Pivotal developer who had been a steady contributor of code and a mentor to the four, was going to be their first hire. To pay people like her, though, they needed money. They could not get to beta launch without venture funding.

  Yosem retorted that to get premier venture capital firms to invest, they had to have a beta version.

  In the end, they all agreed that they needed to get to a beta release as quickly as possible, and that the kinds of financing they needed was seed money from an angel investor, a different species than the normal VC. An angel was willing to take a chance on a risky venture and not demand control, but would receive a significant reward if the business took off. Yosem said he had some leads on people who might be willing to take such a gamble.

  The national economy was still in poor shape that summer of 2011, three years on from the global economic decline of 2008, and there was little sign that it would improve anytime soon. They calculated that they would need $600,000 to keep the servers going and to hire experts like Sarah. Moreover, they had to raise that money by October, when it was believed that venture capital began to throttle back on investment for the rest of the year.

  Yosem also recommended that they build their business selling and servicing Diaspora pods—basically, allowing an ordinary person to have control of a server, the data stored on it, and the software that ran it without necessarily understanding how it all worked, or even having one at home. This was an actual business that could grow organically from the project; it was not yet another iteration of data monetization.

  As it happened there was a recent model for a business that was also a revolutionary tool: the blog. In reality, blogs were websites with simple-to-use templates for adding text or pictures. They had emerged in the 1990s as hackers developed software that would make writing on web pages nearly as simple as it was on word processors. They were among the earliest tools for ordinary people to publish words and pictures on the web. By 2003, Matt Mullenweg, a nineteen-year-old at the University of Houston, began to work on blogging code from existing software. His creation was made under free and open software principles, and when it was ready, a friend suggested a name: WordPress.

  Mullenweg did not invent the blog form, but he and his friends had assembled free tools and made them part of popular culture. By the summer of 2011, WordPress was built into 14 percent of the world’s websites. More than 50 million blogs were using WordPress; the parent organization reported that every month, 287 million people viewed 2.5 billion WordPress pages. Young man Mullenweg was the Gutenberg of the web.

  WordPress embodied much of what Diaspora aimed for. It was free, empowering software. People owned their data. Yet it was a successful business, too, with no compromise of its values. Without paying anyone, you could get the software, create a page, and host it on your own server at WordPress.org. It also offered, by subscription, a hosting service at WordPress.com, which was the base of WordPress’s financial success. Because WordPress was decentralized in its essence, no one was in charge of the blogs of the world and their contents.

  The whole team believed that the basic Diaspora code should reside within a not-for-profit corporation, in keeping with the project’s origins. They would keep using their existing for-profit corporation to develop other applications and build up a business hosting pods. It was no different from WordPress. That way, in good faith, they could turn again to their community of supporters to ask for additional money to keep the project going, especially if the angel investment took a while to materialize.

  Afterward, Yosem reflected that the session had been the most productive, focused business meeting they’d had.

  —

  Tucked into the middle of the July Fourth weekend, the “TomCruiseFuckYeah” party grew to epic proportions. Although Parker and Adi were the guests of honor, they did a good bit of the legwork. They had worked in improv, and they sized up the backyard space. The fixed great tent had promise as a screen. Ilya found an old interview of Tom Cruise discussing his involvement with the Church of Scientology, projected it onto the roof of the tent, and ran it in a continuous loop. Dan Grippi served as DJ, playing the electronic music that he loved. Adi concocted a Top Gun cocktail, named for an early film in the Cruise oeuvre. It consisted of apple vodka, ginger beer, and champagne, cut with water. He made it by the pitcherful, adapting the recipe as the supply of ingredients shifted. Guests came in Tom Cruise–related costumes. The plan had been for Adi and Parker to cover the cost of the booze, but as the party grew in scope, Ilya insisted on chipping in. The night was a roaring, silly success.

  That “Caturday” night gathering was not the end of the get-togethers that holiday weekend. On Monday, a small picnic was organized in Dolores Park by Ilya; his new roommate Tony Lai, the lawyer from London who was one of Elizabeth Stark’s students; Stark; Katie Johnson, Bobby Fishkin; and a woman Bobby had been pursuing romantically for six months. By the end of the evening, Ilya and the woman had connected behind a closed door. Bobby was devastated. Ilya was flabbergasted; he had been unaware of Bobby’s romantic designs.

  “I had no idea,” Ilya said. “Dude, I am so sorry.”

  Ilya assured him that he was not short on female companionship, and did not want to wreck his burgeoning friendship with Bobby. Ilya had already started seeing a bright and funny eighteen-year-old girl, recently out of high school and a tumultuous home life, whom he had met at Noisebridge, the Mission District hacker space. She had quickly and, in Ilya’s view, somewhat unexpectedly moved in with him. He was uneasy about the situation, he told his roommates, but not certain how to disentangle himself without causing too much pain. Nevertheless, part of their ritual, if they were together, was a passionate kiss at 11:11 every night. Then Ilya would step out for the night.

  For two straight weeks after the Fourth of July mishap, he would find an excuse to call Bobby, offering up some cheery bit of news, then suggesting that they get together. “What are you up to?” he would ask. “Let’s hang out.”

  They would go to Mission bars like Elixir or Serendipity for Bloody Marys. If the place was hospitable, they would smoke weed; if it was not, they would go back to Bobby’s place and get stoned.

  —

  The tour of Pivotal was completed. Michael Fertik, the CEO of Reputation.com, had agreed to visit the Diaspora group at the Pivotal offices. Yosem had urged Fertik to see for himself how Diaspora was different from other start-ups because of the disciplined culture at Pivotal. He saw the pairs of programmers, the orderly procession of work. He was impressed.

  “This place is amazing!” Fertik said to Max. “Forget you guys, how much would it cost me to buy up this shop?” They both laughed. Two weeks earlier, at a meeting in Reputation’s office in Silicon Valley, Fertik had broached an outright purchase of Disapora and merging it, and the four guys, into Reputation. Even close to broke, the guys were not that interested, but they agreed to keep talking.

  Now they were gathered in a Pivotal conference room for the next stage of courtship. Fertik was a man of some charm and confidence in that charm. Just ten days earlier, venture funds had closed the deal with him for $42 million in investments in Reputation, atop earlier bets. That money was not going to stay in Fertik’s pocket, and he had told Max as much. Saying that he did not like to sit at such meetings, he stood; at times, it seemed like he was running a seminar, asking questions and writing the answers on the whiteboard. That is, when he could pry a word out of them.

  Before Fertik arrived, the guys had huddled about their strategy and goals. They thought Reputation would be staid, and that the culture at Pivotal had nourished them. Software engineers were hard to find. Max’s favorite start-up guru, Paul Graham, had w
ritten essays about the process of “acqhire”—acquisitions for the sole purpose of acquiring the technical power of the team, not necessarily out of any interest in the product they were making. Companies with loads of cash might spend between $1 million and $5 million—most of it in stock, a kind of script with potential as a lottery ticket. Yosem cautioned them to play poker.

  Fertik was direct.

  “Level with me, guys. What will it take to get this deal done?” he asked.

  There was silence.

  Fertik began to go around the room, addressing each of them in turn about ambitions, based on his reading from the earlier meeting. “Which of you has aspirations of becoming a start-up CEO? I just want to know who I should place under my wing in the business development department,” Fertik said.

  He added that he could see Max as the CEO of a start-up.

  “You infer correctly,” Max said.

  Fertik looked at Ilya. He thought he had the makings of a future chief technical officer.

  “You deduce correctly,” Ilya said.

  The visitor admitted that he was having a harder time figuring out the ambitions of Rafi and Dan.

  “I’m going back to school in September,” Rafi said.

  After some silence, Dan said he saw himself more on the technical side of things, but wanted to learn about the business as well.

  To Yosem’s eyes, all the energy in the room was with Fertik. The guys were not feeding any momentum to their suitor. More than once, Fertik said he did not want to waste their time, or his, and asked them to be direct.

  Suddenly, Max said: “We’ll only sell for eight million dollars.”

  Fertik gave a moment’s consideration before he spoke.

  “If that’s the case, I think we should no longer continue talking,” he said. “I don’t want to waste my time here. There are other potential acquisitions that I could be looking at.”