More Awesome Than Money

by Jim Dwyer

  The investment group from Singapore, due in town the following week, was going to write them a check for fifty thousand dollars. “Basically, that money will go to pay to Sarah,” Yosem said. “I thought you knew about this.” Although, he cautioned, that money was not yet in hand.

  “Sarah has kids,” Dan said. “She needs insurance. She’s not like us.”

  In his role as consigliere/mentor/adviser, Yosem spent hours talking to Max, assuming that he conveyed the essentials to the rest of the team.

  “Max would say, ‘We want to do this,’ and I assumed ‘we’ meant the team,” Yosem said.

  “You thought you were talking to all of us,” Dan said.

  In Dan’s view, Max was CEO only for the purpose of having someone with that title on the slide shows that they presented to the VCs. Yet in reality, the others seemed to have given him the authority to function as CEO, if only because he had energy for taking on thankless tasks—like making sure thousands of T-shirts got mailed to their Kickstarter contributors—from which the others would avert their eyes.

  Yosem and Dan then reviewed the aftermath of the Kleiner Perkins fiasco. Dan recalled that Max had taken a call from Ellen Pao while they were all in the Pivotal office. Afterward, he reported that Kleiner was not going to fund them.

  “You know that they made an offer?” Yosem said.

  All Dan knew, he said, was that they had been turned down. He listened to Yosem unspool the narrative of what happened after the meeting: that Yosem had urged Max to go back and withdraw the $10 million request, and to write it off to them being college kids with no business experience; that Kleiner Perkins had instead made a far more realistic offer of $750,000, and that it had been turned down by Max, who insisted that they needed $2 million to $3 million.

  It was news to him, Dan said.

  They spoke for more than an hour, each revelation infuriating the other in some form: for Dan, it was all the business decisions that he believed Max had made without consultation, and for Yosem, it was that so little of his conversations with Max were making it to the other members of the group.

  Dan signed off the call with Yosem and immediately contacted Ilya, who soon was on the phone with Yosem to get this news himself. After a few more phone calls, they had decided that Max would be told on Monday that he was not the CEO. And that they could not hire Sarah Mei.

  The conversations continued over e-mail, where Yosem went through every business item with Ilya and Dan. It was almost impossible to believe that only then were they engaged with basic decisions about their project and its business. Yet it was the same blithe naïveté that had allowed them to take on a task as formidable as reorienting the web. Some of this had already been packed into e-mails that had been circulated containing the business plan, but as far as the others were concerned, they had not talked it over.

  “My understanding was that the board had decided to hire Sarah and had written up her job offer,” Yosem wrote.

  “Re: Sarah—none of that was discussed between the board,” Dan wrote.

  Ilya weighed in with an endorsement of Sarah—that she would be “an excellent person to join us”—but added, “Unfortunately, there was no codified board meeting nor a job offer that I know about.”

  Both Dan and Ilya added that they had no idea about the stock award for Sarah. “Let’s not do that again,” Dan wrote.

  “100% with Dan on this one,” Ilya wrote.

  As far as having structured officers, Yosem described a few titles, then addressed the elephant in the room. “My understanding was that you guys had agreed that the CEO is Max. Is this symbolic or operational?” he wrote. “We don’t really need a CEO for the time being, except for symbolic, external investor purposes.”

  Dan replied: “When we agreed that Max was CEO, it was to put a title on a slide for a deck. At the time, all I ever agreed to was the symbolic nature of the title. Obviously, this has not been the case. We need to discuss the details of this amongst the board.”

  “+1,” Ilya wrote.

  As they spoke through the evening, Max was part of another conversational thread about drafts of a fund-raising letter that was due to go out in the next few days. The others did not reveal what they were speaking about, so he knew nothing of the mutiny that was roiling.

  Yosem discussed with Dan and Ilya the job of “virtual CEO,” which would involve a mentor-type figure advising them and being their front person at pitches with investors. Randy Komisar had played that role for a number of companies before joining the investment bank. It was “purely symbolic,” Yosem said, but it “means that I can meet with investors and coach you guys as founders into the CEO role. But Max didn’t feel comfortable doing that, which is ok. One thing I could do to help in this regard is hold regular seminars for you guys on how to run a startup company, like a mini-MBA, as I do for my Stanford engineering/entrepreneurship students.”

  “I would definitely love regular mini-MBA seminars (business is something I know very little about, but would love to know more),” Ilya wrote.

  They would hold a board meeting Monday morning to tell Max that he was not the CEO. After that, they would tell Sarah Mei that her hiring was going to be put off. Yosem sent around an e-mail at nine-thirty that night to the group; it was entirely for Max’s benefit.

  “Dan called me a while ago, and we spoke for a bit,” Yosem wrote. “The gist of it is that it appears that we’re experiencing some communication issues.

  “To avoid them in the future, we should hold a weekly meeting where, during the first half, I can keep you abreast of our progress on the business front, and during the second half, say over lunch, we can have Peter and Sarah join us.”

  After midnight, Dan sent Yosem an e-mail. “Just wanted to say thanks again for taking the time to talk earlier tonight,” he wrote. “You’ve got some great insight, as always.”

  They had scarcely ever held a board meeting, and on Monday morning, no one was quite sure if Rafi was even still a member. Had he automatically resigned when he left the project to go back to school? It was spelled out somewhere in their incorporation paperwork, but they did not have time to figure that out. To be certain that he was notified of the meeting, Dan sent him a note. Did he want to join them by phone around eleven or eleven-thirty Pacific time? Not possible: Rafi was in class then. But he wanted the minutes.

  The three of them gathered in a conference room.

  “You’re not calling yourself the CEO anymore,” Dan said. “You’re not the CEO. That was a title we put on a slide. We are equals in this.”

  He went on to recite the developments that he and Ilya had learned about only over the weekend: the hiring of Sarah Mei, and the awarding of 7.5 percent of the company. That, Max said, had been part of the plan all along. It was in the business plan they all had been sent.

  “We never made a decision to make a formal job offer,” Dan said.

  Ilya said that he thought Sarah Mei was great, but that he had known nothing of the plan to give her Rafi’s stock.

  “She’s giving her notice today,” Max said.

  Dan swore. They were paying themselves virtually nothing, and any new money was committed to one person making $130,000, who was also getting a hunk of the company? It made no sense.

  Max insisted that was the price for Silicon Valley talent, which was what they needed to move forward.

  What about the Kleiner Perkins offer? How come he had not told them about it?

  “I went back to you guys, and you said no,” Max said. “Don’t blame me. That was what you guys wanted.”

  Dan and Ilya said they had known nothing of it. Max insisted that he had told them. No, said Dan.

  “That would have changed everything,” Dan said.

  Going forward, the three of them would function as co-CEOs. It was a silly notion; they had not figured out how they would divide the t
asks. But in truth, it was a holding position. Yosem was waiting in the wings.

  How often did start-ups fail? Depending on who was counting, nine out of ten, or six out of ten, or some other majority fraction. In the tech world, failure was not a failing; it was part of the culture of trying. As Drew Houston, who started Dropbox at age twenty-four after he got frustrated on a bus ride from New York to Boston because he had forgotten his thumb drive, noted: “Bill Gates’s first company made software for traffic lights. Steve Jobs’s first company made plastic whistles that let you make free phone calls. Both failed, but it’s hard to imagine they were too upset about it.” The Bay Area teemed with small groups, two or three people who had an idea for something. Even the most devoted band of brothers, or pals from the computer club room, would succumb to the tensions of working side by side for hours without end. Ilya thought it was fortunate that they had not all ended up living together. Being able to tolerate partners took work.

  Diaspora did not fall under the standard rubric for evaluating start-ups; it had no investors waiting for returns or for a big exit buyout. They were not subject to the discipline of venture capital, for good or ill. It was more than a year and a half since they’d heard Eben Moglen’s speech and run away to join the circus. For nearly all that time, Max, by default and by aspiration, had been the person who took care of the business side—whatever it was or might be—in between coding with the others. Or, in Ilya’s case, as he learned to code. In truth, Max had been stretched in a million directions. As he saw it, now he was being blamed for them not being a functioning business, for not telling them about things that they did not want to know about. Dan was ready to kill him, Max thought.

  When the meeting ended, Max stalked out of the conference, over to the table space that Pivotal had given them. He slammed down some papers, put on his headphones. He was done speaking to people for the day.

  Dan turned into the aisle and headed across the room to Sarah Mei’s desk. “I’m sorry,” he said. “Don’t give notice.”

  They were not ready to move ahead with her hiring, for reasons that had nothing to do with her, he told her. They thought she was awesome. Sarah took the news calmly.

  During the evening, Yosem noted in an e-mail to Dan and Ilya that Max had recently offered him 5 percent of the stock. “I didn’t mention this in front of Max at today’s meeting, however, because I assumed that Max had not discussed this with the board either,” Yosem wrote. “As I see all four of you as my friends, please decide my stock compensation based on what you think is fair given my contributions to Diaspora during the time I’ve been working with you. As you know, I’ve worked on Diaspora, not because I care about compensation, but rather because I believe in what we’re doing and really enjoy working with you.”

  The same, in fact, could probably be said for Sarah Mei, who had found time in her life to improve their code without remuneration. Later that night, Yosem dropped a note to her. The Singapore advisers had postponed their trip—one of them was in the middle of a divorce—and the funds were not in hand. “I feel bad,” he wrote, “because I know you were excited about coming on board, just as we were excited to have you join us full-time.”

  She replied with equanimity. “Pivotal is a pretty nice place to be, all things considered,” she said.

  A good thing: the next day, after checking with the lawyers who were working on contingency for Diaspora, Max and Yosem separately learned that Rafi’s stock did not automatically revert to the pool because he had left as an employee. While he was still on the board, his stock would continue to vest. They could make other arrangements, but as of the first week of October, his status had not changed.

  What that meant is that not only could they not have given Sarah Mei the first fifty thousand dollars from the angel investment advisers, they could not have given her the 7.5 percent stock, either. They had neither the stock nor the money in hand.

  The next day, a reporter from TheStreet, a financial news blog, asked to do an interview for a story on how competitors to Facebook were “chipping away” at its hold. He noted that Diaspora was a potential rival that was generating a lot of buzz.

  The interviews were a particularly tender point, as Max had been on NPR just the week before. They had agreed to return to a strict rotation for dealing with press inquiries. “I believe it’s Max’s turn,” Yosem wrote. “Max, you want to take this one?”

  Max tersely declined.

  With everyone in charge, and no one, they decided to meet on Wednesday evening and discuss the leadership situation over dinner. They planned to go to a German restaurant, Schmidt’s, but instead coded through dinner hour. After waiting three hours, Yosem headed back to Palo Alto, and the Diaspora crew went to a Meetup at Shotwell’s, a bar in the Mission. Dan called Yosem from outside and said that Max was making him and Ilya uncomfortable.

  “This has got to stop,” Dan said to him. “You have to put your foot down.”

  For the rest of the night, Yosem got legal advice. Max had to write a single sentence resigning the title of CEO, since that was how he was listed on the incorporation papers. If he refused, the other board members could strip—“destitute” was the legal term—him of the title. He suggested that they engage a virtual CEO, a position he volunteered to fill, or to help them fill. “The point is the business really needs someone with business experience to serve in that role, whether it’s me or someone else,” he said.

  “We’ve tried on the job training, along with my pretty much coaching Max for the CEO role over the course of a year, and there have been multiple communication issues, few results on the financing front, and dissatisfaction all around,” Yosem wrote in an e-mail that he sent to Dan at four in the morning. “This is really not Max’s fault. Imagine if I had asked and tried to run product development.”

  As virtual CEO, Yosem said, he would serve at the pleasure of the board, which would have the final say on all decisions. The board meetings would be, in essence, training sessions. They would become “Q&A sessions, where I explain the logic of business decision-making, make recommendations, and the board votes and makes decisions.”

  He ended on an emphatic note. “You told me last night to put my foot down, and this is where I’m going to put my foot down. Enough is enough, and you’re right, the time has come.”

  Except, Dan decided in the light of Thursday, the time had not come. He had not talked it over enough with Ilya and Rafi. They’d have a board meeting on the following Monday, and everyone would be prepared.

  —

  At the end of the first full week of turmoil, Ilya needed a clear break.

  “There’s a secret rave being held on a cruise ship,” Bobby Fishkin announced.

  It sounded perfect to Ilya.

  A friend of a friend of Fishkin’s had purchased the thirteenth largest cruise ship in the world, the first oceangoing passenger liner built by Germany after World War II, with berths for three thousand people. The ship had long since run out its commercial life and, after a period when it was a kind of dry-docked hotel for a cult, was bought by a ship aficionado named Chris Wilson for one dollar. In theory, he could have sold it as scrap metal for a handsome price. Instead, Wilson, a man of quite ordinary means, set about restoring the ship, now known as the Aurora, and had it towed to Pier 38 in San Francisco Bay. He discovered that it was not welcome, a subject of energetic enforcement of maritime and port codes by harbor authorities who made frequent inspections. Its main sin appeared to be that it was an unsightly presence in the venue chosen for the 2013 America’s Cup, the international yachting competition that had been brought to San Francisco by Larry Ellison, the founder of the software company Oracle, and one of the world’s wealthiest people.

  From time to time, Fishkin explained to Ilya, Wilson quietly rented out the space to help pay his storage bills.

  They made their way down to Pier 38, along the darkened waterfront,
and boarded the Aurora. About three or four hundred people had turned up, and they were all collected in a few spaces on the ship, waves of electronic music pulsing across the decks. Officially, no drugs or alcohol were permitted. Ecstasy would not have been unusual, though.

  Whatever was going in the actual rave was not on the agenda of Bobby and Ilya. In fact, Ilya had once told Max that his ideal girl was a raver who did not do drugs, an esoteric combination.

  Through Bobby’s friend, they were given a tour of the boat, which seemed like a skyscraper lying on its side. It had ten stories. Some three thousand place settings were stashed away. Down they wandered to the lower decks, to engine rooms, to the galleys and any other cranny. So big was the ship that the swaying ravers were unseen and unheard.

  “We could bring two thousand people here, and it would still feel empty,” Bobby said.

  Ilya’s eyes lit.

  “What if we got one thousand hackers to hack the boat?” he asked.

  CHAPTER TWENTY-FOUR

  Over the weekend, Dan and Yosem conferred. At a board meeting on Monday, Dan, Ilya, and Rafi would formally remove Max and decide about appointing Yosem. The battle plan, legally, had been laid out. On Monday, Dan sent a quick note to Yosem: “Meeting has been postponed.” Later, in a phone conversation, Dan explained why: they were busy.

  Early the next morning, an e-mail arrived from Yosem, sent to Dan, Ilya, and Rafi, but not Max. The subject was “The Story of Diaspora to Date.”

  “I was not concerned when I heard from Dan that the meeting with Max was being postponed, but I was concerned when I heard about the reason why,” Yosem wrote. “Dan said that Dan, Ilya, and Max had had a very productive product brainstorming session and did not want to stop it to talk about the officer role reassignment.

  “That’s fine, but you need to realize what that decision signals in terms of priorities: ‘Since things were going so well at building a product, we could not take time away from that to focus on building a business.’”