Snapchat founder’s success story
Snapchat, the app loved by celebs and teens for its cute animated filters and self-destructing messages, is now worth billions. We chart the frat boy-to-riches story of its founder – and ask how long the party will continue
STROLL through the campus of California’s Stanford University with its exquisitely coiffed palm trees, Spanish-tiled roofs and manicured lawns, and you’d be forgiven for thinking you’d taken a wrong turn onto Club Med’s first and only suburban resort.
Make no mistake, though, the place is all business. Nestled amid rolling hills and clumps of nondescript office parks in Palo Alto, one of the priciest postcodes in America’s Silicon Valley, Stanford is the breeding ground of Big Tech. It’s Ground Zero of the Next Big Thing. Hewlett Packard, LinkedIn and Instagram, to name a few, were launched by alumni. Google, founded as a student project by Larry Page and Sergey Brin, is now the world’s second-largest company after Apple, which is just down the road. The university mixes academia with red-blooded capitalism. Professors, often tech tycoons themselves, invest in student start-ups. Teenagers drop out of the $45 000-a-year (R528 000) institution to launch companies they reckon might just change the world.
The last time that happened was in 2011 when Evan Spiegel and a couple of “bros” from his fraternity created a sexting app. They’d eventually call it Snapchat. What has unfolded since they first conjured the idea for an app to send risqué photos that would self-destruct after a few seconds has become the stuff of Silicon Valley lore.
If you’re over 30, there’s a good chance you’ve never used Snapchat, and wouldn’t know how to if you tried. If you have kids over the age of 11, chances are they’re obsessed with it.
Around 178 million people worldwide use the app daily, but its fans are heavily
Facebook founder Mark Zuckerberg offered to buy it for billions. Spiegel, then 23 years old, turned him down
skewed toward the young. Recent statistics showed that users aged 24 and younger visit it about 18 times a day, using it to send selfies superimposed with dog ears or to share short videos, which they can set to self-destruct after anything from one to 10 seconds.
It has more daily users than Twitter and prides itself on being the anti-Facebook: the place online where your parents are not and never will be.
SPIEGEL, who once enjoined his fellow fraternity brothers over email to “f*** bitches, get leid [sic]”, is a billionaire. The 27-year-old travels in a blacked-out SUV, flanked by armed security guards, and is fêted by media. He fancies himself as the heir to Apple guru Steve Jobs, a portrait of whom once hung in his office. He’s also Mr Miranda Kerr, having married the Australian supermodel last year in a small ceremony in the back garden of their $12-million (R141-million) ranchstyle home in Brentwood, California.
Yet his ascent to the top of the tech heap has been as controversial as it has been improbable. In a new book, How to Turn Down a Billion Dollars, Billy Gallagher, a contemporary of Spiegel at Stanford, gives an insight into a meteoric rise that resembles that of Facebook.
Based on more than 200 interviews and his own first-hand experience as Spiegel’s fraternity “brother”, Gallagher includes in his story a bitter lawsuit from an ousted co-founder, youthful indiscretions and white-knuckle excitement as the project explodes in popularity – leading to hubris, humiliation and, ironically, a star turn from the Facebook founder, Mark Zuckerberg.
Back in 2013, when it was clear that Snapchat was becoming a phenomenon, Zuckerberg offered to buy it for billions. Spiegel, then all of 23 years old, turned him down. The episode inspired not only the book’s title but legions of techie fanboys.
So how did a rich kid from Los Angeles become the monarch of teenagers’ favourite kingdom? On a chilly January morning I meet Gallagher, who watched the Spiegel show first-hand, to ask him. Now studying for an MBA, he sits hunched in his puffa jacket, with a five o’clock shadow and a nasty cough, nursing lemon water at a café in the courtyard of Stanford’s business school. All these years later he’s still trying to get his head around what he witnessed.
“It felt like it was a fad that only existed here at Stanford,” he says. “It was sort of like, ‘Oh, our friend made this app, and it’s goofy and fun, and we’ll probably delete it in a few months.’ And then it was worth $800 million (R9,6 billion). Now Facebook offers to buy it. And just every few months was like bang, bang, bang. You kept thinking, ‘Wow, this is crazy!’ ”
So how did Spiegel do it? Gallagher says it comes down to his knack for knowing what people want, a skill he honed many years ago as a party-thrower extraordinaire at his Stanford fraternity, Kappa Sigma.
By the time Gallagher arrived at Stanford from Philadelphia in 2010 as a first-year student, Spiegel, who was in his third year, was well known. Kappa Sigma was about to be kicked off campus, thanks in no small part to Spiegel whose role as “social chair” led him to throw “f**king ragers”, as he referred to parties in leaked emails.
“Spiegel was a big presence,” Gallagher says. “He’s a showman. He always wants to be doing it bigger and better and bolder. It was always more, more, more.”
At parties Spiegel could most often be found DJing or ensuring no one was short of jello shots made with cheap booze. He was brash and prone to outlandish ideas. A common refrain within the fraternity was: “Spiegel, we can’t do that.”
Gallagher showed up on the West Coast like a lot of young white men in tech’s great land of opportunity. Fresh
out of the $38 000-a-year (R456 000) Haverford School, he was unencumbered by doubt about his future success. He wangled a part-time gig writing for the news website TechCrunch, which was keen for an inside track on the next big thing coming out of the university.
Snapchat looked like just the ticket. It was a crude, quirky app that seemingly everyone was using to send pictures of each other falling asleep in class, or often much racier material. An interview with Spiegel, whom Gallagher knew socially through the fraternity, was his first story. “I started pretty strong,” he says with a satisfied grin.
THE idea that turned into Snapchat had been born the previous year, on a spring day in 2011, when Reggie Brown, a fraternity “brother” of Spiegel’s, was smoking a spliff with friends and hit upon a puff of inspiration. He hurried down the hall to Spiegel’s room. “We should make an application that makes deleting-picture messages,” he blurted. Spiegel lit up. He called it a “million-dollar idea”. No one could have conceived of it then, but Brown’s idea would end up being worth $28 billion (R336 billion).
Spiegel grew up privileged in Pacific Palisades, a beach community of Los Angeles, the son of accomplished corporate lawyers. They sent him to Crossroads School for Arts and Sciences, an elite private school favoured by A-listers such as Dustin Hoffman and Gwyneth Paltrow. He arrived at Stanford certain of one thing, which he repeated often: “I’m not going to work for someone else.”
His first startup, called Future Freshman, was a database of university information for prospective students. The problem was it required a huge amount of data entry. Thankfully Spiegel had free labour. Like most fraternities, aspiring members – pledges – had to endure initiation rituals known as hazing, which usually involved embarrassing, sometimes dangerous, stunts and plenty of binge-drinking.
Spiegel was an enthusiastic hazer, often organising “roll-outs” where pledges would be woken in the middle of the night and forced to perform various indignities. One stunt involved drunken tricycle jumps off a flimsy wooden ramp. Pledges learnt to fear when the gangly kid from LA came calling.
One day he gathered them for a different purpose. He outlined Future Freshman, informed the pledges of their new jobs as data-entry clerks, then left them to get on with building the database. Gallagher recalls: “They huddled around a leftover keg, half of them drinking and bitching about Spiegel, the other half drinking while doing the work.”
Future Freshmen fell flat. So when Brown came up with his “million-dollar idea” the following year, Spiegel ran with it. But as a design student he didn’t have the technological chops to create an app. He drafted in Bobby Murphy, a quiet coder who knocked up a crude prototype and called it Picaboo. It was a dud.
Spiegel was undeterred. As university broke up for summer the trio of Murphy, Spiegel and Brown moved to Spiegel’s father’s house in Pacific Palisades to develop their app. Spiegel was the driving force. Murphy wrote the code. Brown, blond-haired and amiable, was the odd man out. He read English at Stanford. Gallagher describes him as “a regular guy who wanted to hang out and have a good time without worrying about the future”.
Brown had come up with the idea, designed the now-famous ghost logo, and wrote Picaboo’s first press release: “What betch [sic] ever wants anyone to get hold of her pictures? The newest application for iPhone, Picaboo let’s [sic] you and your boyfriend send photos for peeks and not keeps!”
The release helped etch the company’s image as, above all else, a sexting app, which Spiegel would soon try to walk back. But in those early days they were desperate for recognition. As they neared launching it on Apple’s App Store in July 2011, Spiegel went into marketing mode. He convinced a pair of aspiring models to pose for photos in their bikinis, splashing each other with water on the beach, which he integrated into the screenshots for Picaboo. It was to no avail. Friends and family aside, nobody knew about the app. The following month simmering resentments over Brown’s role boiled over during a phone call that turned into a shouting match as he demanded a 30% stake in the company. Days later Spiegel and Murphy changed the passwords to Picaboo’s systems. Brown was out. Not long after the break-up, they changed Picaboo’s name to Snapchat after receiving a cease-anddesist from a photo company of the same name. The question for Brown was: did any of it matter? After all, their little app had fewer than 100 users. As they returned to varsity for what would be Spiegel and Brown’s last year – Murphy had already graduated – more and more people were downloading what had become known as “Spiegel’s app”. Beyond Stanford, the first place where it took hold was at a high school 650km south, in Orange County. Spiegel’s mother had told his cousin about the app.
Within months 100 users became hundreds of thousands
She and her friends downloaded it and began using it voraciously. Within months 100 users became hundreds of thousands. Gallagher recalls: “After a few months I just noticed that all of my friends on the East Coast were suddenly on Snapchat.”
Things were moving fast. In June 2012 Spiegel walked across the graduation stage – and was handed an empty folder. He had become so immersed in Snapchat that he stopped going to class, so didn’t have enough credits to collect his degree. He and Murphy moved to southern California and threw themselves into the company.
Then in February 2013 Brown sued. The claim alleged that he’d been “betrayed” by his former partners, who’d pushed him out of the company he’d co-founded. After a year of bitter legal wrangling, Snapchat settled. Brown’s payoff was extraordinary – $158 million (R1,8 billion) for what amounted to nine months of part-time work. In exchange, he agreed to a gag order barring him from speaking about the company.
Burnt by the ordeal, Spiegel tried to retreat from the limelight. Gallagher, who’d interviewed him several times, was cut off after writing about Brown’s lawsuit. “I’ve talked to other reporters who had similar experiences,” he says, “where they wrote negative things or just covered the lawsuit. Spiegel just shut them off.”
SNAPCHAT, meanwhile, was booming. It wasn’t long before another young Turk came knocking. Mark Zuckerberg had just floated Facebook on the stock market and was desperate to find ways to grow his empire. In November 2012 he offered to buy Snapchat for $60 million (then about R530 million), but it wasn’t an entirely friendly overture: he made it clear that Facebook was only days away from rolling out a new feature, called Poke, that did exactly what Snapchat did: disappearing photos and video. “The message was clear: join us, or we’ll crush you,” Gallagher writes. Spiegel declined.
Poke, as it happened, was a flop. People just didn’t use it. Meanwhile Snapchat continued to gain tens of millions of fans. Zuckerberg had one last go. In November 2013 he made what he thought was a knockout bid: $3 billion (then about R30 billion). Again Spiegel said no.
By then it was clear Snapchat was able to capture young people’s attention in a way Facebook simply couldn’t. To Gallagher, it’s clear why it took off. “By the time I was in my second year of university, my friends and I were like, ‘I wish there was a button where I could just erase everything on Facebook.’ So much of what was on there was just cringe-worthy,” he says. “Snapchat had this really appealing sense of ‘I can post whatever I want and it’s going to go away.’”
Yet most press coverage simply viewed Snapchat as a sexting app. This was partly, Gallagher argues, because most journalists are too old to understand the app.
But Spiegel’s history also came back to bite him. In 2014 the now-defunct website Valleywag published emails he’d sent during his partying years. They were horrible. He joked about shooting lasers at “fat girls”.
The episode left the impression that Spiegel, instead of a Jobsian visionary, was merely a prototypical tech bro.
“I have no excuse. I’m sorry,” he wrote. “They in no way reflect who I am today or my views towards women.”
Less than three years after his public shaming, on 2 March last year, Spiegel and Murphy rang the bell to open trading on the New York Stock Exchange.
Snap Inc, as the company had been renamed, had a storming first day as a public company. Its stock rocketed from $17 (then about R233) a share to $24,48 (about R355), valuing it at $28 billion (about R383 billion). Thanks to their stakes, Spiegel and Brown were worth $5 billion (about R68 billion) apiece.
Things haven’t gone quite so well since. Having raised several billion dollars from investors, Spiegel is under pressure to turn his idea into a money-making machine. That has proved exceedingly difficult, Gallagher reckons, partly because of Spiegel himself. The company has grown to nearly 3 000 employees, but he trusts only a small inner circle. He prefers to hold meetings while walking along the boardwalk because, in theory, it’s more difficult for people to eavesdrop.
In 2016 the company spent nearly $900 000 (then about R12,6 million) on his personal security detail, including armed guards that hustle him around in a blacked-out SUV. At his insistence, teams work in separate buildings, often under strict orders to keep their projects secret from colleagues.
Maybe this is partly to do with his old nemesis, Zuckerberg. Virtually every feature that Spiegel rolls out has been shamelessly copied by Facebook and its picture app, Instagram. The running joke is that Spiegel is Zuckerberg’s head of research and development.
Since that frantic first day of trading, Snap Inc’s stock has nearly halved. Recently in one day alone it took a 6% dip after reality TV star Kylie Jenner tweeted that she hasn’t been using the app because she hates its new design. The tweet wiped about $1,3 billion (R15,6 billion) off the company’s market value. But Kylie seems to have since warmed to the app’s new look – she used it to post a video of her baby daughter Stormi’s foot.
Spiegel’s challenge is clear: transform Snapchat into an advertising colossus without snuffing out the magic that has so many young people in thrall.
If he pulls it off, he may yet prove to sceptics that he’s indeed a worthy heir to his idol, Jobs – not just a bro who got lucky. “It’s Spiegel’s show,” says Gallagher, and no matter what, “he’s going to call the shots”.