You Only Have to Be Right Once: The Rise of the Instant Billionaires Behind Spotify, Airbnb, WhatsApp, and 13 Other Amazing Startups - Randall Lane

Amazon link

When Adeo Rossi, Elon Musk’s UPenn roommate, explained why Silicon Valley was so unique in a 2012 Bloomberg piece, he did so in one word: culture. It’s not the weather or Stanford, in fact there are fewer universities in SV than in Boston, he points out. But there’s a collaborative culture in SV that exists no where else; when he tried to open a Founder’s Institute chapter in Bogota, there were a huge – 10 of the top 10 people --  number of successful technology people who’d never met one another. (This wouldn’t happen in SV)

The portraits drawn up in You Only Have To Be Right Once vindicate Rossi’s claim. It’s an edited compilation of Forbes’ cover stories written by journalists who had extensive personal access to the almost mythical tech heroes who’ve been behind the greatest wealth creation the world has ever seen. And as you read it you gain a sense of not only how tightly-knit the Valley’s network is, one in which Pejman Nozad, a carpet store owner, plays a vital role in connecting entrepreneurs with the well-heeled, but also how similar each iconoclastic young tech billionaire is to another. Beyond their neighboring presence on the rich list, they each have an ability, no desire, to solve real-world problems, and a penchant for ripping apart established conventions.

The people and their startups


1- Sean Parker; Napster, Plaxo, Facebook, Spotify

  • characterized by his deep investigative and desire to find universal problems
    • Napster was the transition between CDs and MP3s after the Internet made it possible to strip content from its container; Facebook was a vehicle to create a reliable identity in an anonymous online world; Spotify is an attempt to fix the very music industry that Napster helped break a decade before
  • pushed out of Facebook, his third company in 5 years (after Napster and Plaxo), Parker helped Zuckerberg create the corporate structure of super-voting shares that resisted dilution during fundraising
  • bio: programming in second grade, hacking in high school which caught the attention of the FBI

2- Drew Houston; Dropbox

  • solved the freemium model: in 2011 96% of users paid nothing, yet the company was able to hit $50m in revenue with only 70 staffers, tripling Google’s revenue/employee
  • forced by Y Combinator to get a partner, Ferdowsi, who Pejman Nozad helped hook VCs like Sequoia 
  • conventional marketing didn’t work for them -- $300 per user acquisition – instead they offered extra space for user referrals and a quarter of all new customer came to Dropbox this way
  • update: stock marked down 50% by T. Rowe Price; difficult to justify $10b valuation
  • bio: MIT dropout 

3- Elon Musk; Tesla, SpaceX

  • bio: reading Britannica at 8, physics and business at UPenn, then physics at Stanford 

4- Kevin Systrom; Instagram

  • $1b in 2012, 22 months, from idea to exit, 14 staff, no revenue
    • $10b by 2014 and 200m MAU
      • eMarketer forecasts IG will book $2.8b in revenue in 2017, 10% of FB’s total
    • combined social gaming of Zynga, check-in of Foursquare, with his own love of photos (abroad photography course in Italy where he was given a lo-fi camera  filterS)
  • rejected Facebook offer in 2006 to finish Stanford degree 
  • bio: started at Stanford with intent of studying CS, took him 40 hours/week to get a B in programming class so he majored in management science and engineering… Mayfield Fellows Program got him an internship at Odeo where he met Jack Dorsey… later moved away from marketing and corporate development at Google post-grad (product dev requires CS) to Nextstop where he turned himself in to a coder – now he could create the ideas he had

5- Daniel Ek; Spotify

  • working freemium model again: in 2014, 25% of customers were paying $10/m, total 40m 
  • built with social app integration from the beginning, 1b shares on FB in the first month alone on the platform 
  • burnt through $7m in founders’ capital signing up reticent record labels  given 20% equity
  • bio: coding from 5 years old, making $20k/m in high school designing web sites and selling server space, did 2 $1m deals with Tradedoubler, dig mkting, and started Spotify with Tradedoubler chairman Martin Lorentzon

6- Aaron Levie; Box

  • the Oracle of the next generation of enterprise applications, online storage and collaborationservices
  • Mark Cuban seeded $350k for 30% in ’05 as it launched like a Dropbox, customer-centric, but pivoted in ’07 to enterprise: security and administrator oversight features 
  • Aaron pursued many funding rounds, which his board accommodated in part because he was taking dilution with them: his pre-IPO stake stood at 5.7% compared with Houston’s 15%
  • 11% paying users (but expansion of existing users generates 40% of revenue), Q2’15 loss of 42c/share vs Q2’14 loss of $2.71/share… ’15 rev $300m 

7-Jack Dorsey; Twitter and Square

  • Twitter introduced at SXSW in ’07 IPO’ed to a market cap of $25b, which has since crashed due to a failure to monetize
  • But Twitter is an evidence of Dorsey’s desire to disrupt: the blogging and payment space (Square): in ’13 Twitter had 500m users and Square was used by 2m businesses and exceeded $500m in revenue 
  • bio: many interests: took up botanical drawing, became a certified masseur, and dabbled in fashion design

8- David Karp; Tumblr

  • “minimalism isn’t just an aesthetic choice. It’s the key to freedom.”
  • Acquired in ’13 by Yahoo for $1b, since users up 40% to 420m (includes visitors) with 200m blogs
  • Karp holds a disdain for current paradigm of web marketing which has little effect on consumers’ attitudes and emotions… yet in first year of advertising ’12, Tumblr pulled in $13m, projected $100m for ’15
  • bio: as a senior he was head of product at the parenting website UrbanBaby, acq by CNET, proceeds of which he used to start his own for-hire development firm Davidville, which is when he produced what would become Tumblr… Bijan Sabet of Spark Capital had to cajole and coax him into turning it into a company with $750k for $3m and Union Square Ventures 

9- Nick Woodman; GoPro

  • ’04 to ’13, GoPro sales doubled every year, in ’15 it grossed $1.6b, up from $1b in ’13 
  • first full year ’05 350k in sales… didn’t take venture funding ($88m) till ‘11
  • bio: sports>academics, dot-com venture Funbug tanked along with $3.9 of investor money… he went on a surfing odyssey afterwards where he came up with the seed of the idea for GoPro, for which he gave himself 4 years to create: wearing a CamelBak to avoid needing to walk to the kitchen and peeing out a sliding door

10- Brian Chesky; AirBnb

  • there may be no truer Web2.0 company (that exists entirely on the shoulders of earlier Internet innovations such as feedback rating systems (borrowed from Ebay), social media (FB account lends credibility), and smartphones (portable terminal))
  • we are now in the sharing economy: everyone has a product they can share and earn income through: a few dozen square feet in a driving way = parking via ParkingPanda; dog-friendly room = pet penthouse via DogVacay; unused bicycle = hirable transport for a visitor via Liquid… enabling micro-entrepreneurs
  • as of ’15 year end, it’s the third most valuable private company: Uber @ 62.5, Xiaomi at 46 and Airbnb at 25.5, with expected $900m rev
  • two designers created airbedandbreakfast to sell floorspace (and air beds) during a local ongoing industrial conference – they got 3 takers – so they built it up, pitched to YCombinator, and eventually got 600k seed from Sequoia 
  • first year they ended up with 100k nights booked, up to 700k in ’10, 2m in ’11, and 15m in ‘12
  • 42% of hosts use income to pay for everyday living expenses

11- Alex Karp; Palantir (named after palantiri seeing stones in Lord of the Rings)

  • uses big data to mine data for intelligence and law enforcement applications, including fraud detection… 
  • example: Palantir user visiting a bank can see connections between a Nigerian IP address, a proxy server somewhere in the U.S., and payments flowing out of a hijacked home equity line of credit… or piece together fingerprints on artillery shell fragments, location data, tips from a database, and social media to track down Afghan bomb makers
  • ’15 revenues reputed to be $1.5b, with $20b valuation, Palantir takes up 10-15% of all commercial real estate in Palo Alto
  • bio: JD from Stanford, classmates with Peter Thiel, got a PhD in philosophy from Frankfurt and went onto manage money, setting up Caedmon Group

12- Nozad, Pejman: carpets

  • not a technical guy, or even an entrepreneur (in the tech definition of the word), simply a guy with street smarts who connected the right people in the right place at the right time
  • co-invests with Bobby Yazdani
  • helped Drew Houston secure Sequoia capital

13- Evan Spiegel: Snapchat

  • 100 million users, $12b valuation, 4 years old
  • FB failed to crush Spiegel’s 6-man effort with its own ‘Poke’ product which hit #1 on the App Store on release but soon disappeared from the top 30, the next year Zuckerberg made a $3b acq offer (for a 2-year old revenue-less app) which Spiegel rejected 
  • dropped out of Stanford, on principle, 1 month before graduation
  • I wish there was an app that sent disappearing photos”, greatest existential threat to Facebook… transitory social media that can’t be mined 
  • essentially snapchat solves a problem millennials would never even acknowledge exists: their need in the social media landscape for something transitory, that can avoid their self-censorship and standards, but yet still feeds their narcissism 

14- Palmer Luckey; Oculus Rift

  • eschewing investment (due to failure of VR projects) and chose Kickstarter, raised 250k goal in 2 hours, and $2.4m in 30 days
  • acq by FB in 2014 for $2b, no revenue, no commercial product
    • June’ 13 $30m, Dec’13 $300m, Mar’14 $2b
  • bio: Luckey tinkered with VR tech from 16, and fixed iPhones to make money to fund his habit, 2011 (19) part-time job with VR pioneer Mark Bolas whose open-source innovations helped him create Oculus

15- Adi Tatarko + Alon Cohen; Houzz

  • one-stop interior design planning solution
  • $2.3b valuation, 35m unique visitors/month
  • female founder in an SV environment where >43% of 150 largest companies (in’13) didn’t have a female director
  • 2009 valuation $2m, 2015 $2b+

16- Jan Koum; Whatsapp

  • hatched Feb 2009, acquired 2014 for $18b, 56 employees, $20m in revenue
  • costs 5c to support each user, but they believe $1b in revenue is within reach by 2017 as service and billing fall into place – 480m (from 90m in 2012) users replaced $33b in SMS revenue
    • only other free texting service at the time was BBM
  • bio: lived with mother on welfare in Mountain View until she passed from cancer, kicked out of high school, by 18 taught himself computer networking by buying used-books, enrolled at SJSU while moonlighting as an E&Y security tester

Other people

Breyer, Jim: partner at Accel 

Conway, Ron: famous angel investor

Cuban, Mark: seeded Levie’s Box

D’Angelo, Adam: co-founder of Quora, former CTO of FB 

Graham, Paul: co-founder YCombinator

Lonsdale, Joe: co-founder Palantir, went onto found Addepar, wealth mgmt software

Milner, Yuri: Digital Sky Technologies (DST) and founder of mail.ru which is a top 5 internet company and controls top 3 Russian SSN 

Moskowitz, Dustin: cofounder of Facebook, youngest billionaire ever, founder of Asana, task mgmt 

Nozad, Pejman: rug store owner in Palo Alto

Lorentzon, Martin: Ek’s partner in Spotify

Shiram, Ram: early Google investor, helped Bezos get in, founded Junglee (acq by AMZN) 

Thiel, Peter: co-founded PayPal with Elon Musk & Max Levchin, co-founded and chairman of Palantir, also created hedge fund Clarium Capital 

Valentine, Don: founder of Sequoia Capital (partners: Doug Leone and Michael Moritz) 

Yazdani, Bobby: angel, early investor in Google, founder of Saba, ranked by CB Insights as #1/2000

 

And things

Founder’s Institute: incubator/accelerator/investor like YCombinator, brainchild of Adeo Ressi, UPenn roommate of Elon Musk

In-Q-Tel: CIA venture fund, for every $1 it invests, it attracts $9 of investment from other companies

SVAngel: Ron Conway’s angel

TomorrowVentures: Eric Schmidt’s angel

 

Some choicey quotes:

the only nepotism comes from being the catalyst’s roommate, buddy or frat brother (in the 2010s, there’s no sweeter title than co-founder)

white hats stem from the perception of meritocracy 

oculus began in the setting of so many modern success stories that it’s almost become a cliché, a California garage